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THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A  TREATISE 


ON  THE 


POWER  OF  TAXATION 

STATE  AND   FEDERAL 

IN  THE  UNITED  STATES 


By  FREDERICK  N.  JUDSON 

OF  THE  ST.  LOUIS  BAR 


St.    Louis 
The  F.  H.  Thomas  Law  Book  Company 

1917 


T 

Copyright  1917 

by 

FREDERICK  N.  JUDSON 


Press  or 

Nixon-Jones  Printing  Co. 

St.  Louis.  Mo. 


PREFACE 

It  was  said,  in  prefacing  the  First  Edition  of  this  book  in  1902, 
that  questions  of  taxation  were  then  engaging  more  than  ever 
before  the  attention  of  the  legislatures  and  courts,  as  well  as 
economists.  It  can  be  said  without  fear  of  contradiction  that  this 
is  true  of  the  present  time  to  a  far  greater  degree.  The  necessity 
of  meeting  new  demands  for  human  betterment  in  the  develop- 
ment of  our  civilization  has  caused  throughout  the  states  of  the 
Union  a  pressing  demand  for  new  methods  in  taxation  to  secure 
needed  revenue ;  and  the  pressure  of  national  emergencies  in  war 
as  well  as  in  peace,  has  called  for  the  exercise  of  all  the  Federal 
powers  of  taxation. 

The  distinction  between  the  taxing  power  of  the  State  under 
our  complex  form  of  government,  and  the  construction  of  the 
statutes  in  the  exercise  of  that  power,  is  obvious.  Our  states  are 
sovereign  in  taxation,  subject  to  the  restriction  of  the  Federal 
Constitution  and  the  limitations  growing  out  of  our  dual  form  of 
government.  Under  the  Fourteenth  Amendment  the  power  of 
the  Federal  government  secures  to  the  citizen  due  process  of  law 
and  the  equal  protection  of  the  laws  in  the  exercise  by  the  State 
of  its  sovereign  power ;  so  that  there  is  a  Federal  question 
whereon  Federal  jurisdiction  may  be  invoked  in  every  tax  case 
in  wliich  these  fundamental  rights  are  claimed  to  be  denied  by 
State  authority.  So  great  is  the  diversity  in  the  details  of  State 
taxing  systems,  aiid  so  many  are  the  cases  involved  in  their  con- 
struction and  application,  that  tlie  inclusion  of  this  great  volume 
of  afcniiiulated  case  bnv  o7i  taxation  in  an  intelligent  form, with 
different  State  constitutions  and  statutes  expoundi'd  and  applied, 
as  was  said  in  tlie  preface  of  the  First  Edition,  would  now  require 
a  publication  of  encyclopedic  proportions. 

The  limitation  of  the  taxing  power  of  the  States  under  our 
form  of  govern tiicnt  and  under  the  Constitution  of  the  United 
States,  has  been  ('X[)onnded  and  developed  by  the  Supreme  Court 


671282 


IV  PREFACE 

'of  the  United  States  for  more  than  a  century ;  and  the  rules  for- 
mulated by  the  Court  are  essentially  judge-made  law,  evolved  for 
the  complicated  conditions  of  modern  business  from  the  gradu- 
ally developed  conception  of  the  relation  of  the  State  to  the  Fed- 
eral government.  The  historical  method,  therefore,  has  been  fol- 
lowed, presenting  the  judicial  development  of  these  concep- 
tions of  the  relation  of  the  State  to  the  general  government, 
and  liberal  use  has  been  made  of  quotations  from  opinions  of 
the  Supreme  Court  in  formulating  and  announcing  these  funda- 
mental rules. 

It  is  the  aim  of  this  book  to  show  the  limitation  of  the  taxing 
power  of  the  State  and  Federal  government,  so  far  as  these  limi- 
tations have  been  declared  and  expounded  by  the  Supreme  Court 
of  the  United  States;  and  decisions  of  the  State  Court  and  in- 
ferior Federal  courts  have  been  cited  as  implying  or  illustrating 
the  fundamental  limitations  thus  declared.  These  decisions  de- 
clare what  the  State  cannot  tax,  and  thereby  show  what  it  can 
tax.  What  the  State  has  taxed  must  be  learned  from  its  own 
statutes  and  the  decisions  of  its  own  courts.  Wliat  the  several 
states  are  now  taxing  (the  State  tax  systems  now  in  force),  it  has 
been  the  aim  to  show  in  the  collocation  of  State  taxing  systems 
in  the  Appendix.  "What  the  State  ought  to  tax  is  a  question  for 
economists  and  reformers. 

The  vast  increase  in  the  Federal  taxing  power,  illustrated  in 
the  recent  enactments  set  forth  in  the  Appendix,  called  forth  by 
the  existing  national  emergencies,  is  the  most  interesting  and  im- 
pressive fact  in  the  development  of  taxation  in  our  national  his- 
tory. This  Federal  power  is  based,  not  only  upon  the  adoption 
of  the  Sixteenth  Amendment  in  1913,  but  also  on  the  judicial 
construction  of  the  original  grant  of  the  Constitution.  There  are 
indications  that  the  States  may  in  the  future  avail  themselves  of 
the  effectiveness  of  the  Federal  taxing  system  by  adopting  one  or 
more  of  its  features,  in  remedying  the  recognized  ineffectiveness 
of  the  general  property  tax,  which  has  been  the  main  dependence 
of  the  States. 

To  save  unnecessary  repetition,  the  Supreme  Court  of  th(^ 
United  States  is  mentioned  as  the  Supreme  Court  only,  and  is  dis- 


PREFACE  V 

tinguished  from  the  Supreme  Courts  of  the  States,  as  the  titles 
of  the  cases  cited  from  the  latter  include  the  names  of  the 
States. 

I  take  pleasure  in  acknowledging  the  efficient  assisitance  of  Mr. 
Eustace  C.  Wheeler,  of  the  St.  Louis  Bar,  in  general  revision  and 
in  the  preparation  of  the  Index. 

Frederick  N.  Judson. 
St.  Louis,  Oct.,  1917. 


TABLE  OF  CONTENTS 


CHAPTER    I. 

LIMITATIONS     UPON     STATE     TAXATION     GROWING     OUT  OF 

THE    RELATIONS    OF    THE    STATE    AND 

FEDERAL    GOVERNMENTS. 

Page 

§  1.     Taxation  and  the  Constitution  of  the  United  States 2 

2.  The   Constitution   in   relation   to   the   State  and   Federal 

power  of  taxation 3 

3.  The  concurrent  powers  of  internal  taxation 4 

4.  Judicial  construction  of  Federal  taxing  power 6 

5.  Restraints  upon  State  taxation  developed  by  judicial  con- 

struction    7 

6.  Importance  of  decision  in  McCulloch  v.  Maryland 8 

7.  Opinion  in  McCulloch  v.  Maryland  9 

8.  Osborn  v.  United  States 12 

S.     Brown  v.   Maryland   12 

10.  U.  S.  securities  not  taxable  by  States 13 

11.  Legal  tender  notes,  etc.,  made  taxable  by  Act  of  Congress  14 

12.  Bonds  of  District  of  Columbia  exempted 14 

13.  The   exemption  as   dependent  upon  the  Relation  of  the 

Obligations  to  the  Government 15 

14.  Salaries  of  U.  S.  officials  not  taxable 16 

15.  State  tax  upon  passengers  in  mail  coaches  invalid 17 

16.  Taxation  of  banks  holding  U.  S.  securities  invalid 18 

17.  Corporate  franchise  tax  distinguished  from  property  tax  19 

18.  Taxable  corporate  franchise  defined   20 

19.  Taxation    of    shares    of    corporations    holding    Federal 

securities   20 

20.  State  tax  upon  interstate  passengers  invalid 21 

21.  Lands  and  other  property  of  U.  S.  not  taxable  by  States.  21 

22.  Limitations  of  exemption  of  U.  S.  lands,  etc 24 

23.  Lands  granted  to  railroads,  when  taxable 24 

24.  The  title  essential  for  State  taxation 25 

25.  Taxability  of  mining  claims 26 

26.  The  taxability  of  ores  and  other  output  of  Indian  lands.  27 

27.  Indian   reservations  not  taxable    28 

vii 


Viii  .  TABLE   OF    CONTENTS. 

Page 
§  28.     Cattle    etc.,   of  non-Indians   on   Indian   reservations   tax- 
able    30 

29.  Indian  tax  exemption  and  alienation 31 

30.  State  taxation   of   railroads   incorporated   by   the   United 

States 32 

31.  Railroad  franchises  granted  by  United  States  not  taxable.  33 

32.  Definition  of  United  States  franchise  33 

33.  Intangible    and    tangible    property    of    railroads    incorpo- 

rated, by  U.  S.  taxable  34 

34.  Telegraph  companies  under  the  Act  of  July  24,  1866 35 

35.  The  taxability  of  Federal  agencies 36 

36.  Letters  patent  and  copyrights    38 

37.  Corporate  capital  invested  in  patent  rights  39 

38.  State  tax  on  bequests  to  U.  S 39 

39.  U.  S.  securities  not  exempt  from  State  inheritance  tax..  40 

40.  Treaty-making  power  and   State  taxation 40 

41.  Tax  evasion  through  investments  in  U.  S.  securities 42 

42.  Payment  of  State  taxes  in  coin  sustained  43 


CHAPTER    II. 

CONTRACTS  OF  EXEMPTION  PROM  TAXATION. 

43.  Legislative  grants  held  to  be  contracts ; 45 

44.  Grant  of  exemption  held  a  contract 46 

45.  Contracts  of  exemption  not  implied  47 

46.  The  validity  of  tax  exemption  contracts  established 48 

47.  Application  to  consolidated  corporation 49 

48.  Ohio  bank  tax  cases   49 

49.  Missouri  exemptions   enforced   against   constitutional   re- 

peal    50 

50.  Opinion  in  the  Missouri  cases   51 

51.  Northwestern   University   and   other   cases 52 

52.  Bank  notes  and  coupons  made  receivable  for  taxes 52 

53.  Tennessee   constitutional   amendment  held   void 53 

54.  Mississippi  notes  in  aid  of  Confederacy  held  void 53 

55.  Change  in  remedy  not  impairment  of  contract 54 

56.  The  Virginia  Coupon  Cases    54 

57.  Virgiriia  Coupon  Cases  under  Act  of  1882   55 

58.  The  Supreme  Court  on  the  Eleventh  Amendment  of  the 

U.  S.  Constitution 55 

59.  The  later  Virginia  Coupon  Cases   5« 

60.  The  Supreme  Court  on  Virginia  court  overruling  previous 

opinion  57 


TABLE   OF    CONTENTS.  IX 

Page 

61.  The  Supreme  Court  determines  for  itself  whether  State 

legislation   constitutes  a   contract    58 

62.  Illustrations  of  the  independent  judgment  as  to  contract  59 

63.  Contract  must  be  properly  brought  before  the  court 60 

64.  When  State  court  not  followed 61 

65.  When  concluded  by  decision  of  State  court 61 

66.  Deference  to  opinion  of  State  court   62 

67.  Limitation  of  independent  judgment 64 

68.  Contract  only  impaired  by  a  law   64 

69.  Impaired  by  municipal  ordinance  having  force  of  law..  65 

70.  The  Supreme  Court  determines  what  constitutes  impair- 

ment of  a  contract 65 

71.  Adjudication  of  contract  impairment   66 

72.  What  constitutes  a  contract  of  exemption 66 

73.  Railroad  franchise  is  property   67 

74.  Conditional   exemptions   from   taxation 68 

75.  The  legislative  power  to  make  an  exemption  contract...  68 

76.  Specific  exemptions  and  general  legislation  distinguished  69 

77.  Contract  not  to  reduce  dividend  by  taxation  below  fixed 

per  cent  sustained   70 

78.  Tax  on  foreign-held  securities   71 

79.  Taxation  by  State  or  municipality  of  its  own  securities..  72 

80.  Contract  right  to  tax  as  a  remedy 75 

81.  Remedy  may  be  changed,  if  substantial  right  not  impaired  76 

82.  Contractual    and   governmental    legislation    distinguished.  78 

83.  Municipal   charter  powers   not   contractual 78 

84.  State  exemption  of  municipal  property  not  contractual..  79 

85.  State  control   of  proceeds  of  municipal   taxation 80 

86.  Retrospective  legislation  and  vested  rights 80 

87.  Justice  Miller  on  legislative  contracts    81 

88.  Tax  exemption  not  implied  from  license  83 

89.  Bounties  and   privileges    84 

90.  Consideration   for  exemption   essential    84 

91.  Judgment  for  torts  not  a  contract   85 

92.  Tax  emptlon   repealed  under  general   power  reserved   to 

amend   or   repeal    85 

93.  Tax  exemptions  strictly  construed 87 

94.  "Immunity"   and   "privilege"   distinguished    88 

95.  Lost  by  change  of  corporate  business  89 

96.  Lost  by  repeal  before  incorporation  or  issue  of  stock 89 

97.  Tax  exemption  is  a  personal  immunity    89 

98.  Exemption   not  assignable  to  assignee   91 

Exemption,  when  applicable  to  lessee  or  assignee 91 


99 


TABLE  OF   CONTENTS. 

Page 

100.  Exemption  not  extended   to   party  not  entitled  to  rely 

thereon  92 

101.  Effect  of  railroad  consolidation  on  tax  exemptions 93 

102.  Corporate  exemption  limited  to  specific  form  of  taxation.  94 

103.  Property  of  corporations  and  shareholders  distinguished 

in  contracts  of  exemption 95 

104.  Capital  stock  and  surplus  of  corporations  96 

105.  Special  assessments  97 

106.  The  impairment  of  the  obligation  of  private  contracts..  97 


CHAPTER    III. 

REGULATION   OP   COMMERCE. 

§  107.     Express  restraint  upon  taxing  power  of  State 100 

108.  Necessity  for  national  control  over  commerce 100 

109.  Mr.   Madison   on   necessity   of   national    control    of   com- 

merce     101 

110.  National   control   of   commerce,   the   comprehensive   limi- 

tation    102 

111.  Gibbons  v.  Ogden   103 

112.  Brown   v.    Maryland   104 

113.  Original  package  rule 106 

114.  License  tax  on  importer  also  void  as  regulation  of  com- 

merce    107 

115.  Regulation  of   commerce  during   non-action   of  Congress.  108 

116.  Freedom  of  interstate  commerce  109 

117.  Consent  of  Congress  to  State  regulation   110 

118.  Judicial  construction  of  "arrival"  in  State 110 

119.  Duties  on  imports  relate  only  to  foreign  imports Ill 

120.  Woodruff  v.  Parham Ill 

121.  Importations  from  other  States  taxable  in  original  pack- 

ages    113 

122.  Tax  must  be  without  discrimination  114 

123.  Taxability   of   goods   from   other    States    not   affected    by 

Leisy  v.  Hardin 114 

124.  Original   packages  in  interstate   commerce    as    to    State 

police  authority 116 

125.  What  is  an  original  package?   117 

126.  Theory  of  exemption  of  original  packages  from  State  laws  118 

127.  The  definition  of  "original  package"  reaffirmed    119 

128.  Exemption  only  extends  to  importer  120 

129.  Form  of  tax  is  immaterial , 121 


TABLE  OF   CONTENTS.  XI 

Page 

130.  Intent  to  export  is  insufficient  to  exempt  from  taxation. .  122 

131.  Property   in   commercial   transit    122 

132.  Coe  V.   Errol  '. 123 

133.  Products  moved  in  interstate  commerce  may  be  given  a 

taxable  situs  in  State    124 

134.  Same  rule  in  interstate  as  in  foreign  shipments 125 

135.  Termination  of  commercial  transit    126 

136.  Inheritance  tax  on  aliens  not  tax  on  exports 127 

137.  License  tax  on  foreign-exchange  broker  not  tax  on  ex- 

ports   ■ 128 

138.  State  taxing  power  in  relation  to  imports  and  exports..  129 

139.  State  tax  on  alien  passengers  is  void 130 

140.  State  inspection  laws  and  interstate  commerce 131 


CHAPTER    IV. 

REGULATION  OF  COMMERCE— ConfinMed. 

§  141.     Era  of  discriminating  State  taxation  133 

142.  Privileges  and  immunities  of  citizens   135 

143.  Discrimination  against  non-residents  an  interference  with 

commerce 136 

144.  Discriminating  taxation  condemned  in  State  courts 137 

145.  Discrimination  in  taxation  in  favor  of  products  of  State 

unlawful 138 

146.  What  constitutes  discrimination? 140 

147.  Discrimination  must  relate  to  interstate  commerce 141 

148.  Taxation  of  commercial  travelers  from  other  States,  un- 

lawful    141 

149.  The  Supreme  Court  in  Robbins  v.  Shelby  County  Taxing 

District 142 

150.  Robbins  v.  Shelby  County  Taxing  District,  reaffirmed 143 

151.  The  Supreme  Court  in  Brennan  v.  Titusville 144 

152.  Taxation  of  commercial  brokers 145 

153.  The  Supreme  Court  on  taxation  of  commercial  brokers..  147 

154.  The  form  of  commercial  agency,  immaterial 148 

155.  Only  interstate  commerce  agencies  exempt 149 

156.  Sale  of  goods  in  the  State  subject  to  taxing  power  of  State  150 

157.  Discrimination  must  be  more  than  incidental  disadvantage  152 

158.  Tax  upon  peddler  without  discrimination  against  residents 

or  products  of  other  States,  is  valid 153 

159.  Definition  of  peddler 155 

160.  Peddlers  and  drummers 156 

161.  Licensing  under  police  power 158 


Xii  TABLE  OF   CONTENTS. 

Page 

§  162.    Police  power  cannot  interfere  with  interstate  commerce..  159 

163.  Supreme  Court  not  concluded  by  title  of  act  as  to  the  pur- 

pose of  act 160 

164.  When  a  license  tax  act  void  in  part  is  void  in  toto 161 

165.  The  separate  delivery  of  portrait  frames  not  taxable....  162 

166.  Orders  for  purchases  or  sales  on  future  delivery,  not  ex- 

empt from  State  taxation 162 


CHAPTER     V. 

FOREIGN    CORPORATIONS     IN    INTERSTATE     COMMERCE. 

167.  Rights  of  foreign  corporations  in  interstate  commerce...     165 

168.  Foreign  corporation  "does  business"  in  State  only  through 

comity  of  State 166 

169.  Right  to  impose  discriminating  taxation  as  condition  of 

admission  into  State  166 

170.  Foreign  insurance  companies 167 

171.  Same  principle  extended  to  foreign  insurance  associations  167 

172.  Foreign  corporations  not  admitted  into  State  under  United 

States  treaty  168 

173.  State  has  power  to  change  conditions  of  admission  of  for- 

eign corporations 168 

174.  Retaliatory  legislation  in  condition  for  admission 169 

175.  Pembina  Mining  Company  v.  Pennsylvania 170 

176.  Horn  Silver  Mining  Company  v.  New  York 171 

177.  Right  to  discriminate  against  foreign  corporations 172 

178.  Discrimination  limited  to  imposition  of  conditions  for  ad- 

mission       172 

179.  Distinction,  however,  academic  rather  than  practical 173 

180.  Impairment  of  obligation  of  a  contract  in  exclusion  of  for- 

eign corporation 174 

181.  Discontinuance  of  business  by  foreign  life  insurance  com- 

pany       174 

182.  Admission  of  foreign  company  held  to  involve  a  contract 

right 175 

183.  Holding  United  States  bonds  by  foreign  corporation  does 

not  exempt  it  from  taxation  on  corporate  franchises. . .     176 

184.  Nor  is  foreign  corporation  engaged  in  importing  business 

exempt  from  tax  on  corporate  franchises 177 

185.  Tax  upon  capital  employed  within  State 177 

186.  Discrimination  in  favor  of  State  manufactures  in  foreign 

corporation  tax 178 


TABLE  OF   CONTENTS.  Xlil 

Page 

187.  "Doing  business"  in  State 179 

188.  What  is  not  "doing  business"  in  State 180 

189.  Ownership  of  property  in  State  does  not  of  itself  constitute 

"doing  business"  in  State 181 

190.  Holding  stock  in  domestic  company  by  foreign  company  is 

not  "doing  business"  by  latter  in  State 183 

191.  Supreme  Court  of  Pennsylvania  on  what  constitutes  "doing 

business" 183 

192.  "VMiat  is  "doing  business"  in  State 184 

193.  "Doing  business"  by  holding  interest  in  limited  partner- 

ship       185 

194.  Must  have  business  domicile  in  State  186 

195.  Corporations  engaged   in   Federal  business  or  interstate 

commerce 186 

196.  Corporations    engaged    in    "carrying   on    interstate    com- 

merce"       187 

197.  The  revocation  of  right  to  do  business  not  applicable  to 

interstate  carriers 188 

198.  Payment  of  tax  under  threat  of  forfeiture  of  right  to  do 

business  not  voluntary 189 

199.  Corporate  franchise  taxes  in  relation  to  interstate  com- 

merce       189 

200.  Corporations  carrying  on  interstate  commerce  not  exempt 

from  charges  for  privilege  of  incorporation 192 


CHAPTER    VI. 

REGULATION  OF  COMMERCE— THE  TAXATION  OF 
STEAMBOATS    AND    VESSELS. 

201.  Taxation  of  vessels  as  property 194 

202.  Taxable  situs  of  steamboats  and  vessels  at  home  port 195 

203.  Situs   not  affected   by   temporary   enrollment   as  coaster 

elsewhere 196 

204.  The   taxable   situs   either  the  domicile   of   the  owner  or 

the  actual  situs  of  the  vessel 197 

205.  Steamboats  on  rivers  and  great  lakes 198 

206.  Home  port  when  not  conclusive  as  to  situs  198 

207.  State  cannot  tax  privilege  of  navigating  public  waters 199 

208.  Steam  tugs  cannot  be  taxed  for  privilege  of  navigating 

rivers 201 

209.  The  State  may,  however,  tax  the  privilege  of  carrying  on 

the  towing  business  in  a  corporate  capacity 202 


Xiv  TABLE   OF    CONTENTS, 

Page 
§  210.     Police  control  by  State  over  vessels  in  harbor  or  in  tran- 
sit   202 

211.  Power  of  State  to  license  oyster  boats  and  fisheries 203 

212.  State  may  exact  tolls  for  using  rivers  and  harbors  im- 

proved at  its  own  cost 204 

213.  Taxation  of  ferries  and  bridges 205 

214.  Gloucester  Ferry  Co.  v.  Pennsylvania 208 

215.  Taxation  of  interstate  bridges 209 

216.  Taxation  of  interstate  bridge  not  interference  with  inter- 

state commerce 209 

217.  Taxation  of  tonnage 210 

218.  Property  taxation  and  compensation  for  services  distin- 

guished from  tonnage 213 

219.  Supreme  Court  on  tonnage  duties  and  wharfage  charges.  214 

220.  Wharfage  charges  may  be  graduated  by  tonnage 214 

221.  But  wharfage  and  similar  charges  must  be  without  dis- 

crimination    215 

222.  Quarantine  and  pilotage  charges 216 

223.  Taxation  of  land  under  harbors 217 


CHAPTER    VII. 

TAXATION    OF    INTERSTATE    COMMERCE. 

§  224.  Difficulty   of   defining   line   between   Federal    and    State 

power 219 

225.  License  taxation 219 

226.  Osborne  v.  Mobile 220 

227.  Osborne  v.  Mobile  overruled  221 

228.  License  tax  on  agents  of  interstate  railroads  held  invalid.  224 

229.  Immaterial  that  license  interfering  with  commerce  pur- 

ports to  be  for  regulation  and  not  for  revenue 225 

230.  License  for  privilege  of  transacting  local  business  is  valid.     225 

231.  Decision  of  State  court  that  license  only  applies  to  local 

business,  conclusive 227 

232.  It  must  clearly  appear  that  intrastate  business  alone  Is 

taxed ■ 228 

233.  License  must  not  be  condition  for  transacting  interstate 

business 229 

234.  License  or  privilege  tax  not  exceeding    tax    on    property 

valid 230 

235.  Tax  on  interstate  telegraph  messages  invalid 232 

236.  Privilege  tax  on  sleeping  cars 232 


TABLE    OF    CONTENTS.  XV 

Page 

237.  Compensation  exacted  by  city  for  use  of  poles  in  streets 

not  regulation  of  commerce 233 

238.  Payment  reserved  as  bonus  in  railroad  charter  not  regula- 

tion of  commerce 235 

239.  Taxation  of  rolling  stock 236 

240.  Rule  of  average  of  habitual  use  adopted 236 

241.  Supreme  Court  on  taxable  situs  of  railroad  cars 238 

242.  Taxation  of  refrigerator  cars  240 

243.  Mileage  apportionment  in  taxation  of  rolling  stock 241 

244.  State  tax  on  freight  invalid 241 

245.  State  tax  on  railway  gross  receipts 242 

246.  Mileage  apportionment  in  interstate  railway  taxation 242 

247.  Taxation  of  net  earnings  sustained  245 

248.  Tax  on  gross  earnings  held  invalid 246 

249.  Tax  on  gross  receipts  held  invalid  in  State  courts 250 

250.  Maine  v.  Grand  Trunk  R.  R.  Co 250 

251.  Tax  on  gross  earnings  apportioned  by  mileage  valid  as 

excise  tax 250 

252.  Principle  reaffirmed 252 

253.  Immaterial  whether  corporation  is  domestic  or  foreign. ..  253 

254.  A  tax  on  gross  earnings  when  an  interference  with  inter- 

state commerce 254 

255.  Tax  not  upon  receipts  as  such  but  excise  tax  apportioned 

to  receipts 256 

256.  State  tax  on  net  receipts 256 

257.  Valuation  of  property  by  capitalization  of  receipts 257 


CHAPTER     VIII. 

VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION. 

258.  Right  of  property  taxation  conceded  258 

259.  Unit  rule 259 

260.  Illinois  railroad  cases 260 

261.  Supreme  Court  on  situs  of  railroad  property 262 

262.  Supreme  Court  on  apportionment 262 

263.  Application  of  unit  rule  to  interstate  railroads 263 

264.  Supreme   Court  on   mileage   apportionment   in   interstate 

railroads 264 

265.  Exceptional  circumstances  may  make  mileage  rule  inap- 

plicable    264 

266.  Rulings  on  testimony  not  reviewed  in  Supreme  Court  un- 

less bearing  on  Federal  question   265 


Xvi  TABLE   OF    CONTENTS. 

Page 
§  267.     Entire  property  may  be  considered  in  valuation  of  portion 

within  State 266 

268.  Value  of  property  in  use  may  be  considered  in  valuation.  267 

269.  Unit  and  mileage  rule  as  applied  to  taxation  of  telegraph 

companies 268 

270.  Value  of  property  outside  State  to  be  considered  in  valu- 

ation under  mileage  apportionment 270 

271.  Unit  rule  applied  to  express  companies 271 

272.  Ohio  express  company  cases  272 

273.  Special  circumstances  requiring  deduction  must  be  shown.  274 

274.  Rehearing  of  express  company  cases  denied 275 

275.  The  enforcement  of  mileage  apportionment 276 

276.  Kentucky  express  company  case 277 

277.  Power  of  State  in  valuing  interstate  properties  as  defined 

by  Supreme  Court 278 

278.  Evidence  of  inapplicability  of  mileage  rule  admissible.  . . .  279 

279.  Stock  market  quotations  as  evidence  of  value 280 

280.  Presumption  that  all  evidence  submitted  was  considered 

in  valuation 281 


CHAPTER    IX. 

TAXATION  OF  NATIONAL  BANKS. 

}  281.     Taxing  authority  of  States  over  national  banks 283 

282.  Amendment  of  1868 284 

283.  Supreme  Court  on  U.  S.   statute  authorizing  State  taxation 

of  national  banks 285 

284.  Method  of  State  taxation  allowed  by  U.  S.  statute  is  ex- 

clusive    286 

285.  State  franchise  tax  not  enforceable  against  national  banks  287 

286.  State  may  require  bank  to  pay  tax  for  shareholders 289 

287.  Place  of  taxation 291 

288.  Manner  of  assessment 292 

289.  Real  estate  in  other  States  not  deducted  from  value  of 

shares 294 

290.  Territories  have  same  taxing  power  as  States  over  na- 

tional banks 295 

291.  No  deduction  on  account  of  holding  United  States  securi- 

ties       295 

292.  Discrimination  through  taxation  of  State  banks  on  cap- 

ital or  property 296 

293.  "Other  moneyed  capital"  is  "other  taxable  moneyed  cap- 

ital"      297 


TABLE   OF    CONTENTS.  XVll 

Page 

294.  Equality  of  taxation  with  "other  moneyed  capital" 298 

295.  Discriminations  through  exemptions  from  taxation 299 

296.  Allegations  of  discriminating  exemption  held  to  require 

answer 300 

297.  Rules  of  Supreme  Court  as  to  discrimination 301 

298.  Discriminating  exemption  must  be  of  competing  moneyed 

capital 302 

299.  Meaning  of  "other  moneyed  capital" 302 

300.  No  discrimination  in  New  York  taxation  of  railroad,  busi- 

ness, mining  or  Insurance  companies  304 

301.  No  discrimination  in  New  York  taxation  of  trust  compa- 

nies    305 

302.  Nor  in  exemption  of  deposits  in  savings  banks,  building 

and  loan  associations  or  stock  in  foreign  corporations. .  305 

303.  Discrimination    through   deduction  of   debts   from   "other 

moneyed  capital" 306 

304.  No  discrimination  in  deduction  of  debts  from  non-compet- 

ing capital 308 

305.  No  discrimination  in  deduction  of  debts  of  unincorporated 

banks 310 

306.  Discrimination  through  failure  to  assess  other  moneyed 

capital 311 

307.  Tax  upon  deposits  held;  not  discriminative 312 

308.  Discrimination  must  be  substantial 312 

309.  A  difference  in  taxation  not  necessarily  discriminative  .  . .  313 

310.  Resident  and  non-resident  shareholders 313 

311.  Difference  in  the  rate  of  taxation  not  necessarily  discrim- 

inative    314 

312.  Equality  of  taxation  requires  equality  in  valuation  as  in 

rate  of  taxation 315 

313.  Supreme  Court  on  assessors'  practice  of  valuation 315 

314.  Inequality  must  be  intentional  and  habitual 317 

315.  Mere  mistake  in  judgment  no  discrimination 318 

316.  Formal  resolution  not  necessary  for  intentional  discrim- 

ination    319 

317.  A  California  discrimination  in  valuation  held  discrimina- 

tive   320 

318.  Difference  in  valuation  between  different  classes  of  per- 

sonalty not  discriminative  against  national  banks 321 

319.  Taxation  of  real  estate  of  national  banks  323 

320.  Double  taxation  of  national  banks  324 

321.  Enforcement  of  tax 325 

322.  Visitorial  power  of  State  over  national  banks 326 

323.  The  remedy  by  injunction 327 


XVlll  TABLE   OF    CONTENTS. 

CHAPTER    X. 

THE   FOURTEENTH    AMENDMENT.  Page 

§  324.  Occasion  and  immediate  purpose  of  amendment 328 

325.  Slaughter  House  cases 331 

326.  Privileges  and  immunities  of  citizens  of  United  States. .  .  332 

327.  Construction  of  amendment 334 

328.  Amendment  applies  only  to  State  action 335 

329.  Protection  not  limited  to  citizens 336 

330.  Corporations  are  "persons"  under  Fourteenth  Amendment  337 

331.  "Any   person"  and   "any   person  within   the  jurisdiction" 

distinguished 338 

332.  Application  of  amendment  to  State  taxation 338 

333.  Justice  Field  on  Fourteenth  Amendment  and  State  taxa- 

tion       340 

334.  Circuit  Judge  Jackson  on  Fourteenth    Amendment    ahd 

State  taxation 343 

335.  "Due  process  of  law"  and  "the  equal  protection  of  the 

laws"  distinguished 344 

336.  Jurisdiction  over  State  Courts  under  the  Amendment  of 

1914 346 

337.  Substance  and  not  form  regarded  in  alleged  violations  of 

Fourteenth  Amendment 348 

338.  Fourteenth  Amendment  in  condemnation  for  public  pur- 

poses       349 


CHAPTER    XL 

DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE. 

339.  Due  process  of  law  is  "the  law  of  the  land" 352 

340.  Due  process  of  law  in  taxation  does  not  require  judicial 

hearing , . .     353 

341.  Notice  and  hearing  not  required  in  cases  of  licenses,  etc.. .     355 

342.  Hearing  not  required  where  valuation  is  fixed    by    tax- 

payer       357 

343.  Where  amount  of  tax  is  dependent  on  valuation,  hearing 

is  required 357 

344.  Notice  and  hearing  in  inheritance  taxes 359 

345.  Actual   notice  and  hearing  held  sufficient  in  absence  of 

statute 359 

346.  Rehearing  or  appeal  to  courts  not  required  in  valuation. .     360 

347.  Ruling  of  State  court  that  hearing  is  required  is  conclu- 

sive      361 

348.  Personal  notice  of  fixed  public  session  of  revision  boards 

not  required 362 


TABLE   OF    CONTENTS.  XII 

Page 

§  349.     Provision  for  notice  may  be  implied 364 

350.  Distinction  between  assessments  for  general  and  special 

taxation 365 

351.  Notice  by  publication 365 

352.  Due  process  satisfied  by  opportunity  for  hearing  at  any 

stage  of  proceeding 366 

353.  Collection  of  taxes  through  summary  proceedings 367 

354.  Collection  of  taxes  through  distraint  and  seizure 368 

355.  Legislative  discretion  in  imposing  penalties  on  delinquents  368 

356.  Plenary  power  of  State  in  assessments  and  re-assessments  369 

357.  The  equalization  of  assessments   373 

358.  Assessment  in  its  relation  to  tax  titles 374 

359.  Assessment  by  Boards  of  Railroad  Commissioners 375 

360.  State  Boards  of  Equalization  in  taxation  procedure 375 

361.  Estoppel  of  taxpayer  by  his  return  for  assessment 376 

362.  A  joint  and  unapportioned  assessment  of  taxable  and  non- 

taxable property  void  in  toto  377 

363.  Legislative  legalization  of  defective  assessment  held  void.  377 

364.  Forfeiture  of  lands  for  taxes  378 

365.  Rights  of  adverse  claimants  in  Kentucky  tax  forfeitures.  380 

366.  New  remedies  for  collection  of  taxes  may  be  adopted...  381 

367.  Effect  of  statutory  conclusiveness  of  tax  deeds 382 

368.  Essentials  only  considered  in  reference  to  due  process  of 

law 383 

369.  Limitation  and  curative  statutes 385 

370.  Jurisdiction  of  United  States  courts  in  enforcing  collection 

of  State  taxes 386 

371.  No  want  of  due  process  of  law  when  tax  sale  is  subject  to 

right  of  redemption 387 

372.  Due  process  in  assessment  of  Trustees 388 

ft 

373.  Discretionary  and  mandatory  statutory  requirements  dis- 

tinguished    389 

374.  Enforcement  of  tax  lien  by  plenary  civil  action 390 

375.  Due  process  in  Michigan  railroad  taxation 391 


CHAPTER     XII. 

DUE  PROCESS  OF  LAW  AND  THE  PUBLIC  PURPOSE  OF 
TAXATION. 

§  376.  Public  purpose  essential  in  taxation 392 

377.  Loan  Association  v.  Topeka 394 

378.  Municipal  bonds  held  invalid  for  want  of  public  purpose.  395 

379.  Public  purpose  of  taxation  under  Fourteenth  Amendment.  397 


XX  ^         TABLE   OF    CONTENTS. 

Page 

§  380.     Supreme  Court  on  Loan  Association  v.  Topeka 398 

381.  City  taxation  of  annexed  farming  lands  sustained 399 

382.  What  is  public  purpose  for  taxation?  401 

383.  Conflicting  judicial  opinions  as  to  public  purpose  neces- 

sary for  taxation 402 

384.  Erection  of  public  sorghum  mills  not  public  purpose 404 

385.  Elimination  of  grade  crossings  and  a  union  railway  station 

a  lawful  public  purpose 406 

386.  Inspiration  of  patriotism  lawful  public  purpose 407 

387.  Taxation  for  public  ownership  408 

388.  Public  purpose  in  eminent  domain 410 

389.  Any  proceeding  dependent  upon  taxation  for  private  pur- 

pose, invalid  412 

390.  Railroad  aid  bonds 412 

391.  Purpose  of  taxation  must  not  only  be  public  but  pertain  to 

district  taxed 413 


CHAPTER     XIII. 

DUE  PROCESS  OF  LAW  IN  SPECIAL  ASSESSMENTS  FOR  LOCAL 
IMPROVEMENTS. 

§  392.     Special  assessmeits  made  under  taxing  power 416 

393.  Peculiar  difficulties  in  special  assessments 418 

394.  Fifth  and  Fourteenth  Amendments  in  relation  to  special 

assessments  419 

395.  General  power  of  State  in  local  assessments 420 

396.  Power  of  State  to  impose  taxation  upon  municipalities..  422 

397.  Limitation  of  power  to  recover  personal  judgment 424 

398.  Assessments  for  drainage  425 

399.  Assessments  for  irrigation  427 

400.  Assessment  for  defraying  preliminary  expenses  sustained  431 

401.  Public  improvements  in  municipalities   431 

402.  Difficulty  of  determining  special  benefits   433 

403.  Apportionment  of  cost  of  municipal  public  improvements.  433 

404.  Special  benefits  under  State  constitutions  435 

405.  Legislative  discretion  in  apportionment 436 

406.  Consideration  of  special  benefits  excluded  by  legislative 

apportionment 436 

407.  Legislative  power  not  unlimited 438 

408.  Supreme  Court  on   assessments   for  municipal    improve- 

ments    439 

409.  Supreme  Court  on  assessments  for  sewers 441 


TABLE   OF    CONTENTS.  XXI 

Page 

§  410.     Supreme  Court  on  assessments  for  streets  and  sidewalks.  442 

411.  Improvement    ordinance    not    invalidated    by    restricting 

work  to  resident  citizens 444 

412.  Right  of  property  owner  to  equitable  relief  after  perform- 

ance of  contract 444 

413.  Benefit  districts  for  street  improvements 445 

414.  Special  assessments  for  public  parks 445 

415.  If  assessment  is  set  aside,  reassessment  may  be  made. . .  .  446 

416.  Reassessment  dependent  on  the  local  law  447 

417.  Notice  and  opportunity  for  hearing  448 

418.  Notice  and  hearing  under  legislative  apportionment 449 

419.  Where  court  relief  denied,  some  hearing  essential 451 

420.  Hearing  not  essential  for  party  only  contingently  liable.  452 

421.  Hearing  not  required  before  including  property  in  bene- 

fited district 452 

422.  Notice  to  parties  liable  to  be  assessed  in  street  openings 

not  required  453 

423.  Express  finding  of  benefits  not  required  454 

424.  Enforcement  of  special  assessments  455 

425.  Conclusiveness  of  State  determination 456 

426.  Supreme  Court  in  Norwood  v.  Baker 457 

427.  Norwood  v.  Baker  in  State  courts  and  U.  S.  circuit  courts  459 

428.  Norwood  v.  Baker  limited  to  its  "special  facts" 462 

429.  Municipal  bonds  payable  from  assessments  held  valid  not- 

withstanding invalidity  of  assessment 466 

430.  Supreme  Court  in  King  v.  Portland 468 

431.  Assessment  lawfully  levied  for  benefits  already  accrued.  471 

432.  Eminent  domain  and  special  assessments   471 

433.  Legislative  power  and  special  facts 472 

434.  Accidental  or  exceptional  circumstances  474 

436.  Property  incapable  of  benefit,  not  lawfully  assessable. . . .  476 

437.  Municipal  bonds  for  local  improvements 477 

438.  Jurisdiction  of  equity  478 


CHAPTER     XIV. 

DUE  PROCESS  OF  LAW  AND  THE  JURISDICTION  OF 
THE    STATES. 

§  439.     Tax  must  be  levied  upon  subjects  within  jurisdiction  of 

State 481 

440.  Limitation  of  taxing  power  by  jurisdiction  not  dependent 

on  Fourteenth  Amendment 482 

441.  The  taxable  jurisdiction  of  State  over  land   483 


Xxii  TABLE  OF    CONTENTS. 

Page 

§  442.     Assessment  of  land  without  deduction  of  mortgage,  not 

violative  of  due  process  of  law  484 

443.  Jurisdiction  of  State  in  taxation  of  property 484 

444.  Jurisdiction  of  State  for  taxation  over  property  in  bonded 

warehouses 486 

445.  A  State  has  no  taxing  jurisdiction  over  property  in  foreign 

warehouses 486 

446.  State  may  tax  money  and  securities  in  its  jurisdiction  of 

non-resident  owners 487 

447.  Property  in  hands  of  resident  agents  subject  to  taxing 

power    489 

448.  Jurisdiction  for  taxation  of  credits  not  dependent  upon 

residence  of  agent  or  of  debtors  491 

449.  Credits  due  foreign  life  insurance  companies 492 

450.  Premiums   due   foreign   insurance   companies    subject   to 

local  taxation 493 

451.  Credits  must  be  localized  in  jurisdiction  for  taxation  ....  493 

452.  Enforcement  of  taxes  against  non-resident  owners  of  prop- 

erty in  State 494 

453.  Credits  under  the  Louisiana  Code  held  taxable 495 

454.  Credits  held  not  localized  for  taxation   496 

455.  Bank  credits  under  California  statute  held  not  taxable. . .  .  496 

456.  Power  of  State  in  taxing  corporation  bondholders  through 

corporation 497 

457.  State  cannot  compel  foreign  railroad  company  to  act  as 

tax  collector 498 

458.  State  may  make  mortgages  taxable  interests  in  real  estate  499 

459.  Foreign-held  bonds  case  in  part  overruled  501 

460.  State  may  tax  stock  of  non-resident  holders  in  domestic 

corporations 502 

461.  Non-resident  stockholder  not  taxable  in  absence  of  statute  503 

462.  Due  process  of  law  in  taxation  of  interstate  properties..  504 

463.  Due  process  of  law  in  taxation  of  corporations 507 

464.  Deposits  by  foreign  insurance  companies  taxable  by  the 

State 508 

465.  Jurisdiction  in  taxation  over  property  of  trustees,  receiv- 

ers, etc 509 

466.  The  taxable  situs  of  stock  not  transferred  by  pledge 510 

467.  Situs  for  taxation  of  deposits  in  litigation 511 

468.  State's  jurisdiction  over  property  for  taxation  summarized  511 

469.  Taxation  of  business  and  license  taxation 512 

470.  Membership  in  an  incorporated  chamber  of  commerce  tax- 

able    512 

471.  License  tax  on  emigrant  agent,  sustained 514 


TABLE   OF    CONTENTS.  XXIU 

Page 

§  472.    Taxation  and  regulation  under  police  power 515 

473.  Special  excise  taxes  in  the  exercise  of  police  power,  sus- 

tained    516 

474.  Limitation  of  power  to  impose  taxes  on  occupations 517 

475.  Jurisdiction  over  persons  for  taxation  518 

476.  Domicile  distinguished  from  residence  and  citizenship..  520 

477.  Right  to  change  domicile 520 

478.  Motive  in  change  of  domicile,  immaterial 521 

479.  Term  "residence"  employed  in  sense  of  "domicile"  521 

480.  Due  process  of  law  and  taxation  at  domicile   522 

481.  John  D.  Rockefeller  not  domiciled  in  Ohio  for  taxation..  523 

482.  Taxation  of  personal  property  situated  without  State  of 

owner's    domicile    523 

483.  Taxation   of  citizens  at  domicile  on  mortgages  in   other 

States 526 

484.  State  may  tax  resident  stockholders  in  foreign  corporation 

upon  value  of  stock 528 

485.  No  immunity  of  State  securities  from  taxation  in  other 

States 530 

486.  Domicile  and  location,  as  situs  for  taxation,  in  same  State.  531 

487.  Double  taxation  not  presumed 532 

488.  Due  process  of  law  and  double  taxation 533 

489.  Double  taxation  from  competing  State  authorities  535 

490.  Interstate  comity  essential  to  avoid  double  taxation 535 

491.  Double  taxation  under  the  Federal  government 537 

492.  Due  process  of  law  and  inheritance  taxation 538 

493.  Duplicate  inheritance  taxation 539 

494.  The  Supreme  Court  on  duplicate  inheritance  taxation....  541 

495.  Question  one  of  construction  and  not  of  legislative  power.  541 

496.  Due  process   of  law  in  taxation   requires  legislative   au- 

thority    542 

497.  State  construction  of  legislative  authority  conclusive....  545 

498.  Constitutionality  of  statutes  is  for  judicial,  not  executive, 

determination 547 


CHAPTER    XV. 

EQUAL  PROTECTION   OF   THE  LAWS. 

499.  Immediate  purpose  of  clause  549 

500.  What  is  "the  equal  protection  of  the  laws?" 549 

501.  Equality  in  taxation  under  Fourteenth  Amendment S.'i!) 

502.  Equality  and  efficiency  in  taxation  through  diversity  of 

methods 552 


XXiv  TABLE   OF    CONTENTS. 

Page 

§  503.     Classification  for  taxation 552 

504.  "Equal  protection  of  the  laws"  does  not  require  iron  rule 

of  equal  taxation 554 

505.  The  equal  protection  of  the  laws  in  corporate  taxation. .  555 

506.  Foreign  corporations  and  "equal  protection  of  the  laws".  557 

507.  Foreign  interstate  carriers  and  the  equal  protection  of  the 

laws 558 

508.  Specification  of  railroads  is  reasonable  classification  for 

taxation 560 

509.  Special  methods  of  assessment  of  railroad  property  sus- 

tained    561 

510.  Right  of  appeal  not  essential  to  "equal  protection  of  the 

laws"   563 

511.  Exemption  of  producers  in  license  taxation 564 

512.  Classification   in   taxation  and   in  police  legislation  com- 

pared    565 

513.  Difficulty  of  classification 566 

514.  Inequality  of  burden  does  not  establish  invalidity  of  tax.  568 

515.  Equality  and  uniformity  in  inheritance  taxation. 569 

516.  "Equal  protection  of  the  laws"  in  inheritance  taxation. .. .  570 

517.  The  Supreme  Court  on  inheritance  taxation  and  equal  pro- 

tection of  the  laws 573 

518.  Classification  by  amount  in  license  taxation   574 

519.  Property  taxation  and  inheritance  taxation  distinguished.  575 

520.  Classification  by  exemption   576 

521.  Exemption  for  efficiency  in  taxation  578 

522.  Exemption  of  certain  Michigan  telephone  companies  valid  579 

523.  Conditions  which  warrant  classification 580 

524.  Constitutional  amendment  held  unconstitutional 581 

525.  Department  Store  Tax  held  unconstitutional 583 

526.  Taxation  of  employers  of  foreign-born  persons  held  invalid  584 

527.  Discrimination  between  residents  and  non-residents 585 

528.  Illegal  discrimination  in  license  taxation 586 

529.  Street  railroads  and  equal  protection  of  the  laws 589 

530.  The  Supreme  Court  on  classification  in  license  or  occupa- 

tion taxation 589 

531.  Discrimination  in  expenditure  of  public  funds   591 

532.  Equal  protection  of  the  laws  in  tax  procedure 593 

533.  Discrimination    between    races    in   expenditure    of   school 

funds 593 

534.  Federal  and  State  guaranties  of  equal  taxation 595 


TABLE   OF    CONTENTS.  XXV 


CHAPTER     XVI. 

EQUAL  PROTECTION  OF  THE  LAWS  IN  THE  VALUATION  OF 

PROPERTY. 

Page 

§  535.     Inequality  in  taxation  through  inequality  of  valuation...  597 

536.  Inequality  of  valuation  from  error  of  judgment 599 

537.  Inequality  through  unequal  local  assessments 599 

538.  Fraudulent  valuation  in  assessments   601 

539.  Discrimination  by  undervaluation  of  other  property 602 

540.  Dilemma  of  courts  in  remedying  unequal  valuation 602 

541.  Habitual  and  intentional  violation  of  assessor's  duty  must 

be  proved 6O3 

542.  Relief  against  discriminating  assessments  in  State  courts  605 

543.  Equality  of  valuation  enforced  in  Federal  courts 608 

544.  Judge  Taft  on  dilemma  of  courts 610 

545.  Formal  resolution  not  necessary  for  intentional  discrim- 

ination    gl2 

546.  Supreme  Court  condemns  inequality  of  valuation 613 

547.  Illegality  of  unequal  valuation  reaffirmed — Jurisdiction  of 

equity 615 

548.  Inequality  of  valuation  as  Federal  question 617 

549.  Proof    of    discrimination    by    cross-examination    of    State 

Board  of  Equalization  members 6I9 

550.  Systematic   discrimination   by   undervaluation    of     other 

property,  illegal 620 

551.  The  proof  of  unlawful  discrimination  621 

552.  Full  valuation  enforced  by  creditors  of  counties  and  muni- 

cipalities    g22 


CHAPTER     XVII. 

THE  TAXING  POWER  OP  CONGRESS. 

553.  Taxing  power  of  Congress  granted  by  Constitution 626 

554.  Purpose  for  which  taxing  power  may  be  exercised 627 

555.  Appropriation  of  public  money 630 

556.  Supreme  Court  on  bounty  legislation  632 

557.  Moral  and  equitable  claims  as  "debts"  633 

558.  Conclusiveness  of  legislative  determination  as  to  what  are 

"debts" g34 

559.  Taxes,  duties,  imposts  and  excises 634 

560.  What  are  direct  taxes? g37 

561.  The  income  tax  amendment  of  1913 


562. 


639 


The  corporation  excise  tax  of  1909,  constitutional  640 


XXVI  TABLE   OF    CONTENTS. 

Page 

§  563.     Constitutionality  of  the  income  tax  act  of  1913,  sustained  641 

564.  Inheritance  tax  not  direct  tax 643 

565.  Direct  taxation  in  economic  sense  and  constitutional  sens« 

distinguished 644 

566.  The  war  revenue  act  of  June  13,  1898 645 

567.  Direct  tax  as  defined  by  the  Supreme  Court 645 

568.  Taxing  power  of  Congress  coextensive  with   territory   of 

United  States 648 

569.  Uniformity  in  Federal  taxation   647 

570.  Uniformity  in  levy  of  duties  649 

571.  Levying  duties  under  the  war  power 650 

572.  Uniformity  clause  as  applied  to  territorial  acquisitions..  651 

573.  The  insular  decisions 652 

574.  Tax  upon  exports 654 

575.  Tax  on  foreign  bills  of  lading  is  tax  on  exports 65'3 

576.  Porto  Rican  tariff  of  1900  not  tax  on  exports 657 

577.  Act  conferring  reciprocity  powers  on  President  sustained  658 

578.  Taxing  power  of  Congress  with  reference  to  treaty  power  659 

579.  State  instrumentalities  and  agencies  exempt  from  Federal 

taxation 660 

580.  Exemption  does  not  extend  to  the  State's  assumption  of 

business  of  liquor  selling 663 

581.  Federal  succession  tax  on  bequests  to  municipality 663 

582.  State  securities  are  not  exempt  from  Federal  inheritance 

taxes 664 

583.  Federal  securities  subject  to  Federal  inheritance  taxes.  .  664 

584.  Taxing  power  of  Congress  and  State  authority 665 

585.  Taxing  power  of  Congress  and  State  franchises 665 

586.  Taxing  power  of  Congress  and  police  power  of  State 667 

587.  Municipal  corporations  subject  to  internal  revenue  taxa- 

tion    668 

588.  Diminution  of  salaries  by  taxation 669 

589.  Progressive  taxation 670 

590.  Scope  of  Federal  taxing  power  671 

591.  Taxing  power  of  Congress  in  relation  to  interstate  com- 

merce    672 

592.  Congress  may  increase  excise  as  well  as  property  tax. . . .  674 

593.  Taxation  of  property  of  non-resident  aliens 675 

594.  Taxation  of  property  of  residents  invested  abroad 676 

595.  The  taxing  power  of  Congress  over  territories 677 

596.  Classification  in  territorial  taxation  of  Indian  Reservations  678 

597.  The  taxing  power  in  case  of  unincorporated  territories.  .  678 

598.  Taxation  in  District  of  Columbia 680 

599.  Power  of  Congress  in  enforcing  collection  of  taxes 685 


TABLE   OF    CONTENTS.  XXVll 


CHAPTER     XVIII. 

THE    ENFORCEMENT    OF    FEDERAL    LIMITATIONS    UPON    THE 

STATE   TAXING   POWER. 

Page 

§  600.     Judicial  Remedies  for  illegal  taxation   688 

601.  Two  forums  for  Federal  question  in  taxation    690 

602.  Amount  of  tax  as  affecting  procedure 692 

603.  Value  of  the  right   involved   as   affecting  jurisdiction   of 

Federal  court   694 

604.  Pleading  Federal  question  in  U.  S.  courts 695 

605.  Federal  question  and  right  of  removal   696 

606.  Federal  question  on  writ  of  error  to  State  court 697 

607.  What  is  a  Federal  question    700 

608.  Party  admitting  correctness  of  his  own  tax  cannot  invoke 

Federal  protection 702 

609.  Questions  of  fact  not  considered  on  writ  of  error  to  State 

court 702 

610.  Writ  of  error  is  to  highest  State  court  having  jurisdiction  702 

611.  A  personal  interest  necessary  for  writ  of  error  to  State 

court 703 

612.  Practical  considerations  in  selection  of  procedure 703 

613.  Jurisdiction  over  case  and  over  Federal   question   distin- 

guished     705 

614.  When  is  Federal  question  in  taxation  involved 706 

615.  Federal  right  must  be  set  up  in  adversary  proceeding 707 

616.  Injunction  against  taxation   in  Federal  courts 708 

617.  Want  of  adequate  remedy  at  law  must  be  shown 709 

618.  Injunction  often  only  proper  remedy   710 

619.  Fraud  as  warranting  injunction  in  taxation  712 

620.  Procedure  in  Income  Tax  Cases    713 

621.  Injunction  only  allowed  on  payment  of  taxes  actually  due  714 

622.  Injunction  will  not  lie  when  assessment  incomplete 716 

623.  When  application  must  first  be  made  to  State  Board 716 

624.  State  statutory  remedies  do  not  oust  equitable  jurisdiction 

of  Federal  courts    717 

625.  Jurisdiction  and    procedure    in   equity 719 

626.  Equity  no  jurisdiction  to  levy  a  tax 720 

627.  Habeas  corpus  as  remedy  for  illegal  taxation 721 

628.  Allowances  of  interest  and  penalties  in  tax  procedure 722 

629.  Equitable  relief  barred  by  collusion 723 

630.  State  can  only  be  sued  with  its  consent 724 

631.  Suit  against  State  and  against  State  officials  distinguished  725 

632.  Where  jurisdiction  depends  upon  party,  it  is  party  named 

in   record    727 


XXVIU  TABLE   OP    CONTENTS. 

Page 
§  633.     Collection  of  taxes  on  property  in  possession  of  receiver 

of  Federal  court    728 

634.  Objections  to  jurisdiction  and  defenses  to  merits 730 

635.  Over-valuation  not  a  defense  in  action  at  law 730 

636.  Effect  of  prior  adjudication  in  State  court 731 

637.  Judiciary  concluded  by  decision  of  political  department  of 

government 732 

638.  No  equity  jurisdiction  in  Federal  courts  to   enforce  levy 

of  tax    732 

639.  Mandamus  to  issue  tax 733 

640.  Duty  of  taxing  officers  in  mandamus 734 

641.  Mandamus  must  be  based  upon  statute  authorizing  tax. . .  735 

642.  Local  tax  laws  administered  in  Federal  courts 736 

643.  Local  law  and  general  law  distinguished 737 

644.  Suits  by  stockholders  in  right  of  corporation 738 

645.  Burden  of  proof  in  resisting  taxation 739 

646.  Remedy   against    tax    officials 740 

647.  Importance  of  speedy  remedy  in  taxation 742 


CHAPTER    XIX. 

ENFORCEMENT  OF  LIMITATIONS  UPON  FEDERAL 
TAXATION 

648.  The  remedial  law  in  Federal  and  State  taxation 747 

649.  Federal  taxes  cannot  be  enjoined 748 

650.  Suit  against  collector  to  recover  taxes  illegally  or  errone- 

neously  assessed 749 

651.  Involuntary  payment  of  taxes  essential  for  recovery 750 

652.  Requirements  of  statute  must  be  complied  with 752 

653.  Judgment  against  collector  carries  interest  and  costs....  754 

654.  Suits  against  the  United  States  under  the  Tucker  Act. . .  .  755 

655.  Procedure  under  the  Tucker  Act 759 

656.  Where  the  judgment  of  the  Court  of  Appeals  not  final. . . .  760 

657.  Limitations   of  actions    761 

658.  Only  party  in   interest  can  bring  suit 763 

659.  The  recovery  of  duties  illegally  or  erroneously  collected..  763 

660.  The  Federal  procedure  summarized 764 


APPENDIX 


THE  STATE  TAX  SYSTEMS, 

Page 

Introduction 769 

Alabama 772 

Arizona 775 

Arkansas 778 

California 781 

Colorado 791 

Connecticut 794 

Delaware 796 

Florida 800 

Georgia 803 

Idaho 806 

Illinois  . 809 

Indiana 813 

Iowa  815 

Kansas 818 

Kentucky 821 

Louisiana : 826 

Maine 830 

Maryland 832 

Massachusetts 835 

Michigan 839 

Minnesota 843 

Mississippi 846 

Missouri 850 

Montana 855 

Nebraska .' 859 

Nevada 863 

New  Hampshire 866 

New  Jersey 869 

New  Mexico 872 

New  York •. 875 

North  Carolina ' 880 

North  Dakota 883 

Ohio 887 

Oklahoma 891 

xxix 


XXX  TABLE   OF    CONTENTS. 

THE  STATE  TAX  SYSTEMS— Continued, 

Page 

Oregon 897 

Pennsylvania 900 

Rhode  Island 904 

South  Carolina .' 906 

South  Dakota 909 

Tennessee 912 

Texas 916 

Utah 919 

Vermont 923 

Virginia 926 

Washington 933 

West  Virginia 935 

Wisconsin ' 939 

Wyoming 943 

FEDERAL  TAX  LAWS  947 

Introduction 947 

Summary  of  Income  Tax  Law 949 

Income  Tax  Law  of  September  8,  1916,  as  amended 

October  3,  1917  953 

The  Estate  or  Inheritance  Tax  Laws  as  amended 

^October  3,  1917 983 

The  Munitions  Tax  of  September  8,  1916 990 

Federal  Miscellaneous  Excise  Taxes 991 

Act  of  March  3,  1917 1004 

Index  to  the  War  Revenue  Act 1005 

War  Revenue  Act  of  October  3,  1917 1007 

Table  of  Cases 1043 

Index 1081 


THE  LAW  OF  TAXATION 


CHAPTER    I. 

LIMITATIONS  UPON  STATE  TAXATION  GROWING  OUT  OF  THE 

RELATIONS  OF  THE  STATE  AND  FEDERAL 

GOVERNMENTS. 

§       1.     Taxation  and  the  Constitution  of  the  United  States. 

2.  The  Constitution  in  relation  to  the  State  and  Federal  power  of 

taxation. 

3.  The  concurrent  powers  of  internal  taxation. 

4.  Judicial  construction  of  Federal  taxing  power. 

5.  Restraints  upon  State  taxation  developed  by  judicial  construc- 

tion. 

6.  Importance  of  decision  in  McCulloch  v.  Maryland. 

7.  Opinion  in  McCulloch  v.  Maryland. 

8.  Osborn  v.  United  States. 

9.  Brown  v.  Maryland. 

10.  United  States  securities  not  taxable  by  States. 

11.  Legal  tender  notes,  etc.,  made  taxable  by  Act  of  Congress. 

12.  Bonds  of  District  of  Columbia  exempted. 

13.  The  exemption  as  dependent  upon  the  relation  of  the  obliga- 

tions to  the  Government. 

14.  Salaries  of  United  States  officials  not  taxable. 

15.  State  tax  upon  passengers  in  mail  coaches  invalid. 

16.  Taxation  of  banks  holding  United  States  securities  invalid. 

17.  Corporate  franchise  tax  distinguished  from  property  tax. 

18.  Taxable  corporate  franchise  defined. 

19.  Taxation  of  shares  of  corporations  holding  Federal  securities. 

20.  State  tax  upon  interstate  passengers  invalid. 

21.  Lands   and    other   property   of   United    States   not   taxable   by 

States. 

22.  Limitations  of  exemption  of  United  States  lands,  etc. 

23.  Lands  granted  to  railroads,  when  taxable. 

24.  The  title  essential  for  State  taxation. 

25.  Taxability  of  mining  claims. 

26.  The  taxability  of  ores  and  other  output  of  Indian  lands. 

27.  Indian  reservations  not  taxable. 

28.  Cattle,  etc.,  of  non-Indians  on  Indian  reservation  taxable. 

29.  Indian  Tax  exemptions  and  alienation. 

30.  State  taxation  of  railroads  incorporated  by  the  United  States. 

(1) 


2  UNITED   STATES  x\GENCrES   AND   PROPERTIES.  §    1 

31.  Railroad  franchises  granted  by  United  States  not  taxable. 

32.  Definition  of  United  States  franchise. 

33.  Intangible  and  tangible  property  of  railroads  incorporated  by 

United  States  taxable. 

34.  Telegraph  companies  under  the  Act  of  July  24,  1866. 

35.  The  taxability  of  Federal  agencies. 

36.  Letters  patent  and  copyrights. 

37.  Corporate  capital  invested  in  patent  rights. 

38.  State  tax  on  bequests  to  United  States. 

39.  United  States  securities  not  exempt  from  State  inheritance  tax. 

40.  Treaty-making  power  and  State  taxation. 

41.  Tax  evasion  through  investments  in  United  States  securities. 

42.  Payment  of  State  taxes  in  coin  sustained. 

§  1.    Taxation  and  the  Constitution  of  the  United  States. — 

The  power  to  tax  has  been  defined  as  the  power  in  the  State  to 
enforce  proportional  contributions  from  persons  and  property 
for  the  support  of  the  government  and  for  all  public  needs. 
This  power  is  therefore  essential  to  the  existence  of  an  organized 
political  community.  In  the  language  of  the  Supreme  Court^ 
concerning  the  power  of  taxation  delegated  to  Congress  by 
the  Constitution: 

"The  power  to  tax  is  the  one  great  power  upon  which  the 
whole  national  fabric  is  based.  It  is  as  necessary  to  the  exist- 
ence and  prosperity  of  a  nation  as  is  the  air  he  breathes  to  the 
natural  man.  It  is  not  only  the  power  to  destroy,  but  it  is  also 
the  power  to  keep  alive." 

The  original  thirteen  States,  when  they  became  independent 
Commonwealths  after  the  declaration  of  independence,  exer- 
cised this  sovereign  power  of  taxation  unrestricted  by  any  ex- 
ternal authority.  It  was  the  absence  of  this  power  in  the  Con- 
gress of  the  Confederation,  and  its  inability  to  enforce  pay- 
ment by  the  States  of  its  requisitions  upon  them,  which  brought 
about  the  failure  of  the  Confederation,  and  was  one  of  the  mov- 
ing causes  in  the  organization  of  the  Federal  Union,  under  the 
Constitution  of  the  United  'States. 

This  fatal  defect  in  the  Articles  of  Confederation,  the  ina- 
bility of  Congress  to  enforce  the  collection  of  its  revenues,  was 


1  Nicol  V.  Ames,  173  U.  S.  1.  c.  515,  43  L.  Ed.  791  (1898). 


§    2  UNITED    STATES   AGENCIES    AND    PROPERTIES.  3 

remedied  in  the  Constitution  by  giving  Congress  a  power  of  taxa- 
tion, exclusive  as  to  imports,  and  concurrent  with  the  States  in 
internal  taxation,  dealing  directly  in  both  with  the  subjects  of 
taxation.  1 

§  2.  The  Constitution  in  Relation  to  the  State  and  Federal 
Power  of  Taxation. — As  the  government  of  the  United  States, 
under  the  Constitution,  is  one  of  delegated  powers.  Congress 
has  only  such  taxing  power  as  the  Constitution  delegates  to  tlie 
Federal  government;  while  the  States  retain  their  original 
powers  of  taxation,  subject  to  the  restrictions  which  the  same 
instrument  imposes  upon  them.  Thus  the  Constitution  acts  in 
the  one  case  as  a  grant,  and  in  the  other  as  a  restraint  of  power. 
It  is  true  that  the  original  State  sovereignty  in  taxation  was 
never  possessed  by  the  States  later  admitted  into  the  Union,  in 
the  same  sense  as  by  the  original  thirteen.  But  this  relation  of 
the  States  to  the  Federal  government  established  by  the  Con- 
stitution is  assumed  without  distinction  by  all  the  States  ad- 
mitted to  the  Union,  on  the  same  basis  as  it  existed  between  the 
original  thirteen  States  and  the  central  government ;  for,  under 
the  Constitution,  all  the  powers  not  delegated  to  the  United 
States  by  the  Constitution  are  reserved  to  the  States  respec- 
tively, or  to  the  people.2  It  was  said  by  the  Supreme  Court  in 
a  notable  case  -.3 

"A  State  in  the  ordinary  sense  of  the  Constitution  is  a 
political  community  of  free  citizens,  occupying  a  territory  of 
defined  boundaries  and  organized  under  a  government  sanc- 
tioned and  limited  by  a  written  constitution,  and  established  by 
the  consent  of  the  governed.    It  is  the  union  of  such  States  un- 


1  Thus  Mr.  Hamilton  said  in  the  Federalist,  No.  16:  "The  govern- 
ment of  the  Union,  like  that  of  each  State,  must  be  able  to  address  it- 
self immediately  to  the  hopes  and  fears  of  individuals;  and  to  attract  to 
its  support  those  passions  which  have  the  strongest  influence  upon  the 
human  heart.  It  must,  in  short,  possess  all  the  means  and  have  a  right 
to  resort  to  all  the  methods,  of  executing  the  powers  with  which  it  is 
intrusted,  that  are  possessed  and  exercised  by  the  governments  of  the 
particular  States." 

2  Constitution,  Amendment  X. 

3  Texas  v.  White,  7  Wall.  1.  c.  721,  19  L.  Ed.  227  (1860), 


4  UNITED  STATES  AGENCIES  AND  PROPERTIES.        §  3 

der  a  common  constitution,  which  forms  the  distinct  and  greater 
political  unit,  which  that  Constitution  designates  as  the  United 
States,  and  makes  of  the  people  and  States  which  compose  it  one 
people  and  one  country." 

And  again  the  court  said:  "Equality  of  constitutional  right 
and  power  is  the  condition  of  all  the  States  of  the  Union,  old 
and  new.  "i  It  was  decided  in  that  case  that  the  ordinance  of 
1787,  for  the  government  of  the  Northwestern  Territory,  and 
the  resolution  admitting  the  State  of  Illinois  into  the  Union, 
could  not  control  the  powers  and  authority  of  the  State  after 
her  admission,  and  that  on  her  admission  she  at  once  "became  en- 
titled to  and  possessed  of  all  the  rights  of  dominion  and  sover- 
eignty which  belonged  to  the  original  States." 

Subject  to  the  restraints  imposed  by  the  Constitution,  and 
those  growing  out  of  the  relations  thereby  created,  the  States 
retain  their  original  taxing  power,  or  more  accurately,  all  the 
States  hold  subject  to  such  restrictions  the  sovereign  taxing 
power,  which  the  original  thirteen  States  exercised  prior  to  the 
adoption  of  the  Constitution.2  The  constitutional  basis  of  in- 
ternal taxation  in  the  United  States,  therefore  rests  upon  the 
concurrent  exercise  by  two  sovereignties  of  the  power  of  taxa- 
tion over  the  same  subjects  and  in  the  same  territory.  The  exer- 
cise by  the  States  of  their  original  power  is  subject,  however, 
to  a  further  qualification  arising  out  of  the  supremacy  of  the 
Constitution,  laws  and  treaties  of  the  United  States,  which  are 
made  by  the  Constitution  the  supreme  law  of  the  land.^ 

§  3.  The  Concurrent  Powers  of  Internal  Taxation. — When 
the  Constitution  was  adopted,  or,  in  the  words  of  John  Quincy 
Adams,  "extorted  from  the  grinding  necessity  of  a  reluctant 
people,"  this  grant  to  the  Federal  government  of  a  concurrent 
power  over  internal  taxation  was  jealously  and  stoutly  resisted. 
The  exclusive  jurisdiction  of  the  Federal  government  over  im- 
ports and  customs  duties  seems  to  have  been  recognized  as  a 


1  Esoanaba  Company  v.  Chicago,  107  U.  S.  678,  27  L.  Ed.  442  (1883). 
See  also  Huse  v.  Glover,  119  U.  S.  543,  30  L.  Ed.  487  (1886). 

2  1  Story  on  Cons.,  Sec.  940. 

3  Art.  VI.,  Sec.  2,  of  the  Constitution. 


§    3  UNITED    STATES   AGENCIES    AND   PROPERTIES.  5 

necessity,  but  internal  taxation,  it  was  claimed,  should  be  left 
to  the  States,^  or  the  people  would  be  oppressed  by  an  army  of 
Federal  tax  collectors  and  crushed  by  the  weight  of  this  double 
taxation  by  the  State  and  Federal  authority.  The  Constitution 
contains  no  express  limitation  upon  the  taxing  power  of  the 
States  except  as  to  imports  and  exports,  and  its  defenders, 
notable  among  them  Mr.  Hamilton  in  the  Federalist,  contended 
that  this  left  the  power  of  the  States  over  internal  taxation  un- 
restrained. Thus  he  said  concerning  the  supposition  that  the 
taxing  power  of  the  States  M'as  repugnant  to  that  of  the 
Union :  2 

' '  It  cannot  be  supported  in  that  sense  which  would  be  requisite 
to  work  an  exclusion  of  the  States.  It  is,  indeed,  possible  that  a 
tax  might  be  laid  on  a  particular  article  by  a  State,  which  miglit 
render  it  inexpedient  that  thus  a  further  tax  should  be  laid  on 
the  same  article  by  the  Union ;  but  it  would  not  imply  a  consti- 
tutional inability  to  impose  a  further  tax.  The  quantity  of  the 
imposition,  the  expediency  or  inexpediency  of  an  increase  on 
either  side,  would  be  mutually  questions  of  prudence ;  but  there 
would  be  involved  no  direct  contradiction  of  power.  The  par- 
ticular policy  of  the  national  and  of  the  State  systems  of  finance 
might  now  and  then  not  exactly  coincide  and  might  require 
reciprocal  forbearances.  It  is  not,  however,  a  mere  possibility 
of  inconvenience  in  the  exercise  of  powers,  but  an  immediate 
constitutional  repugnancy  that  can  by  implication  alienate  and 
extinguish  a  pre-existing  right  of  sovereignty.  "* 


1  See  2  Thorp's  Constitutional  History  of  the  United  States,  Book  III, 
for  an  interesting  account  of  the  arguments  for  and  against  the  Con- 
stitution.   See  also  Federalist,  Nos.  30  to  36. 

2  Federalist,  No.  32. 

3  Mr.  Hamilton  in  Federalist,  No.  36,  in  answer  to  the  argument  that 
there  would  be  "double  sets  of  officers"  for  internal  ta.xation,  says  that 
probably  "the  United  States  will  either  wholly  abstain  from  the  objects 
preoccupied  for  local  purposes  or  will  make  use  of  the  State  officers  and 
State  regulations  for  collecting  the  additional  imposition."  He  inti- 
mated also  that  the  expenses  of  the  States  would  probably  be  small  and 
that  only  a  small  land  tax  would  be  required  for  their  purposes  after 
their  then  outstanding  debts  were  paid.  This  discussion  of  the  Fed- 
eralist as  to  the  concurrent  power  of  taxation  was  used  in  McCuUoch 
V.  Maryland  in  support  of  the  argument  in  favor  of  the  power  of  the 
State  to  tax  the  branch  of  the  National  Bank;  see  reference  to  same  in 
the  opinion  of  Chief  Justice  Marshall,  infra,  Sec.  7. 


6  UNITED   STATES  AGENCIES  AND   PROPERTIES.  §   4 

The  distinction  made  by  Mr.  Hamilton,  on  the  adoption  of 
the  Constitution,  between  questions  of  "expediency"  in  the 
concurrent  exercise  of  the  sovereign  powers  of  taxation  by  the 
dual  sovereignties  of  the  State  and  Federal  government  and  the 
"constitutional  repugnancy"  which  precludes  the  exercise  of 
the  power  of  the  States,  is  of  still  graver  importance  under  the 
changed  conditions  of  our  own  time.  The  Federal  taxing  power 
has  been  extended  to  include  direct  income  taxation,  i  and  this 
form  of  taxation  is  open  to  all  the  States,  and  is  exercised  by 
several.2  On  the  other  hand,  the  States  have  so  expanded  in 
number,  population  and  wealth,  that  the  revenues  of  the  small- 
est now  rank  with  that  of  the  Federal  government  at  the  time 
of  the  adoption  of  the  Constitution.  Furthermore,  the  public 
expenditure,  both  under  normal  conditions  and  in  public  emer- 
gencies, are  forcing  both  the  Federal  and  State  governments  to 
increase  their  revenues  by  taxation  of  the  same  property  and 
business,  which  is  subject  to  these  dual  sovereignties. 

While  the  "expediency"  referred  to  by  Mr.  Hamilton,  is 
necessarily  remitted  to  those  who  are  charged  with  the  respon- 
sibility of  exercising  these  sovereign  powers,  it  is  necessary  to 
consider  the  eases  of  "constitutional  repugnancy"  which  now, 
as  heretofore,  "extinguish  the  pre-existing  right  of  sovereignty" 
in  the  States 

§  4.  Judicial  Construction  of  Federal  Taxing  Power.— The 
attention  of  the  fathers  in  framing  the  Constitution  was  there- 
fore not  directed  to  the  restraint  upon  the  taxing  power  of  the 
States  growing  out  of  the  relations  between  the  States  and  the 
Federal  government,  for  no  one  then  foresaw  the  tremendous  ex- 
pansion of  the  national  commerce  and  of  the  functions  of  the 
Federal  government,  but  their  attention  was  directed  to  restraints 
upon  the  Federal  taxing  power.  This  jealousy  of  the  Federal 
government  occasioned  the  only  express  restrictions  upon  its  tax- 


1  See  infra,  Sec.  561. 

2  See    infra,   appendix,    Massachusetts,    Mississippi,    Missouri,    Okla- 
homa, South  Carolina,  Virginia  and  Wisconsin. 

3  For  the  inherent  limitation  of  the  Federal  taxing  power  over  State 
agencies,  see  infra,  Sec.  579. 


§  5  'united  states  agencies  and  properties.  7 

ing  power,  to-wit,  the  provision  that  direct  taxes  shall  be  appor- 
tioned according  to  population,  the  requirement  of  uniformity 
as  to  all  duties,  imposts  and  excises,  and  the  prohibition  of  a 
tax  upon  exports  from  any  State,  or  any  preference  between 
ports  of  the  States.! 

After  more  than  a  century  of  government  under  the  Consti- 
tution, the  Supreme  Court  was  unable,  at  least  at  the  time,  to 
agree  upon  a  construction  of  any  one  of  these  three  restrictions. 
It  was  decided  by  a  bare  majority  of  five  to  four  that  the  term 
"direct  taxes"  did  not  mean  what  it  had  been  construed  to 
mean  during  the  one  hundred  years  since  the  foundation  of  the 
government ;  2  while  upon  the  application  of  the  uniformity  re- 
quirement in  Federal  taxation  to  the  territorial  insular  acquisi- 
tions of  the  country,  the  .judges  were  unable  to  agree  upon  any 
opinion; 3  and  only  by  a  majority  of  one,  as  in  the  Income  Tax 
Case,  was  a  decision  rendered  as  to  what  was  a  duty  upon  exports 
or  a  preference  between  ports  with  reference  to  these  same  terri- 
torial acquisitions.4  This  inability  of  the  eminent  jurists  of 
the  Supreme  Court  to  agree  in  the  construction  and  application 
of  these  provisions  of  the  Constitution  forcibly  illustrates  not 
only  the  complexity  inherent  in  the  adjustment  of  the  concur- 
rent taxing  powers  of  dual  sovereignties,  but  in  a  broader  sense 
the  inadequacy  of  a  written  constitution  when  confronted  with 
conditions  and  emergencies  never  contemplated  by  its  framers. 

§  5.  Restraints  Upon  State  Taxation  Developed  By  Judi- 
cial Construction. — While  the  taxing  power  of  the  States  is 
thus  unrestrained  by  any  express  constitutional  restrictions,  ex- 
cept such  as  are  involved  in  the  exclusive  power  over  foreign 
commerce  and  concurrent  power  in  internal  taxation  given  to 
Congress,  there  is  a  very  important  restraint  arising  out  of  the 
necessary  relations  between  the  State  and  the  Federal  govern- 
ment created  by  the  Constitution,  and  the  supremacy  of  the 


I'See  Constitution,  Art.  I.,  Sees.  8  and  9. 

ajncome  Tax  Cases.  157  U.  S.  429,  39  L.  FA.  759   (1895);    158  U.  S. 
601;  39  L.  Ed.  1108   (1895). 

■■i  Dovvnes  v.  Bidwoll,  183  U.  S.  244,  45  L.  Ed.  1088   (1901). 
«  Dooley  v.  United  States,  183  U.  S.  151,  46  L.  Ed.  128  (1901). 


8  UNITED   STATES   AGENCIES   AND   PROPERTIES.  §    6 

Federal  power  which  the  Constitution  established.     Thus  it  is 

provided  :^ 

''This  Constitution  and  the  laws  of  the  United  States  which 
shall  be  made  in  pursuance  thereof,  and  all  treaties  made,  or 
which  shall  be  made,  under  the  authority  of  the  United  States, 
shall  be  the  supreme  law  of  the  land ;  and  the  judges  in  every 
State  shall  be  bound  thereby,  anything  in  the  Constitution  or 
laws  of  any  State  to  the  contrary  notwithstanding." 

There  is  no  provision  in  the  Federal  Constitution  prohibiting 
State  taxation  of  Federal  agencies  or  franchises,  or  interstate 
commerce,  or  protecting  from  taxation  property  exempted  by 
contracts  of  the  State  legislatures;  but  neither  is  there  any  ex- 
press provision  in  the  Constitution  whereunder  the  Federal  Su- 
preme Court  can  declare  an  Act  of  Congress  or  of  a  State  legis- 
lature void  as  violating  that  instrument,  and  it  is  said  that  for- 
eigners have  searched  the  Constitution  in  vain  to  find  a  recog- 
nition of  this  power."  It  has  in  fact  been  developed  by  judicial 
construction  from  the  necessary  relation  between  the  legislative 
power  and  the  court  created  by  the  written  Constitution.^ 

Thus  also  by  judicial  construction  from  the  necessary  relation 
between  the  power  of  State  taxation  and  the  supremacy  of  the 
Federal  authority,  the  great  volume  of  the  law  of  Federal  re- 
straints upon  State  taxation  has  been  developed  upon  the  funda- 
mental principle  of  the  supremacy  of  the  Federal  authority,  as 
expounded  by  the  great  constructive  mind  and  the  masterful 
reasoning  of  Chief  Justice  Marshall. 

§  6.    Importance  of  Decision  in  McCulloch  v.  Maryland.— 

The  decision  in  McCulloch  v.  Maryland,4  decided  in  1819,  is 
the  foundation  of  the  great  principle  of  Federal  supremacy  in 
taxation,  which  necessarily  involves  the  exemption  from  State 
taxation  of  the  agencies  of  the  Federal  government.  The  ques- 
tion before  the  court  was  the  validity  of  a  statute  of  Maryland 
requiring  the  notes  of  the  branch  of  the  United  States  Bank  es- 
tablished in  that  State  to  be  issued  upon  stamped  paper,  sub- 


1  Art.  VI.,  Sec.  2,  of  the  Constitution. 
2' See  1  Bryce's  American  Commonwealth,  346. 
sMarbury  v.  Madison,  1  Cranch  110,  2  L.  Ed.  60   (1803). 
4  4  Wheaton  316,  4  L.  Ed.  579. 


§    7  UNITED    STATES   AGENCIES    AND   PROPERTIES.  9 

ject  to  a  stamp  tax  levied  by  the  State.  There  was  thus  at  is- 
sue not  only  the  constitutional  power 'of  Congress  to  establish 
the  bank  and  of  the  bank  to  establish  its  .branches,  but  also  the 
power  of  the  State  to  tax  such  branches.  It  was  the  first  case 
presented  to  the  court,  involving  the  powers  impliedly  given  by 
the  Constitution  and  the  Federal  limitations  upon  the  taxing 
power  of  the  State  growing  out  of  the  relations  between  the 
States  and  the  Federal  government  created  by  the  Constitution. 
Counsel  for  the  State  of  Maryland  argued  that  the  principle  of 
concurrent  powers  in  internal  taxation,  as  expounded  by  the 
writers  in  the  Federalist,  carried  with  it  the  right  on  the  part 
of  the  States  to  tax  the  agencies  of  the  Federal  government,  and 
on  the  part  of  the  Federal  government  to  tax  the  agencies  of 
the  States. 

The  opinion  of  Chief  Justice  Marshall  is  justly  deemed  one 
of  the  greatest,  if  not  the  greatest,  of  that  great  jurist,  as  it 
certainly  is  the  most  far-reaching  in  its  consequences,  dealing 
as  it  does  with  the  limitations  of  the  sovereign  power  of  both 
Federal  and  State  governments.  It  is  notable,  as  are  others  of 
his  opinions,  in  that  it  cites  no  authorities,  for  there  were  none 
to  cite.  1 

§  7.  Opinion  in  McCulloch  v.  Maryland.— After  holding 
that  Congress  had  the  constitutional  power  to  establish  the 
bank,  and  the  bank  the  right  to  establish  its  branch  in  the  State, 
it  was  held  further  that  the  State,  within  which  the  branch  was 
located,  could  not,  without  violating  the  Constitution,  tax  that 
branch.  The  State  government  had  no  right  to  tax  any  of  the 
constitutional  means  employed  by  the  government  to  execute  its 
constitutional  powers,  and  no  power  by  taxation  or  otherwise  to 


iThe  report  says:  "This  case  involving  a  constitutional  question  of 
great  public  importance,  and  the  sovereign  rights  of  the  United  Statos 
and  the  State  of  Maryland,  and  the  government  of  the  United  States 
having  directed  their  Attorney-General  to  appear  for  the  plaintiff  in 
error,  the  court  dispensed  with  its  general  rule,  permitting  only  two 
counsel  to  argue  for  each  party."  The  case  was  argued  by  Mr.  Webster, 
Mr.  Pinckney  and  Attorney-General  Wirt  for  the  United  States  Bank, 
and  by  Mr.  Ilopkinson,  Mr.  Jones  and  Attorney-General  Martin  for  the 
State. 


10  UNITED    STATES   AGENCIES   AND    PROPERTIES.  §    7 

retard,  impede,  burden  or  in  any  manner  control  the  operation 
of  the  constitutional  laws  enacted  by  Congress  to  carry  into 
effect  the  powers  vested  in  the  national  government.  Thus 
Chief  Justice  Marshall  said: 

"That  the  power  of  taxation  is  one  of  vital  importance;  that 
it  is  retained  by  the  States ;  that  it  is  not  abridged  by  the  grant 
of  a  similar  power  to  the  government  of  the  Union ;  that  it  is  to 
be  concurrently  exercised  by  the  two  governments:  are  truths 
which  have  never  been  denied.  But,  such  is  the  paramount 
character  of  the  Constitution,  that  its  capacity  to  withdraw  any 
subject  from  the  action  of  even  this  power  is  admitted." 

After  conceding  that  there  was  no  express  prohibition  of 
such  a  tax  in  the  Constitution,  it  was  said : 

"There  is  no  express  provision  for  the  ease,  but  the  claim 
has  been  sustained  on  a  principle  which  so  entirely  pervades  the 
Constitution,  is  so  intermixed  with  the  materials  which  compose 
it,  so  interwoven  with  its  web,  so  blended  with  its  texture,  as  to 
be  incapable  of  being  separated  from  it  without  rending  it  into 
shreds. ' ' 

And  further,  page  431 : 

"That  the  power  to  tax  involves  the  power  to  destroy;  that 
the  power  to  destroy  may  defeat  and  render  useless  the  power 
to  create ;  that  there  is  a  plain  repugnance,  in  conferring  on  one 
government  a  power  to  control  the  constitutional  measures  of 
another,  which  other,  with  respect  to  those  very  measures,  is  de- 
clared to  be  supreme  over  that  which  exerts  the  control,  are 
propositions  not  to  be  denied.  ...  If  the  States  may  tax 
one  instrument,  employed  by  the  government  in  the  execution 
of  its  powers,  they  may  tax  any  and  every  other  instrument. 
They  may  tax  the  mail ;  they  may  tax  the  mint ;  they  may  tax 
patent  rights;  they  may  tax  the  papers  of  the  custom  house; 
they  may  tax  judicial  process;  they  may  tax  all  the  means  em- 
ployed by  the  government,  to  an  excess  which  would  defeat  all 
the  ends  of  government.  This  was  not  intended  by  the  Ameri- 
can people.  They  did  not  design  to  make  their  government  de- 
pendent on  the  States.  .  .  .  The  question  is,  in  truth,  a 
question  of  supremacy ;  and  if  the  right  of  the  States  to  tax  the 
means  employed  by  the  general  government  be  conceded,  the 
declaration  that  the  Constitution,  and  the  laws  made  in  pur- 
suance thereof,  shall  be  the  supreme  law  of  the  land,  is  empty 
and  unmeaning  declamation." 


§    7  UNITED    STATES   AGENCIES   AND   PROPERTIES.  11 

Reference  was  made  in  the  opinion  to  the  arguments  of  the 
Federalist,  and  it  was  held  that  they  were  intended  to  prove  the 
fallacy -of  apprehensions  of  an  unlimited  power  of  taxation.  It 
was  said : 

"Had  the  authors  of  these  excellent  essays  been  asked,  whether 
they  contended  for  that  construction  of  the  Constitution,  which 
would  place  within  the  reach  of  the  States  those  measures  which 
the  government  might  adopt  for  the  execution  of  its  powers;  no 
man,  who  has  read  their  instructive  pages,  will  hesitate  to  ad- 
mit that  their  answer  must  have  been  in  the  negative. ' ' 

It  was  said  further  that  the  right  of  the  State  to  tax  the  banks 
chartered  by  the  general  government  was  not  the  same  as  the 
right  of  the  national  government  to  tax  the  banks  chartered  by 
the  State : 

"The  difference  is  that  which  always  exists,  and  always  must 
exist,  between  the  action  of  the  whole  on  a  part,  and  the  action 
of  a  part  on  the  whole — between  the  laws  of  a  government  de- 
clared to  be  supreme,  and  those  of  a  government  which,  when 
in  opposition  to  those  laws,  is  not  supreme." 

The  opinion  concluded  as  follows,  pp.  436,  437 : 

"The  court  has  bestowed  on  this  subject  its  most  deliberate 
consideration.  The  result  is  a  conviction  that  the  States  have 
no  power,  by  taxation  or  otherwise,  to  retard,  impede,  burden, 
or  in  any  manner  control  the  operations  of  the  constitutional 
laws  enacted  by  Congress  to  carry  into  execution  the  powers 
vested  in  the  general  govermnent.  This  is,  we  think,  the  un- 
avoidable conse(iuence  of  that  supremacy  which  the  Constitution 
has  declared. 

"We  are  unanimously  of  the  opinion  that  the  law  passed  by 
the  legislature  of  Maryland,  imposing  a  tax  on  the  Bank  of  the 
United  States,  is  unconstitutional  and  void. 

"This  opinion  does  not  deprive  the  States  of  any  resources 
which  they  originally  possessed.  It  does  not  extend  to  a  tax 
paid  by  the  real  property  of  the  bank,  in  common  with  the 
other  real  property  within  the  State,  nor  to  a  tax  imposed  on  the 
interest  wliifh  the  citizens  of  Maryland  may  hold  in  this  institu- 
tion, in  common  with  other  properly  of  the  same  description 
throughout  the  State.  Hut  this  is  a  tax  on  the  operations  of  the 
bank,  and  is  consequently  a  tax  on  the  operation  of  an  instru- 
ment employed  by  the  government  of  the  Union  to  carry  its 
powers  into  execution.     Such  a  tax  must  be  unconstitutional. ' ' 


12  UNITED    STATES   AGENCIES   .VND   PROPERTIES.  §    9 

§  8.  Osborn  v.  United  States. — A  few  years  later,  in  1824, 
the  court  was  askedi  to  reconsider  so  much  of  this  opinion  as 
held  that  the  States  had  no  rightful  power  to  tax  the  banks  of 
the  United  States.  It  was  contended  that  banking  is  a  private 
business,  the  essential  character  of  which  was  not  changed  by 
the  fact  that  the  parties  engaging  therein  were  incorporated 
under  the  Act  of  Congress,  and  it  was  therefore  not  properly  an 
instrumentality  of  the  government  in  the  sense  that  the  mint 
or  post  office  was.  But  the  court  replied  that  while  banking  was 
a  private  business,  the  Bank  of  the  United  States  was  not  cre- 
ated for  its  own  sake  or  for  private  purposes,  and  to  tax  its 
facilities,  its  trade  and  occupation,  was  to  tax  the  bank  itself. 
The  tax  in  this  case  was  one  levied  by  the  State  of  Ohio  taxing 
the  banks  of  the  United  States  fifty  dollars  on  each  office  of  dis- 
count and  deposit  in  the  State.    The  court  said,  1.  c,  p.  867 : 

''Considering  the  capacity  of  carrying  on  the  trade  of  banking, 
as  an  important  feature  in  the  character  of  this  corporation 
which  was  necessary  to  make  it  a  fit  instrument  for  the  objects 
for  which  it  was  created,  the  court  adheres  to  its  decision  in  the 
case  of  McCulloch  v.  Maryland,  and  is  of  opinion  that  the  act 
of  the  State  of  Ohio,  which  is  certainly  much  more  objectionable 
than  that  of  the  State  of  Maryland,  is  repugnant  to  a  law  of  the 
United  States  made  in  pursuance  of  the  Constitution,  and  there- 
fore void." 

§  9.  Brown  v.  Maryland. — This  principle  of  Federal  su- 
premacy in  relation  to  the  taxing  power  of  the  States  was  again 
emphatically  stated  in  1827,  in  the  great  case  of  Brown  v.  Mary- 
land.^ In  answer  to  the  argument  that  the  construction  given 
by  the  court  to  the  power  to  regulate  commerce  would  abridge 
the  power  of  the  State  to  tax  its  own  citizens  or  their  property 
within  its  territory,  the  court  (Chief  Justice  Marshall)  said, 
p.  448 : 

"We  admit  this  power  to  be  sacred;  but  cannot  admit  that  it 
mav  be  .used  so  as  to  obstruct  the  free  course  of  a  power  given 
to  Congress.  We  cannot  admit  that  it  may  be  used  so  as  to  ob- 
struct or  defeat  the  power  to  regulate  commerce.     It  has  been 


1  Osborn  v.  Bank  of  the  United  States,  9  Wheaton  738,  6  L.  Ed.  204. 

2  12  Wheaton  419,  6  L.  Ed.  678. 


§    10  UNITED   STATES   AGENCIES   AND    PROPERTIES.  13 

observed  that  the  powers  remaining  with  the  States  may  be  so 
exercised  as  to  come  in  conflict  with  those  vested  in  Congress. 
When  this  happens,  that  which  is  not  supreme  must  yield  to  that 
which  is  supreme.  This  great  and  universal  truth  is  inseparable 
from  the  nature  of  things,  and  the  Constitution  has  applied  it  to 
the  often  interfering  powers  of  the  general  and  State  govern- 
ments, as  a  vital  principle  of  perpetual  operation.  It  results 
necessarily  from  this  principle  that  the  taxing  power  of  the 
States  must  have  some  limits.  It  cannot  reach  and  restrain  the 
action  of  the  national  government  within  its  proper  sphere.  It 
cannot  reach  the  administration  of  justice  in  the  courts  of  the 
Union,  or  the  collection  of  the  taxes  of  the  United  States,  or  re- 
strain the  operation  of  any  law  which  Congress  may  constitu- 
tionally pass.  It  cannot  interfere  with  any  regulation  of  com- 
merce." 

§  10.  United  States  Securities  Not  Taxable  By  States. — This 
principle  was  first  applied  to  the  attempted  State  taxation  of 
Federal  securities  in  1829,  in  Weston  v.  Charleston,  i 

The  city  of  Charleston  passed  an  ordinance,  taxing,  with  other 
personal  effects,  the  six  and  seven  per  cent  stock  of  the  United 
States,  25  cents  on  every  $100.  This  tax  having  been  sustained 
by  the  State  courts,  was  taken  to  the  Supreme  Court 
of  the  United  States  and  there  adjudged  unconstitutional.  It 
was  clainied  that  a  tax  on  stock  came  within  the  exception  stated 
in  the  case  of  McCuUoch  v.  Maryland,  but  the  court  held  the 
contrary,  saying,  1.  c,  p.  468 : 

"The  American  people  have  conferred  the  power  of  borrowing 
money  on  their  government,  and  by  making  that  government 
supreme,  have  shielded  its  action,  in  the  exercise  of  this  power, 
from  the  action  of  the  local  governments.  The  grant  of  the 
power  is  incompatible  with  a  restraining  or  controlling  power, 
and  the  declaration  of  supremacy  is  a  declaration  that  no  such 
restraining  or  controlling  power  shall  be  exercised."^ 


1  2  Peters  450,  7  L.  Ed.  481. 

2  Justices  Johnson  and  Thompson  dissented,  the  former  sajing,  1.  c. 
p.  473:  "Why  should  not  the  stocic  of  the  United  States,  when  it  be- 
comes mixed  up  with  the  capital  of  its  citizens,  become  subject  to  tax- 
ation in  common  with  other  capital?  Or  why  should  one  who  enjoys 
all  the  advantages  of  a  society  purchase  at  a  heavy  expense  and  lives 
in  affluence  upon  an  income  derived  exclusively  from  interest  on  gov- 
ernmental stock,  be  exempted  from  taxation?" 


14  UNITED    STATES   AGENCIES   .VND    PROPERTIES.  §    12 

§  11.  Legal  Tender  Notes,  Etc.,  Made  Taxable  By  Act  of 
Congress. — The  principle  thus  established  was  applied  to  cer- 
tificates of  indebtedness  issued  by  the  United  States  to  creditors 
of  the  government  for  supplies  furnished  to  aid  in  carrying  on 
the  Civil  War;^  also  to  the  United  States  notes,  that  is,  treasury 
notes  or  greenbacks  constituting  the  circulating  medium  of  the 
country,  as  these  were  held  to  be  engagements  to  pay  dollars  and 
therefore  obligations  of  the  national  government  and  exempt 
from  State  taxation.^  Gold  and  silver  certificates  issued  by  the 
government,3  and  the  notes  issued  by  national  banks,  organized 
under  Act  of  Congress,  were  also  held  thus  exempt.^  But  this 
exemption  of  national  bank  notes  and  United  States  legal  tender 
notes  and  certificates  of  the  United  States,  circulating  as  cur- 
rency, was  repealed  by  Act  of  Congress  in  1894.5 

§  12.  Bonds  of  District  of  Columbia  Exempted. — Bonds  is- 
sued by  the  District  of  Columbia  under  authority  of  Congress, 
which  were  to  be  paid  in  part  by  taxation  of  property  within  the 
District  and  in  part  by  appropriations  of  Congress,  were  held  to 
be  lawfully  exempted  by  Congress  from  taxation  by  State  or 
municipal  authority.  6  It  was  contended  that  Congress  had  no 
power  to  declare  this  exemption.    But  the  Circuit  Court  of  Ap- 


1  The  Banks  v.  The  Mayor,  7  Wall.  16,  19  L.  Ed.  57  (1869). 

2  Bank  v.  Supervisors,  7  Wall.  26,  19  L.  Ed.  60  (1869). 

3  State  V.  Mayor,  63  N.  J.  L.  547. 

4  See  Horn  v.  Green,  52  Miss.  452;  but  contra  Montgomery  County 
Commissioners  v.  Elston,  32  Ind.  27;  Ruffin  v.  B.  of  Com.,  69  N.  C.  498. 

5  Act  of  August  13,  1894,  providing  "that  circulating  notes  of  na- 
tional banking  associations  and  United  States  legal  tender  notes  and 
other  notes  and  certificates  of  the  United  States  payable  on  demand 
and  circulating  or  intended  to  circulate  as  currency  and  gold,  silver  or 
other  coin,  shall  be  subject  to  taxation  as  money  on  hand  or  on  deposit, 
under  the  laws  of  any  State  or  Territory:  Provided,  that  any  such  tax- 
ation shall  be  exercised  in  the  same  manner  and  at  the  same  rate  that 
any  such  State  or  Territory  shall  tax  money  or  currency  circulating  as 
money  within  its  jurisdiction."  It  was  also  provided  that  the  act  should 
not  change  the  laws  relating  to  the  taxation  of  national  bank  shares. 
See  infra.  Sec  281. 

6  Grether  v.  Wright,  23  C.  C.  A.  498,  75  Fed.  742  (1896). 


§    13  UNITED    STATES   AGENCIES   AND   PROPERTIES.  15 

peals  (6t1i  Cir.)  held,  in  an  interesting  opinion  by  Judge  Taft, 
after  careful  review  of  the  authorities,  that  where  Congress  law- 
fully directs  the  issue  of  evidences  of  indebtedness  in  the  exer- 
cise of  any  power  derived  by  it  from  the  Constitution,  whether  it 
be  by  virtue  of  the  power  to  borrow  money  on  the  credit  of  the 
United  States,  or  any  other  grant,  such  evidences  of  debt  are 
exempt  from  State  taxation,  or  at  least  may  be  exempted  there- 
from, if  Congress  sees  fit  to  give  them  this  quality.  The  suit 
was  upon  municipal  bonds  issued  to  borrow  money  to  pay  the 
debts  incurred  in  improving  and  beautifying  the  city  of  Wash- 
ington, the  capital  of  the  nation.  The  court  said  that  the  bonds, 
so  authorized  by  Congress,  were  issued  for  an  essentially  na- 
tional purpose,  and  that  in  effecting  that  purpose  by  means  of 
the  express  constitutional  power  to  borrow  money  on  the  credit 
of  the  United  States,  the  legislative  power  of  Congress  in  thus 
exempting  them  .was  as  territorially  extensive  as  the  exercise  of 
the  power  for  any  other  constitutional  purpose.  Hence  it  oper- 
ated in  each  State  upon  the  taxing  officers  of  the  State  and  upon 
the  government  thereof,  and  expressly  forbade  the  taxation  of 
the  bonds. 

§  13.  The  Exemption  as  Dependent  Upon  the  Relation  of 
the  Oblig'ations  to  the  Government. — It  has  been  customary  in 
acts  authorizing  the  issue  of  obligations  of  the  United  States  to 
declare  such  securities  exempt  from  State  taxation,  but  such 
statutory  enactment  is  not  the  real  foundation  of  the  exemption, 
which  grows  out  of  the  character  of  the  securities  and  their  rela- 
tion to  the  national  government,  and  does  not  rest  upon  any  spe- 
cific declaration  in  the  act  authorizing  their  issue. 

This  was  illustrated  in  the  decision  of  the  -Supreme  Court  that 
United  States  treasury  checks  or  orders  issued  for  interest  ac- 
crued upon  registered  bonds  of  the  United  'States,  where  the  in- 
tent was  for  immediate  payment,  may  be  taxed  by  the  State.  The 
court  said  these  checks  were  obligations  of  the  United  States  and 
were  not  intended  to  circulate  as  money,  and  therefore  did  not 
fall  within  the  letter  of  the  statute,  R.  S.  Sec.  3701,  but  they 
did  fall  within  its  spirit  and  were  proper  subjects  of  taxation, 
as  they  were  intended  for  immediate  payment  and  had  no  rela- 


16  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    14 

tion   to   the   performance   of  the   functions    of    the    govern- 
ment.^ 

On  the  other  hand  the  bonds  issued  by  municipalities  in  the 
territory  of  Oklahoma  were  held  to  be  so  issued  in  the  perform- 
ance of  a  governmental  function,  and  it  was  immaterial  that 
these  bonds  were  not  guaranteed  by  the  United  States  or  even 
by  the  central  government  of  the  territory,  nor  were  they  de- 
clared to  be  exempt  by  any  governmental  authority,  but  they 
were  held  by  the  court  to  be  exempt  because  they  were  in  effect 
the  obligations  of  the  territorial  government  and  therefore  gov- 
ernmental agencies  of  the  United  States.^  It  seems  in  this  case 
that  at  the  time  of  the  assessment  the  territory  had  ceased  to 
exist,  but  as  the  obligations  of  the  municipalities  of  the  territory 
were  assumed  by  the  State  of  Oklahoma,  the  court  said  that  this 
was  immaterial.  In  this  case  the  inclusion  of  these  bonds  in  the 
computation  of  the  assets  of  a  Minnesota  savings  bank  for  taxa- 
tion was  held  unlawful. 

While  securities  issued  by  the  nationax  government,  or  in  the 
performance  of  a  governmental  function,  under  national  author- 
ity, are  thus  exempt  from  State  taxation  by  reason  of  their  char- 
acter and  their  relation  to  the  national  government,  without  any 
specific  designation  of  such  exemption,^  it  is  also  true 
that  Congress  has  the  authority  to  declare  such  securities  subject, 
not  only  to  State,  but  to  Federal  taxation,  which  is,  therefore, 
really  dependent  upon  the  will  of  Congress,  and  this  will  must 
be  declared,  to  make  what  is  judicially  exempt,  subject  to  taxa- 
tion. Thus,  the  national  authority  has  been  exercised  in  making 
Federal  securities  subject  to  State  taxation  in  the  ease  of  legal 
tender  notes.    See  infra,  Sec.  11. 

§  14.  Salaries  of  United  States  Officials  Not  Taxable. — In 
1842  the  same  principle  of  exemption  was  applied  by  the  Supreme 
Court  to  the  case  of  an  officer  of  the  United  States  in  Dobbins  v. 


1  Hibernia  Savings  &  Loan  Society  v.  San  Francisco,  200  U.  S.  310, 
50  L.  Ed.  495,  affirming  159  Cal.  205  (1906). 

2  Farmers  &  M.  Savings  Bank  v.  Minnesota,  232  U.  S.  516,  58  L.  Ed. 
706  (1914). 

3  Van  Brocklin  v.  Tennessee,  117  U.  S.  151,  29  L.  Ed.  845  (1886). 


§    15  UNITED    STATES   AGENCIES   AND   PROPERTIES.  17 

Erie  County. i  The  State  of  Pennsylvania  assessed  a  tax  on  all 
offices  and  posts  of  profit,  and  the  attempt  was  made  to  collect  it 
from  the  captain  of  a  United  States  revenue  cutter  at  the  station 
on  Lake  Erie.  The  Supreme  Court  of  Pennsylvania  sustained 
this  tax  and  distinguished  the  case  from  Weston  v.  Charleston 
and  McCulloeh  v.  Maryland,  on  the  ground  that  the  officer  was  a 
taxable  person.  But  the  Supreme  Court  of  the  United  States, 
in  an  opinion  by  Justice  Wayne,  held  that  there  was  no  distinc- 
tion. The  affairs  of  the  national  government  are  necessarily  car- 
ried on  by  agents  who  must  be  compensated,  and  if  the  State 
could  tax  the  salaries  of  such  agents,  it  would  in  effect  give  the 
State  a  revenue  out  of  the  United  States  and  would  reduce  the 
compensation  fixed  by  the  United  States  to  below  what  it  ad- 
judged was  reasonable  for  the  service. 

§  15.     State  Tax  Upon  Passengers  in  Mail  Coaches  Invalid. 

— The  Cumberland  road  was  constructed  by  the  Federal  govern- 
ment through  the  States  of  ]\Iaryland,  Virginia,  Pennsylvania  and 
Ohio.  Acts  were  passed  by  the  several  States,  and  accepted  by 
the  United  States,  providing  that  no  toll  should  be  received  or 
collected  from  any  wagon  or  carriage  employed  with  the  prop- 
erty of  the  United  States,  or  any  cannon  or  military  store  be- 
longing to  the  United  States.  It  was  held  that  wherever  a  car- 
riage carried  the  mail  upon  this  road,  although  it  carried  other 
property  and  passengers  also,  it  must  be  considered  to  be  laden 
with  the  property  of  the  United  States  and  therefore  exempted 
from  payment  of  State  toll.  2 

The  regulation  of  the  Post  Office  Department  required  the 
coaches  to  carry  passengers  for  the  security  of  the  mails.  A  toll 
of  four  cents  imposed  by  the  State  of  Maryland  upon  every  pas- 
senger for  every  space  of  ten  miles  in  the  passenger  or  mail 
coaches  was  adjudged  inconsistent  with  the  compact  made  with 
the  United  States.^ 


1  16  Peters  435,  and  10  Ed.  1022.  See  also  Ulsh  v.  Perry  County,  7 
Pa.  Dist.  Rep.  488,  holding  the  act  of  Pennsylvania  of  April  15,  1834, 
taxing  a  postal  clerk,  invalid. 

'- Searight  v.  Stokes,  3  Howard  151,  11  L.  Ed.  537;  Neil  v.  Ohio,  3 
Howard   720,  11   L.   Ed.  800    (1844). 

sAchison  v.  Huddleson,  12  Howard  293,  and  13  L.  Ed.  993   (1850). 


18  UNITED   STATES   AGENCIES   jVND    PROPERTIES.  §    16 

§  16.  Taxation  of  Banks  Holding  United  States  Securities 
Invalid. — In  Bank  of  Commerce  v.  New  York  City,  decided  in 
1862, 1  the  principle  that  Federal  securities  are  exempt  from 
State  taxation,  laid  down  in  "Weston  v.  Charleston,  was  extended 
to  banks  organized  under  the  laws  of  New  York,  a  part  of  whose 
stock  was  invested  in  Federal  securities.  The  capital  of  the 
bank  was  then  taxed  upon  a  valuation  like  the  property  of  in- 
dividuals, and  the  court  held  that  the  case  was  controlled  by  the 
principle  of  the  Weston  case.  The  tax  was  therefore  adjudged 
invalid  so  far  as  the  property  of  the  corporation  was  invested  in 
United  States  securities.  Subsequent  to  this  decision,  the  State 
of  New  York  enacted  another  statute  that  all  banks  should  be 
subject  to  taxation  on  a  valuation  equal  to  the  amount  of  their 
capital  stock  paid  in,  or  subject  to  be  paid  in,  and  their  surplus 
earnings,  and  it  was  held  by  the  New  York  Court  of  Appeals 
that  this  did  not  impose  a  tax  upon  the  United  States  securities 
in  which  some  of  the  banks  had  invested  all  and  others  a  part  of 
their  capital.  But  the  Supreme  Courts  held  that  the  tax  was 
still  upon  the  Federal  securities ;  that  the  tax  on  the  capital  and 
surplus  was  a  tax  on  the  property  of  the  bank,  and,  therefore, 
upon  the  securities  in  which  that  property  was  invested ;  that  it 
was  not  upon  the  franchise  of  banking  or  privilege  of  doing  a 
banking  business,  but  upon  the  property  of  the  bank,  i.  e.,  upon 
the  capital  representing  its  property. 

This  distinction  between  a  tax  upon  shareholders  and  one  upon 
corporate  property,  although  established  over  dissent,  said  the 
Supreme  Court,  had  come  to  be  inextricably  mingled  with  all 
taxing  systems  and  could  not  be  disregarded  without  bringing 
them  into  confusion.  A  State,  therefore,  cannot  tax  the  property 
of  a  bank  by  adopting  the  value  of  the  shares  as  the  measure  of 
the  taxable  valuation  of  the  property,  unless  it  allows  a  deduction 
from  such  valuation  on  account  of  bonds  of  the  United  States 
owned  by  the  banks. 


12  Black  620,  17  L.  Ed.  451    (1862.) 

2  Bank  Tax  Case,  2  Wallace  200,  17  L.  Ed.  743  (1865). 

3  Home  Savings  Bank  v.  Des  Moines,  51  L.  Ed.  901,  205  U.  S.  503 
(1907),  reversing  (Iowa)  101  N.  W.  867. 


§17  UNITED    STATES   AGENCIES   AND   PROPERTIES.  19 

§  17.  Corporate  Franchise  Tax  Distinguished  from  Prop- 
erty Tax. — But  it  was  later  decided  in  a  series  of  cases  reported 
in  the  6th  "Wallace  that,  where  the  State  tax  was  upon  the  State 
corporate  franchise,  and  not  upon  the  property  of  the  corpora- 
tion or  upon  the  stock  as  representing  the  property,  the  tax  was 
not  invalidated  by  reason  of  the  investment  of  the  property  of 
the  corporation  in  exempted  Federal  securities.  This  principle 
was  applied  to  a  statute  of  Connecticut,  providing  that  savings 
banks  should  pay  a  tax  of  three-fourths  of  one  per  cent  on  their 
deposits;!  to  a  ]\Iassachusetts  tax  which  was  levied  on  the  aver- 
age amount  of  deposits  during  a  period  of  six  months; 2  and  to 
a  Massachusetts  corporation  tax3  which  required  all  corpora- 
tions having  a  capital  stock  divided  into  shares  to  pay  a  tax  of  a 
certain  percentage  upon  the  excess  of  the  cash  market  value  of 
their  stock  over  and  above  the  value  of  their  real  estate  and  ma- 
chinery. In  this  last  case  the  tax  was  held  valid,  although  the 
surplus  capital  of  the  corporation  was  invested  in  exempted  Fed- 
eral securities. 

This  distinction  was  again  brought  before  the  court  in  the 
case  of  a  New  York  statute  which  levied  a  tax  upon  the  ''cor- 
porate franchise  or  business"  of  a  company,  at  the  rate  of  one- 
quarter  of  a  mill  upon  the  capital  stock  for  each  one  per  cent  of 
dividend  of  six  per  cent  or  over;  also  eight-tenths  of  one  per 
cent  upon  the  premiums  of  fire  and  marine  insurance  companies. 
A  fire  insurance  company  claimed  that  it  was  entitled  to  a  de- 
duction of  that  portion  of  its  capital  invested  in  bonds  of  the 
United  States.  This  contention  was  overruled  by  the  New  York 
Court  of  Appeals,*  and  its  judgment  was  at  first  affirmed  in  the 
United  States  Supreme  Court  by  a  divided  court,  s     A  rehearing 


1  Society  for  Savings  v.  Coite,  6  Wallace  594,  18  L.  Ed.  897  (1868). 

2  Provident  Institution  v.  Massachusetts,  6  Wallace  611,  18  L.  Ed. 
907  (1868). 

■  Hamilton  Company  v.  Massachusetts,  6  Wallace  632,  18  L.  Ed. 
904  (1868).  Chief  Justice  Chase  and  Justices  Grier  and  Miller  dissented 
in  these  cases. 

492  New  York,  328. 

6  Home  Ins.  Co.  v.  N.  Y.,  119  U.  S.  129.  30  L.  Ed.  350  (1886). 


20  UNITED    STATES    AGENCIES    AND   PROPERTIES.  §    19 

was  granted,   the  ca-se  reargued   and   the   judgment  again  af- 
firmed, i 

The  court  held  that  the  tax  was  not  levied  upon  the  capital 
stock  nor  upon  the  bonds  of  the  United  States  composing  a  part 
of  the  stock,  and  that  it  was  properly  designated  as  one  upon  the 
corporate  franchise  or  business. 

§  18.  A  Taxable  Corporate  Franchise  Defined. — The  court 
in  this  case  defined  a  taxable  corporate  "franchise  or  business" 
as  the  right  to  be  a  corporation,  that  is,  to  act  in  a  corporate 
capacity  with  right  of  succession,  and  limitation  of  personal 
liability  as  distinguished  from  the  privileges  or  franchises  which, 
when  incorporated,  the  company  may  exercise.  The  court  said 
that  such  a  corporate  privilege  was  valuable,  and  the  State  had 
a  right  to  impose  conditions,  and  determine  the  amount  of  the 
tax  thereon  by  such  mode  as  it  might  select,  and  its  action  was 
not  the  subject  of  review. 

The  State  franchise  which  is  thus  subject  to  taxation,  even  if 
the  corporation  owns  Federal  securities,  is  to  be  distinguished 
from  the  Federal  franchises  granted  by  Congress,  see  infra, 
Sec.  30,  which  are  not  the  subject  of  State  taxation  unless  with 
the  consent  of  Congress. 

§  19.  Taxation  of  Shares  of  Corporations  Holding"  Federal 
Securities. — As  will  be  hereafter  seen,  infra,  Sec.  291,  it  was 
held  in  the  ease  of  the  national  banks,  that  as  the  act  of  Con- 
gress under  which  they  were  incorporated  authorized  the  taxa- 
tion of  their  shares,  it  is  immaterial  that  their  capital  is  par- 
tially or  wholly  invested  in  United  States  bonds,  as  the  tax  is 
upon  the  individual  shares  and  not  upon  the  capital  or  property 
of  the  bank  as  such.  This  distinction,  or  rather  the  judicial 
recognition  of  the  fiction  distinguishing  the  property  of  the 
shareholders  from  the  property  of  the  corporation,  has  also  been 
applied  by  the  court,  as  will  be  hereafter  seen,  in  reference  to 
contracts  of  exemption  from  taxation,  see  infra,  Sec.  103. 

It  would  seem  that  the  same  principle  woitM  be  applicable  to 


1  Home  Ins.  Co.  v.  N.  Y.,  134  U.  S.  594,  33  L.  Ed.  1025.    Justices  Miller* 
and  Harlan  dissenting. 


§   21  UNITED    STATES   AGENCIES   AND   PROPERTIES.  21 

the  case  of  any  Federal  securities  or  rights  of  property  granted 
by  the  United  States,  as  in  the  ease  of  patent  rights,  infra,  Sec. 
36,  and  that  the  tax  is  valid  if  levied  upon  the  corporate  shares, 
or  as  a  franchise  tax  upon  the  corporation.  A  ready  means  of 
taxing  United  States  securities  is  thus  afforded,  by  naming  the 
tax  as  one  upon  the  franchise  of  the  company,  or  upon  the  cor- 
porate shares,  instead  of  upon  the  property  or  capital  of  the 
corporation,  although  in  fact  the  tax,  whatever  it  is  called,  is 
upon  substantially  the  same  property,  in  both  cases. 

§  20.  State  Tax  Upon  Interstate  Passeng-ers  Invalid.— In 
Crandall  v.  Nevada,  i  the  court  adjudged  invalid  a  capitation 
tax  levied  by  the  defendant  of  one  dollar  upon  every  person 
leaving  the  State  by  any  railroad,  stage  coach  or  other  carrier, 
to  be  paid  by  the  corporations  or  persons  carrying  the  passen- 
gers. The  court,  in  an  opinion  by  Justice  Miller,  expressed  re- 
gret that  such  a  question  should  be  submitted  with  no  brief 
or  argument  on  the  part  of  the  plaintiff  in  error,  and  said  that 
the  case  was  one  of  importance,  for  it  involved  the  right  of  the 
State  to  levy  a  tax  upon  persons  residing  within  its  jurisdiction 
who  might  wish  to  go  out  of  it,  and  upon  persons  residing  out  of 
it  who  might  have  occasion  to  pass  through  it.  The  statute  was 
adjudged  void,  not  because  it  was  a  violation  of  any  specific 
clause  of  the  Constitution,  although  two  of  the  judges  based  their 
concurrence  on  the  ground  that  it  was  an  attempted  regulation 
of  commerce,  but  because  it  was  a  tax  inconsistent  with  the  rela- 
tions of  the  State  to  the  Federal  government.  The  United  States, 
as  incident  to  the  power  to  prosecute  and  declare  war,  has  a 
right  to  raise  and  transport  troops  through  and  over  the  terri- 
tory of  any  State  of  the  Union,  The  citizens  of  each  State  have 
a  right  to  visit  the  seat  of  government,  to  have  free  access  to  the 
seaports  of  the  country  and  so  on,  and  this  right  is  independent 
of  the  law  of  any  State  over  whose  soil  they  must  pass  in  the 
exercise  of  it. 

§  21 .     Lands  and  Other  Property  of  United  States  Not  Tax- 
able By  States. — It  may  be  said  in  general  tocms  lliat  all  the 


1  i;  Wallace  35,  18  L.  Ed.  744   (1868). 


22  UNITED   STATES   AGENCIES   AND    PROPERTIES.  §    21 

property  of  the  United  States  held  for  Federal  purposes,  as  for 
public  buildings  or  reservations,  including  the  public  domain,  is 
exempt  from  State  taxation,  i  But  this  exemption  no  longer 
exists  when  the  right  to  a  conveyance  is  secured  by  certificate  of 
entry  or  purchase,  even  though  no  patent  has  been  issued.2  The 
equitable  title  must,  however,  be  fully  vested  without  any  more 
to  be  paid  or  any  act  to  be  done  going  to  the  foundation  of  the 
right,  before  the  lands  can  become  taxable. 3  Until  a  Spanish 
grant  has  been  segregated  from  the  public  domain  by  survey 
properly  approved,  it  is  not  subject  to  taxation  by  State  au- 
thority. 4 

This  subject  of  the  exemption  of  property  of  the  United  States 
from  State  taxation  was  fully  discussed  in  Van  Brocklin  v. 
State  of  Tennessee.^      Lands  within  the  confines  of  defendant 


1  Van  Brocklin  v.  Tennessee,  117  U.  S.  151,  29  L.  Ed.  745   (1886). 

2  Witherspoon  v.  Duncan,  4  Wall.  210,  18  L.  Ed.  339  (1867);  Carroll 
V.  Safford,  3  Howard  441,  11  L.  Ed.  671  (1845) ;  Railway  Co.  v.  Prescott, 
16  Wallace  603,  21  L.  Ed.  373    (1873). 

In  Bothwell  v.  Bingham  County,  237  U.  S.  642,  59  L.  Ed.  1157  (1915), 
affirming  24  Idaho  125,  held  that  proceedings  for  the  acquisition  of 
title  to  arid  lands  under  the  Carey  Act  of  August  18,  1894,  and  the 
Amendatory  Acts  of  June  11,  1896,  and  March  3,  1901,  have  reached  the 
point  where  the  land  may  be  taxed  by  the  state  when  nothing  remains 
to  be  done  by  the  entryman  in  order  to  entitle  him  to  a  patent,  and  the 
United  States  has  no  longer  any  beneficial  interest  in  the  land,  having 
patented  the  same  to  the  state,  though  the  state  has  not  yet  issued  a 
patent  to  the  entryman. 

See  also  Sargeant  v.  Herrick,  221  U.  S.  404,  55  L.  Ed.  1787  (1911),  re- 
versing 140  Iowa  590,  holding  that  the  location  of  a  military  bounty 
land  warrant,  under  the  Act  of  March  3,  1855,  did  not  operate  as  a  pay- 
ment of  the  purchase  price  which  was  essential  to  the  right  to  a  patent. 

As  to  segregation  of  lands  in  Spanish  Grant  in  Florida  from  public 
domain  by  location  and  survey,  so  as  to  be  subject  to  taxing  jurisdic- 
tion of  state,  the  survey  though  not  approved  by  Commissioner  of  Gen- 
eral Land  office  being  made  foundation  of  patent  subsequently  issued, 
see  Wilson  Cypress  Co.  v.  Del  Cozo  Y.  Macos,  236  U.  S.  635,  59  L.  Ed. 
758,  reversing  202  Fed.  742. 

3  Railway  Co.  v.  Prescott,  supra;  Wisconsin  Central  Railroad  Co.  v. 
l^rice  County,  133  U.  S.  496,  33  L.  Ed.  687  (1890),  reversing  64  Wis.  579. 

4  Robertson  v.  Sewell,  31  C.  C.  A.  107,  87  Fed.  536  (5th  Cir.)    (1898). 

5  Supra. 


§    21  UNITED    STATES   AGENCIES   AND   PROPERTIES.  23 

purchased  by  the  Federal  government  at  a  sale  for  direct  taxes 
levied  by  it  in  1862,  and  afterwards  sold  by  it  or  redeemed  by 
the  former  owner,  were  exempt  from  State  taxation  while  held 
by  the  United  States.i  The  court  says  in  its  opinion  that  the 
necessity  for  exempting  all  the  property  of  the  United  States 
from  State  taxation  has  been  recognized  by  the  highest  courts 
of  several  of  the  States,  and  also  in  the  statutes  of  most  of  them. 
It  remarked,  however,  that  such  a  provision  in  the  laws  is  not 
the  foundation  of  the  exemption,  but  is  inserted  only  from 
abundant  caution  and  because  the  assessment  of  taxes  is  to  be 
made  by  local  officers  skilled  in  the  valuation  of  property,  but 
ignorant  of  legal  distinctions."-  The  general  principle  is  thus 
laid  down  at  pp.  174  and  175 : 

"In  short,  under  a  republican  form  of  government,  the  whole 
property  of  the  State  is  owned  and  held  by  the  State  for  public 
uses,  and  is  not  taxable,  unless  the  State  which  owns  and  holds 
it  for  those  uses  clearly  enacts  that  it  shall  share  the  burden  of 
taxation  with  other  property  within  its  jurisdiction.  Whether 
the  property  of  one  of  the  States  of  the  Union  is  taxable  under 
the  laws  of  that  State  depends  upon  the  intention  of  the  State 
as  manifested  by  those  laws.  But  whether  the  property  of  the 
United  States  shall  be  taxed  under  the  laws  of  a  State  depends 
upon  the  will  of  its  owner,  the  United  States,  and  no  State  can 
tax  the  property  of  the  United  States  without  their  consent." 

And  the  general  power  of  the  United  States  in  the  acquisition 
of  lands  in  a  State  is  thusi  stated  at  p.  154 : 

"So  the  United  States,  at  the  discretion  of  Congress,  may  ac- 
quire and  hold  real  property  in  any  State,  whenever  such  prop- 
erty is  needed  for  the  use  of  the  government  in  the  execution  of 
any  of  its  powers,  whether  for  arsenals,  fortifications,  light- 
houses, custom-houses,  court-houses,  barracks  or  hospitals,  or  for 
any  other  of  the  many  public  purposes  for  which  such  property 
is  used ;  and  when  the  property  cannot  be  ae(|uired  by  voluntary 
arrangement  with  the  owners,  it  may  be  taken  against  their 
will,  by  the  United  States,  in  the  exercise  of  the  power  of  eminent 


1  But  after  sale  under  a  confiscation,  the  lands  are  subject  to  State 
taxation,   see   Newby   v.    Brownlee,    23   Fed.    320. 

2  P.   171,   where  there  is  a  statement  of  the  express  exemption   of 
property  of  the  United  States  in  the  general  tax  acts  of  each  State. 


24  UNITED    STATES   AGENCIES    AND   PROPERTIES.  §    23 

domain,  -apon  making  jnst  compensation,  with  or  without  a  con- 
current act  of  the  State  in  which  the  land  is  situated. ' 

§  22.    Limitations  of  Exemption  of  U.  S.  Lands,  Etc. — But 

the  extent  of  the  exemption  of  lands  in  a  State  acquired  by  the 
United  States  may  be  limited  by  inserting  terms  in  the  cession 
by  the  former  which  the  latter  agrees  to.  Thus  in  a  grant  by 
Kansas  of  the  Fort  Leavenworth  military  reservation  to  the 
United  States,  the  State  reserved  the  right  to  tax  the  railroads, 
bridges  and  other  corporations  within  the  territory  ceded,  and 
it  was  held  that  this  right  could  be  enforced  against  the  property 
and  franchises  of  a  railroad  company  within  the  reservation. 2 

"Where  land  was  acquired  by  the  United  States  for  the  erec- 
tion of  a  post  office  in  Kansas  City,  Missouri,  it  was  held  that  the 
moment  the  government  acquired  the  property,  its  jurisdiction 
over  it  became  absolute  and  exclusive,  and  there  was  no  power 
thereafter  to  enforce  the  lien  for  taxes  which  theretofore  had 
attached  under  the  State  laws.  3  So  the  exemption  of  land  from 
taxation  continues  during  the  interim  between  the  filing  of  an 
original  land  warrant  and  the  filing  of  a  substitute  warrant  is^ 
sued  in  place  of  the  original,  canceled  on  account  of  forgery  in 
the  assignment.  4 

§  23.  Lands  Granted  to  Railroads,  When  Taxable. — "Where 
a  railroad  land  grant  was  made  by  Congress,  providing  that  the 
land  should  not  be  conveyed  to  the  company  until  the  United 
States  treasury  was  paid  the  cost  of  surveying,  selecting  and 
conveying  the  same,  it  was  held  by  the  Supreme  Court  that  this 
exempted  the  lands  from  State  or  territorial  taxation  until  the 
required  payment  was  made.  The  court  said  it  was  aware  that 
the  company  might  take  advantage  of  this  principle  and  neglect 
to  pay  the  costs  in  order  to  avoid  taxation,  but  that  the  remedy 
was  with   Congress.  5       Congress  thereupon  passed  the  Act  of 


iChappell  V.  United  States,  160  U.  S.  499,  40  L.  Ed.  510  (1896). 

2  Ft.  Leavenworth  Railroad  Co.  v.  Lowe,  114  U.  S.  525,  29  L.  Ed.  264 
(1885). 

3  Bannon  v.  Burns,  39  Fed.  892;  Cir.  Ct.  W.  Dist.  of  Mo. 

♦  Pitts  V.  Clay,  27  Fed.  635;   U.  S.  Cir.  Ct.  Nor.  D.  Iowa. 
5  Nor.  Pac.  R.  R.  Co.  v.  Traill  County,  115  U.  S.  600,  29  L.  Ed.  477 
(1885);  Railway  Co.  v.  McShane,  22  Wall.  444,  22  L.  Ed.  747   (1875). 


§    24  UNITED    STATES   AGENCIES   AND   PROPERTIES.  25 

July  10,  1886,  providing  that  surveyed  but  unpatented  lands  on 
whieh  the  costs  of  survey  had  not  been  paid,  included  in  railroad 
land  grants,  should  be  subject  to  State  taxation.  ^ 

Where  public  lands  are  granted  to  a  State  by  Congress  to  aid 
in  the  construction  of  a  railway,  the  grantee  cannot  tax  the 
lands  while  it  holds  them  as  trustee  for  the  United  States,  but 
they  can  be  taxed  after  they  have  been  sold  within  the  meaning 
of  the  Act  of  Congress.  ^ 

§  24.  The  Title  Essential  for  State  Taxation. — Lands 
granted  to  railroads  by  the  United  States  become  taxable  M^hen 
the  equitable  title  of  the  company  is  perfected  by  its  compliance 
with  the  requirements  of  the  statute,  which  are  the  conditions 
precedent  to  its  right  to  a  patent,  whether  the  costs  of  survey 
have  been  paid  or  not.  ^  Thus,  it  was  decided  that  the  possessory 
claim  of  the  Central  Pacific  Railroad  to  its  land  grant  in  the 
State  of  Nevada  was  subject  to  taxation,  notwithstanding  the 
fact  that  the  lands  might  thereafter  be  determined  to  be  mineral 
lands,  and  so  excluded  from  the  operation  of  the  railroad  grant. 
As  long  as  the  company  asserted  a  possessory  claim  to  the  lands, 
a  corresponding  obligation  was  implied  to  pay  the  taxes  upon 
them.  The  court  further  decided  that,  where  a  State  statute  de- 
fined the  term  "real  estate,"  as  including  any  possessory  right  or 
claim  in  the  land,  and  accordingly  listed  such  right  or  claim  for 
taxation,  this  involved  no  Federal  question,  since  it  appeared 
that  express  authority  had  been  given  by  Congress  to  tax  the 
lands. 

The  court  said  in  another  case  that  the  right  of  the  State  to 
tax  was  not  defeated  by  the  fact  that  there  was  a  controversy 
about  the  character  of  some  of  the  lands.  If  there  is  an  uncer- 
tainty it  must  be  resolved  by  the  railroad.  *     The  fact  that  the 


1  Cen.  Pac.  R.  R.  Co.  v.  Nevada,  162  U.  S.  512,  40  L.  Ed.  1057  (1896), 
affirming  30  Pac.  686. 

2  Tucker  v.  Ferguson,  22  Wall.  527,  22  L.  Ed.  805  (1875).  See  also 
Hunnewell  v.  Cass  Co.,  22  Wall.  464,  22  L.  Ed.  752. 

■■■  Central  Pac.  R.  R.  Co.  v.  Nevada,  162  U.  S.  512,  40  L.  Ed.  903,  Jus- 
tice Field  dissenting.     U.  S.  v.  Canyon  County,  232  Fed.  985   (1916). 

0  Northern  Pac.  R.  R.  Co.  v.  Myers,  172  U.  S.  589,  43  L.  Ed.  564, 
Justices  Brewer,  White,  Shiras  and  Peckham  dissenting. 


26  UNITED    STATES   AGENCIES   AND    PROPERTIES.  §    25 

mineral  lands  have  been  reserved  to  the  United  States  does  not 
prevent  the  vesting  of  title  in  other  lands,  and  the  latter  become 
taxable  notwithstanding  the  reservation.  The  reports  of  the 
United  States  surveyors  that  lands  are  agricultural  and  not  min- 
eral is  sufficient,  as  there  must  be  a  time  for  determining  once 
for  all  what  lands  are  mineral.  The  court  held  that  the  term 
"mineral  lands"  in  such  a  reservation  meant  lands  known  to  be 
such  at  the  time  the  company  acquired  its  title.i 

Lands  which  have  not  been  officially  surveyed  by  the  United 
States,  are  not,  as  a  rule,  taxable ;  and  such  a  survey  is  not  com- 
pleted -until  it  has  been  accepted  by  the  Land  Department  of 
the  United  States.^ 

Government  land,  as  to  which  all  conditions  precedent  to  trans- 
fer of  title  have  been  performed,  is  subject  to  taxation  by  the 
State  to  a  purchaser,  although  the  legal  title  still  remains  in  the 
government  and  although  the  government  may  claim  that  the  title 
of  a  purchaser  should  be  forfeited  for  failure  to  perform  condi- 
tions subsequent.  It  has  been  held  that  the  fact  that  such  a  claim 
is  pending  between  the  government,  and  the  purchaser  is  not  suffi- 
cient to  defeat  the  tax  on  the  ground  that  the  government  has 
such  an  interest  in  the  land  so  as  to  exempt  the  same  from  taxa- 
tion.^ 

§  25.  Taxability  of  Mining  Claims. — ^A  statute  of  Colorado 
authorizing  the  taxing  of  mining  claims,  whether  patented,  or 
entered  for  patent,  or  not,  and  authorizing  a  sale  of  the  claim  in 
case  of  failure  to  pay  the  tax,  and  that  such  a  sale  should  pass 
title  to  the  purchaser,  was  valid,  although  the  Enabling  Act, 
admitting  Colorado  as  a  State,  provided  that  no  taxes  should 
ever  be  imposed  upon  such  lands  or  property  of  the  United 
States.* 

1  Northern  Pac.  R.  Co.  v.  Walker,  47  Fed.  Rep.  681;  Davis  v.  Weid- 
bolt,  139  U.  S.  507,  35  L.  Ed.  238;  Northern  Pac.  R.  R.  v.  Wright,  4  C. 
C.  A.  193. 

2  Clearwater  Timber  Co.  v.  Schoshone  County,    155  Fed.  612   (1855). 

3U.  S.  V.  Southern  Oregon  Co.,  196  Fed.  423  (1912);  Cir.  Ct. 
Dist.  of  Oregon. 

4  Elder  v.  Wood,  208  U.  S.  226,  52  L.  Ed.  464  (1908),  affirming  37 
Colo.  174. 


§    26  UNITED   STATES  AGENCIES   AND   PROPERTIES.  27 

The  tax  deed  conveyed  merely  the  right  of  possession  and  af- 
fected no  interest  of  the  United  States.  The  court  said  that  the 
land  was  not  assessed,  but  the  claim  itself,  that  is,  the  right  of 
possession  for  mining  purposes.  Such  an  interest  from  early 
times  has  been  held  to  be  properly  distinct  from  the  land  itself, 
vendable,  inheritable  and  taxable.  The  court  held  that  in  the  tax 
sale  of  this  claim  there  had  been  no  violation  of  any  federal 
right. 

§  26.  The  Taxability  of  Ores  and  Other  Output  of  Indian 
Lands. — Although  the  title  to  mineral  lands  may  remain  in  the 
United  States,  the  ores,  when  dug  or  extracted  under  a  mining 
claim,  are  free  from  any  claim  or  title  of  the  United  States,  and 
as  personal  property  they  are  subject  to  State  taxation  in  like 
manner  as  other  personal  property.  This  was  ruled  in  relation 
to  the  mining  laws  of  Nevada  of  1871,  taxing  mining  ores,  i 

The  revenue  tax  imposed  by  Oklahoma  (Act  of  May  26,  1908, 
Sec.  6)  upon  coal  miners  or  producers  equal  to  a  specified  per- 
centage of  the  gross  receipts  from  the  total  coal  produced,  which 
shall  be  in  addition  to  the  taxes  levied  and  collected  upon  an 
ad  valorem,  basis  upon  such  mining  propertj^  and  the  appurten- 
ances thereunto  belonging,  was  an  occupation  or  privilege  tax, 
which  could  not  be  exacted  from  a  Federal  instrumentality  act- 
ing under  Congressional  authority,  such  as  the  corporate  lessee 
under  the  authority  of  the  Curtis  Act  of  June  28,  1898,  of  coal 
mines  upon  segregated  and  unalloted  lands  belonging  to  the 
Choctaw  and  Chickasaw  Indian  tribes. 2 

A  State  when  assessing  for  taxation  the  corporate  assignee  of 
an  oil  and  gas  lease  of  Osage  lands  made  under  the  authority 
of  the  A(it  of  February  28,  1891,  and  extended  by  the  Act  of 
March  3,  1905,  which  recognized  the  assignment  may  not  include 
in  such   assessment  the  lease   and  rights  thereunder  either  as 


1  Forbes  v.  Gracey.  94  U.  S.  762,  24  L.  Ed.  313  (1877). 

2  Choctaw,   Etc.,   R.   Co.  v.   Harrison,  235   U.   S.   292,  59   L.   Ed.   234 
(1913). 


28  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    27 

separate  objects  of  taxation  or  as  represented  or  valued  by  the 
stock  of  the  corporation,  i 

§  27.  Indian  Reservations  Not  Taxable. — The  Indians  have 
been  dealt  with  by  the  government  from  its  early  history  as  a 
dependent  people,  and  the  land  grants  made  to  them  under  treat- 
ies with  their  tribes  and  thereafter  allotted  to  individual  In- 
dians are  exempt  from  State  taxation,  as  long  as  the  United 
States  has  an  interest  legal  or  equitable  in  the  lands  or  is 
charged  with  the  performance  of  some  obligation  or  duty  respect- 
ing the  same." 

A  state  has  no  right  to  tax  lands  held  in  severalty  by  individ- 
ual Indians  under  patents  issued  to  them  by  virtue  of  treaties 
made  with  their  tribes.^ 

The  fact  that  the  primitive  habits  and  customs  of  the  tribe 
have  been  largely  broken  into  by  their  intercourse  with  the 
whites,  does  not  authorize  the  State  government  to  regard  the  In- 
dians as  subject  to  its  laws.  Where  lands  are  exempt  from  levy, 
sale  and  forfeiture,  they  are  exempt  from  ordinary  proceedings 
for  the  collection  of  taxes.  The  Indian  Reservations  reserved  to 
the  Indians  in  their  tribal  relations  by  the  United  States,  can- 
not be  taxed  by  the  State.  Thus  it  was  held  in  the  case  of  the 
New  York  Indians,*  reversing  th^e  New  York  Court  of  Appeals, 
that  the  State  had  no  power  to  tax  the  land  of  the  Indians,  their 
ancient  and  native  home,  the  enjoyment  of  which  had  been  se- 
cured to  them  by  treaty  with  the  Federal  government,  with  the 
assurance  that  the  lands  should  remain  theirs  until  they  chose 


1  Indian  Territory,  Etc.,  Oil  Co.  v.  State  of  Oklahoma,  240  U.  S.  522, 
60  L.  Ed.  779  (1916),  reversing  43  Okla.  307;  M.  K.  &  L.  R.  R.  Co.  v. 
Meyer,  204  Fed.  140. 

The  claim  that  cattle  owned  by  a  Jesuit  society  grazing  on  Indian 
lands  were  exempt  from  taxation  was  held  to  be  too  clearly  lacking  in 
merit  to  convey  jurisdiction  upon  the  court.  Montana  Catholic  Mis- 
sions V.  Missoula  County,  200  U.  S.  119,  50  L.  Ed.  398  (1906). 

2U.  S.  V.  Hemmer,  Dist.  Ct.  of  So.  Dak.  195  Fed.  790  (1912). 

3  Case  of  the  Kansas  Indians,  5  Wall.  737,  18  L.  Ed.  667   (1867). 

i5  Wallace  761,  18   L.   Ed.   708    (1867). 


5    27  UNITED    STATES    AGENCIES    AND    PROPERTIES.  29 

to  sell  them.  And  where  the  Indians,  under  an  arrangement  ap- 
proved by  the  United  States,  agreed  to  sell  their  lands  to  private 
citizens  and  to  give  possession  after  a  term  of  years,  the  taxation 
of  the  land  before  the  end  of  that  term  was  premature.  A  sale 
of  land  in  an  Indian  Reservation  for  State  taxes  is  void.i  But 
the  exemption  ceases  after  the  Indian  alienates  his  land  to  a 
citizen.2 

This  exemption  from  State  taxation,  however,  does  not 
exist  where  inconsistent  with  the  terms  of  a  treaty  of  the  United 
States  with  the  tribe.  This  was  held  in  the  case  of  a  half-blood 
member  of  a  tribe  who  was  not  a  member  of  a  tribal  organiza- 
tion existing  in  the  State  as  a  distinct  political  community,  and 
who  had  received  patents  from  the  United  States  for  lands  in  fee 
simple.  3 

The  lands  allotted  to  Indians  inalienable  for  certain  periods 
of  time  during  which  they  are  held  in  trust  by  the  United  States 
for  the  benefit  of  the  allottees  and  their  heirs  are  exempt  from 
State  taxation,  because  they  are  instrumentalities  lawfully  em- 
ployed by  the  nation  in  the  exercise  of  its  powers  of  government 
to  protect,  support  and  instruct  the  Indians,  and  the  proceeds 
of  the  sale  of  such  lands  by  Indian  heirs  of  the  allottees,  which 
were  deposited  by  direction  of  the  Secretary  of  the  Interior  in  a 
bank  selected  by  the  Commissioner  of  Indian  affairs  subject  to 
tlieir  checks  were  approved  by  the  agent  or  officer  in  charge, 
were  held  in  trust  by  the  United  States  for  the  same  purpose  as 
Avere  the  lands  and  were  exempt  for  the  same  reason,  as  no 
change  of  form  of  property  defeated  a  trust.  The  court  said 
that  this  exemption  continued  both  as  to  lands  and  the  proceeds 
as  long  as  they  were  held  or  controlled  by  the  United  States, 
as  the  trust  had  not  expired.* 

This  exemption  has  been  held  to  extend  also  to  the  personal 
property  issued  by  the  government  to  Indians,  even  after  their 


1  Swope  V.  Purely,  1  Dillon  350. 

2  Peck  V.  Miami  County,  4  Dillon  371. 

3  Pennock  v.  Commissioners.  103  U.  S.  44,  26  L.  Ed.  367  (1880). 

*  U.  S.  V.  Thurston  County,  Neb.,  143  Fed.  287,  reversing  140  Fed. 
456  (1906). 


30  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    28 

citizenship  had  been  conferred  upon  the  allottees,  as  the  property 
was  held  in  trust  for  their  benefit,  i 

As  the  exemption  of  Indian  lands  is  dependent  upon  the 
treaty  provisions  and  other  congressional  legislation,  Congress 
can  provide  when  and  on  what  lands  allotted  to  Indians  should 
be  taxable  by  the  State  law,  or  alienable.^ 

§  28.  Cattle,  Etc.,  of  Non-Indians  on  Indian  Reservation 
Taxable. — Cattle  owned  by  individuals  or  corporations,  and 
pastured  upon  an  Indian  reservation,  under  a  contract  with  the 
Indians,  sanctioned  by  the  United  States,  are  taxable  by  the 
State,  although  its  Constitution  contains  a  disclaimer  of  all  right 
of  any  kind  in  the  land  of  any  Indian  tribe,  until  the  Indian 
right  is  extinguished.^ 

The  same  principle  was  applied  by  the  Supreme  Court  in  the 
case  of  non-resident  owners  of  cattle  grazing  in  parts  of  the 
Osage  Indian  Reservation  in  Oklahoma,  which  were  assessed  for 
taxation  by  that  Territory.  It  was  claimed  that  this  tax  was 
invalid  on  the  ground  that  the  Indians  were  directly  and  vitally 
interested  in  the  property.  But  the  court  held*  that  this  was 
too  remote  and  indirect  to  be  deemed  a  tax  upon  the  lands  or 
privileges  of  the  Indians,  and  that  it  was  immaterial  that  the 
cattle  were  not  in  any  organized  county.  The  tax  was  levied 
only  upon  the  personal  property,  and  this  was  a  matter  of  detail 
within  the  legislative  discretion. 

Where  a  railroad,  chartered  under  the  laws  of  a  Territory, 
receives  a  grant  from  Congress  of  a  right  of  way  over  the  Indian 


lU.  S.  V.  Pearson,  Dist.  Ct.  S.  Dak.,  231  Fed.  270  (1916).  The  court 
in  this  case  followed  the  decision  of  the  Circuit  Court  of  Appeals  above 
cited.  As  to  termination  of  such  trust  see  U.  S.  v.  Thurston  County, 
140  Fed.  456.  See  also  U.  S.  v.  Rickert,  188  U.  S.  432,  47  L.  Ed.  532 
(1902). 

2  See  U.  S.  V.  Board  of  Commissioners  of  Osage  County,  Okla.,  193 
Fed.  485,  Cir.  Ct.  W.  D.  of  Okla.    (1911). 

3  Truscott  V.  Hurlbut  Land  &  Cattle  Co.,  19  C.  C.  A.  374,  73  Fed.  60 
(1896),  Ninth  Circuit. 

4  Thomas  v.  Gay,  169  U.  S.  264,  42  L.  Ed.  1211  (1898).  See  also 
Wagoner  v.  Evans,  170  U.  S.  588,  42  L.  Ed.  1154  (1898),  reversing  in 
part  5  Oak  31. 


§    29  UNITED    STATES   AGENCIES   AND    PROPERTIES.  31 

Reservation  within  the  Territory,  that  part  of  it  within  the 
Reservation  is  subject  to  taxation  by  the    territorial  government.! 

The  fact  that  an  Indian  post  trader  is  licensed  hy  the  govern- 
ment to  trade  with  the  Indians  does  not  exempt  his  stock  in  trade 
from  State  taxation,  such  trader  being  a  mere  licensee,  and  not 
an  agent  of  the  government.  2 

The  legislation  of  the  Chickasaw  nation,  imposing  an  annual 
privilege  or  permit  tax  on  live  stock  owned  or  held  by  non-citi- 
zens, that  is,  persons  not  citizens  or  members  of  the  tribe,  with- 
in the  limits  of  the  Chickasaw  nation,  which  had  received  the 
approval  of  the  governor  of  the  nation  and  the  sanction  of  the 
President  of  the  United  States,  was  not  repugnant  to  the  Fed- 
eral Constitution.3 

§  29.  Indian  Tax  Exemptions  and  Alienations. — In  the  leg- 
islation for  the  members  of  the  Choctaw  and  Chickasa'tv  tribes 
wherein  each  one  held  a  patent  to  320  acres  of  allotted  land  is- 
sued under  the  terms  of  the  Curtis  Act,  containing  a  provision 
that  the  land  should  be  non-taxable  for  a  limited  time,  the  Court 
held  that  this  exemption  was  not  a  mere  personal  privilege  end- 
ing with  alienation  but  it  was  attached  to  the  land  for  the  limited 
period  prescribed  by  the  act.  The  Court  said  if  there  was  any 
doubt  it  should  be  resolved  in  favor  of  the  patentees.  The  Court 
said  that  such  exemptions  in  the  government's  dealings  with  the 
Indians  were  not  subject  to  the  same  rule  of  construction  as  ap- 
plied to  other  exemptions  from  taxation.  Doubtful  expressions 
were  to  be  resolved  in  favor  of  a  weak  and  defenseless  people 
who  are  wards  of  the  nation  and  dependent  wholly  upon  its  pro- 
tection and  good  faith. * 

It  was  therefore  held  in  this  ease,  as  in  also  that  of  the  Creek 
homestead  allottees,  tha,t  they  acquired  a  vested  right  to  exemp- 


1  Maricopa  &  Phoenix  R.  R.  Co.  v.  Arizona,  156  U.  S.  347,  39  L,  Ed. 
447  (1895). 

2  Cosier  v.  McMillan,  22  Mont.  484. 

3  Morris  v.  Hitchcock,  194  U.  S.  384,  48  I..  Ed.  103  (1903);  affirming 
21  App.  D.  C.  565. 

4Choate  V.  Trapp,  224  U.  S.  664,  56  L.  Ed.  941   (1912),  reversing  28 
Okla.  517. 


32  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    30 

tions  from  State  taxation  protected  by  the  Federal  Constitution 
against  abrogation  b}^  Congress  during  that  period.i 

§  30.  State  Taxation  of  Railroads  Incorporated  By  the 
United  States. — The  Union  Pacific  Railroad  Company  was  or- 
ganized under  Act  of  Congress,  and  there  was  no  provision  there- 
in respecting  taxation  by  the  States  through  which  the  road 
should  run.  It  was  held  in  Thomson  v.  Pacific  Railroads  that 
the  principle  decided  in  McCulloeh  v.  Maryland,  did  not  war- 
rant the  exemption  of  the  property  of  this  railroad  in  the  State 
of  Kansas  from  State  taxation,  and  that  there  was  a  clear  dis- 
tinction between  the  means  employed  by  the  government  and  the 
property  of  agents  employed  by  the  government,  although  it  was 
conceded  that  some  of  the  reasoning  in  the  case  of  McCulloeh 
V.  Maryland  seemed  to  favor  the  broader  doctrine.  In  this  case 
the  railroad  company  was  originally  incorporated  by  the  legisla- 
ture of  the  Territory  of  Kansas,  and  subsequently  by  the  State 
of  Kansas,  and  had  been  authorized  to  connect  with  lines  con- 
structed by  the  company  incorporated  under  Act  of  Congress. 
Thus  the  corporation  in  this  case  was  a  State  corporation  en- 
titled to  certain  benefits  and  subject  to  certain  duties  under  the 
legislation  of  Congress.  The  court  said  by  Chief  Justice  Chase, 
1.  c,  p.  590 : 

"We  do  not  think  ourselves  warranted,  therefore,  in  extending 
the  exemption  established  by  the  case  of  McCulloeh  v.  Maryland, 
beyond  its  terms.  We  cannot  apply  it  to  the  case  of  a  corpora- 
tion deriving  its  existence  from  State  law,  exercising  its  fran- 
chise under  State  law,  and  holding  its  property  within  State 
jurisdiction  and  under  State  protection. ' ' 

But  a  few  years  later  the  question  was  directly  presented,  as  to 
the  taxability  under  State  law  of  the  property  of  the  Union  Pa- 
cific Railroad  Company  incorporated  under  Act  of  Congress.  The 
property  of  the  company  was  listed  for  taxation  in  Lincoln 
County,  Nebraska,  and  a  bill  was  filed  to  enjoin  the  collection 


1  English  V.   Richardson,  224   U.   S.   680,   56   L.   Ed.   949    (1912),  re- 
versing 20  Okla.  408. 

2  9  Wallace  579,  19  L.  Ed.  792   (1870). 


§   31  UNITED    STATES   AGENCIES   AND   PROPERTIES.  33 

of  the  tax.  It  was  strongly  urged  that  the  Thomson  ease  did 
not  control,  because  that  company'  was  incorporated  by  Kansas, 
while  the  company  in  this  case  was  incorporated  by  Act  of  Con- 
gress. But  the  court  heldi  that  this  did  not  present  any  reason 
for  the  application  of  a  rule  different  from  that  which  was  ap- 
plied in  the  former  case,  saying,  at  p.  36  : 

"It  is,  therefore,  manifest  tliat  exemption  of  Federal  agencies 
from  State  taxation  is  dependent,  not  upon  the  nature  of  the 
agents,  or  upon  the  mode  of  their  constitution,  or  upon  the  fact 
that  they  are  agents,  but  upon  the  effect  of  the  tax ;  that  is,  upon 
the  question  whether  the  tax  does  in  truth  deprive  them  of 
power  to  serve  the  government  as  they  were  intended  to  serve  it, 
or  does  hinder  the  efficient  exercise  of  their  power.  A  tax  upon 
their  property  has  no  such  necessary  effect.  It  leaves  them  free 
to  discharge  the  duties  they  have  undertaken  to  perform.  A  tax 
upon  their  operations  is  a  direct  obstruction  to  the  exercise  of 
Federal  powers.  "- 

§  31.    Railroad  Franchises  Granted  By  United  States  Not 

Taxable.— But  while  the  property  used  by  private  agencies  em- 
ployed by  the  Federal  government  is  taxable  by  State  authorities 
unless  exempted  by  Act  of  Congress,  franchises  conferred  by 
Congress  are  not  taxable.  Thus  the  assessment  by  the  State  of 
California  upon  the  Pacific  railroads  incorporated  by  Act  of  Con- 
gress was  held  void,  because  the  franchises  granted  by  the 
United  States  government  were  included  in  the  valuation.  The 
court  pointed  out  that  in  the  Thomson  case  and  the  Peuiston 


1  Railroad  Co.  v.  Peniston,  18  Wallace  5,  21  L.  Ed.  785  (1873). 

2  Justice  Swayne  concurred  on  the  ground  that  Congress  had  not 
given  the  exemption  claimed.  Three  Justices,  Bradley,  Field  and  Hunt, 
dissented;  Justice  Bradley  saying  in  his  dissenting  opinion,  p.  50: 

"If  the  roadbed  may  be  taxed,  it  may  be  seized  and  sold  for  non- 
payment of  taxes — seized  and  sold  in  parts  and  parcels,  separated  by 
county  or  State  lines — and  thus  the  whole  purpose  of  Congress  in  cre- 
ating the  corporation  and  establishing  the  line  may  be  subverted  and 
destroyed. 

"In  my  judgment,  the  tax  laid  in  this  case  was  an  unconstitutional 
interference  with  the  instrumentalities  created  by  the  national  gov- 
ernment in  carrying  out  the  objects  and  powers  conferred  upon  it  by 
the  CouttUlution." 


34  UNITED    STATES   AGENCIES    AND    PROPERTIES.  §    33 

ease,  the  tax  was  upon  the  property  of  the  company,  and  not 
upon  the  franchises  or  operations,!  and  that  which  the  State 
could  tax  the  ' '  outside  visible  property  of  the  company ' '  situated 
within  its  jurisdiction,  it  could  not  tax  the  franchises  which  were 
the  grant  of  the  United  States. 

§  32.  Definition  of  United  States  Franchise. — The  Court,  in 
its  opinion  in  this  last  cited  case,  said  that  Blackstone,  under  the 
English  law,  defined  a  franchise  as  "  a  royal  privilege,  or  branch 
of  the  king's  prerogative,  subsisting  in  the  hands  of  a  subject." 
In  this  country,  a  franchise  was  a  right,  privilege,  or  power  of 
public  concern,  which  could  not  be  assumed  without  legislative 
authority.  In  view  of  this  description  of  a  franchise,  it  follows 
that  such  a  grant  by  Congress  could  not  be  taxed  by  a  State  with- 
out the  consent  of  Congress,  and  that  the  taxation  of  a  corporate 
franchise  as  such,  was  the  exercise  of  an  authority  somewhat  ar- 
bitrary, as  it  had  no  limitation  except  in  the  discretion  of  the 
taxing  power.  The  levying  of  such  a  tax  by  the  State  on  a  fran- 
chise granted  by  Congress,  was  subversive  of  the  power  of  the 
government,  and  repugnant  to  its  paramount  authority. 

It  will  be  observed  that  the  definition  of  a  franchise  in  this 
ease  was  made  to  show  that  from  its  nature,  a  franchise  granted 
by  Congress  could  not,  without  its  consent,  be  taxed  by  a  State ; 
while  the  definition  of  a  State  corporate  franchise,  in  Home  In- 
surance Company  case,  supra,  Sec.  18,  was  given  to  show  that  it 
was  a  property  right  granted  by  the  State,  and,  therefore,  within 
the  taxing  power  of  the  State. 

§  33.  Intangible  and  Tangible  Property  of  Railroads  Incor- 
porated By  United  States  Taxable. — But  it  is  only  the  fran- 
chises granted  by  Congress  which  are  not  taxable  by  State  au- 
thority. The  intangihle,  as  well  as  the  tangible  property,  of  the 
company  is  subject  to  State  taxation,  and  the  decision  of  the  Su- 
preme Court  of  the  State  that  the  franchises  taxed  are  franchises 
granted  by  the  State  is  conclusive  upon  the  Federal  court.  2     The 


1  California  v.  Pacific  R.  R.  Co.,  127  U.  S.  3,  32  L.  Ed.  150  (1888). 

2  Central  Pacific  R.  R.  Co.  v.  California,  162  U.  S.  91,  40  L.  Ed,  403 
(1896),  affirming  105  Cal.  576.    . 


§   34  UNITED    STATES   AGENCIES    AND   PROPERTIES.  35 

court  saj'S  in  the  case  last  cited,  after  reviewing  the  decisions, 
at  p.  125 : 

"It  may  be  regarded  as  firmly  settled  that  although  corpora- 
tions may  be  agents  of  the  United  States,  their  property  is  not 
the  property  of  the  United  States,  but  the  property  of  the  agents, 
and  that  a  State  may  tax  the  property  of  the  agents,  subject  to 
the  limitations  pointed  out  in  Railroad  Co.  v.  Peniston,  Van 
Brocklin  v.  Tennessee,  supra. 

*'0f  course,  if  Congress  should  think  it  necessary  for  the  pro- 
tection of  the  United  States  to  declare  such  property  exempted, 
that  would  present  a  different  question.  Congress  did  not  see  fit 
to  do  so  here,  and  unless  we  are  prepared  to  overrule  a  long  line 
of  well  considered  decisions'  the  case  comes  within  the  rule  therein 
laid  down.  Although  in  Thomson 's  case  it  was  tangible  property 
that  was  taxed,  that  can  make  no  difference  in  principle,  and  the 
reasoning  of  the  opinion  applies. 

' '  Under  the  laws  of  California  plaintiff  in  error  obtained  from 
the  State  the  right  and  privilege  of  corporate  capacity ;  to  con- 
struct, maintain  and  operate;  to  charge  and  collect  fares  and 
freights ;  to  exercise  the  power  of  eminent  domain ;  to  acquire 
and  maintain  right  of  way ;  to  enter  upon  lands  or  waters  of  any 
person  to  survey  route;  to  construct  road  across,  along  or  upon 
any  stream,  water  course,  roadstead,  bay,  navigable  stream,  street, 
avenue,  highway  or  across  any  railway,  canal,  ditch  or  flume ;  to 
cross,  intersect,  join  or  unite  its  railroad  with  any  other  railroad 
at  any  point  on  its  route;  to  acquire  right  of  way,  roadbed  and 
material  for  construction ;  to  take  material  from  the  lands  of  the 
State,  etc.,  etc. 

"It  is  not  to  be  denied  that  such  rights  and  privileges  have 
value  and  constitute  taxable  property." 

§  34.  Telegraph  Companies  Under  the  Act  of  July  24,  1866. 
— The  acceptance  by  a  telegraph  company  of  the  provisions  of 
the  act  of  July  24,  1866,  i  giving  the  right  to  construct,  maintain 
and  operate  lines  over  the  military  and  post  roads  of  the  United 
States  does  not  give  it  a  Federal  franchise,  or  make  it  an  in- 
strumentality of  the  government,  so  as  to  prevent  a  State  or  any 
of  its  municipalities  from  imposing  a  license  tax  upon  the  tele- 
graph company's  right  to  do  local  business  within  the  State.  ^ 

iR.  S.  Sees.  52C3.  5268;  Sees.  10072,  10077.  Comp.  Stat.  1913. 
■;  Williams  v.  Talladega,  226  U.  S.  404,  57  L.  Ed.  275  (1913),  reversing 
164  Ala.  633. 


36  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    35 

The  Act  of  Congress  conveyed  no  title,  and  while  it  made  the 
erection  of  telegraph  lines  free  to  all  submitting  to  its  conditions 
as  against  any  State  attempt  to  exclude  them,  except  in  this  nega- 
tive sense  the  statute  was  only  permissive  and  not  a  source  of 
positive  rights.i  It  therefore  followed  that  the  acceptance  of 
the  provisions  of  this  act  did  not  impair  the  authority  of  the 
State  to  tax  its  property  both  tangible  and  intangible,  and  it  was 
immaterial  that  the  tax  upon  such  property  was  termed  a  fran- 
chise tax.2 

A  telegraph  company,  however,  which  accepts  the  provisions 
of  this  act,  occupies  the  position  of  an  instrument  of  foreign  and 
interstate  commerce  and  of  a  government  agent  for  the  transmis- 
sion of  messages  on  public  business,  and  an  ordinance  which 
taxed  without  exemption  the  privilege  of  carrying  on  this  gov- 
eriunent  agency  w^as  held  invalid.3 

As  to  the  method  of  determining  the  valuation  of  interstate 
telegraph  property,  see  infra,  Sec.  269.  An  assessment  of  the 
property  and  franchises  of  the  company  specifically  including 
the  value  of  the  franchise  conferred  by  the  Act  of  Congress  under 
the  Act  of  1866  is  in  so  far  illegal.  4 

§  35.  The  Taxability  of  Federal  Ag-encies. — As  the  basis  of 
exemption  of  Federal  securities  is  not  the  express  declaration  of 
the  statute,  but  the  relation  of  such  securities  to  the  functions  of 
the  government,  so  it  is  fundamental  that  neither  the  taxing  nor 
the  police  authority  of  the  State  can  be  used  to  interfere  in 
any  wise  with  the  functions  of  the  Federal  government.  This 
was  illustrated  in  the  holding  that  a  statute  of  North  Dakota 


1  Western  Union  Teleg.  Co.  v.  Richmond,  224  U.  S.  160,  56  L.  Ed.  710. 
(1911). 

2  Postal  Telegrapli  Cable  Co.  v.  Charleston,  153  U.  S.  692,  38  L. 
Ed.  871  (1893);  Western  Union  Telegraph  Co.  v.  Missouri,  190  U.  S. 
412,  47  L.  Ed.  1116  (1902);  Western  Union  Telegraph  Co.  v.  Pennsyl- 
vania, 195  U.  S.  540,  49  L.  Ed.  312  (1904);  Western  Union  Telegraph 
Co.  V.  Trapp,  186  Fed.  114,  C.  C.  A.  8th  Cir.    (1911). 

3  Williams  v.  Talladega,  supra;  Western  Union  Telegraph  Co.  v. 
Texas,  105  U.  S.  460,  26  L.  Ed.  1067   (1882). 

4Western  Union  Telegraph  Co.  v.  Wright,  185  Fed.  250  (1910); 
C.  C.  A.  5,  reversing  166  Fed.  954,  158  Fed.  1004. 


§    35  .UNITED    STATES    AGENCIES    AND    PROPERTIES.  37 

which  required  that  receipts  for  the  payment  of  the  Federal  In- 
ternal Revenue  tax  upon  the  business  of  selling  intoxicated 
liquors  should  be  registered  and  published  at  the  holder's  ex- 
pense was  not  a  valid  exercise  of  the  police  power  of  the  State, 
but  was  invalid  as  placiUg  a  direct  burden  upon  the  taxing  power 
of  the  Federal  government,  i 

The  franchises  granted  by  the  Hawaiian  government  between 
July  7,  1898,  and  September  28,  1899,  were  not  made  acts  of 
Congress  by  adoption  so  as  to  be  exempt  from  territorial  taxa- 
tion by  the  provisions  of  the  organic  Act  of  1900,  affirming  such 
franchises.  2 

A  surety  company  does  not,  by  becoming  conformably  to  the 
Act  of  August  13, 1894,  a  surety  on  bonds  required  by  the  United 
States  become  a  Federal  instrumentality  so  as  to  be  exempt  from 
a  State  tax  on  premiums  reserved  exacted  from  foreign  corpora- 
tions on  privilege  of  doing  business  within  the  State.s 

So  also  the  property  of  a  government  contractor  which  on  the 
default  of  the  contractor  has  been  taken  for  use  in  completing 
the  contract  is  not  exempt  from  taxation,  in  the  absence  of  an  act 
of  Congress  to  that  effect,  as  the  government  had  no  ownership 
therein.  4 

Land  conveyed  by  the  United  States  to  a  corporation  for  dry 
dock  purposes  with  a  reserved  right  in  the  grantor  to  a  free  use 
of  the  dry  dock,  and  a  provision  for  forfeiture  in  the  case  of  the 
unfitness  of  the  dry  dock  for  use,  or  the  use  of  the  land  for  other 
purposes,  is  not  exempt  from  taxation  as  an  agency  of  the  United 
States.  The  tax  would  be  held  in  such  case  to  create  a  lien  upon 
the  interest  of  the  company  alone. s 


1  North  Dakota  ex  rcl  Flaherty  v.  Hanson,  215  U.  S.  515,  54  L.  Ed. 
307   (1910),  reversing  14  N.  Dak.  347. 

2  Honolulu  Rapid  Transit  &  L.  Co.  v.  Wilder,  211  U.  S.  137,  53  L. 
Ed.  121   (1908);   affirming  8  Hawaii  15. 

3  Fidelity  &  Deposit  Co.  of  Md.  v.  Commonwealth  of  Pa..  240  U.  S. 
319,  60  L.  Ed.  664   (1916);  affirming  244  Pa.  67. 

4  United  States  v.  Moses,  185  Fed.  90,  C.  C.  A.  8th  Cir.  (1911). 

0    Baltimore  Shipping  &  Dry  Dock  Co.  v.  Baltimore,  195  U.  S.  375. 
49  L.  Ed.   242    (*1904);    affirming  97  Md.  97. 


38  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    36 

§  36.  Letters  Patent  and  Copyrights. — Letters  patent^  and 
copjrights2  granted  by  the  United  States  are  governed  by 
the  same  principle.  Thus  a  State  cannot  require  a 
license  for  the  use  of  patent  rights  within  its  jurisdiction,  as  such 
requirement  is  a  violation  of  the  rights  of  the  patentee  under  the 
Federal  law.^  But  in  the  matter  of  patents  and  copyrights  a 
distinction,  analogous  to  that  made  in  the  case  of  railroad  fran- 
chises and  property,  is  taken  between  the  right  of  discovery  and 
the  right  of  property  in  the  fruit  of  the  discovery.  Thus  in  the 
language  of  the  Supreme  Court,  ^  the  use  of  the  tangible  prop- 
erty which  comes  into  existence  by  the  application  of  the  discov- 
ery protected  by  the  patent,  is  not  beyond  the  control  of  State 
legislation,  simply  because  the  patentee  obtains  a  monopoly  in  his 
discovery.    And  in  a  later  case  &   the  court  said,  1.  c,  p.  347  : 

' '  The  right  conferred  by  the  patent  laws  of  the  United  States 
does  not  take  the  tangible  property,  in  which  the  invention  or  dis- 
covery may  be  exhibited  or  carried  into  effect,  from  the  operation 
of  the  tax  and  license  laws  of  the  State.  It  is  only  the  right  to 
the  invention  or  discovery,  the  incorporeal  right,  which  the  State 
cannot  interfere  with." 

This  distinction  was  applied  by  the  Supreme  Court  of  Penn- 
sylvania, 6  to  the  case  of  a  lessee  of  the  American  Bell  Telephone 
Company,  who  was  held  to  be  taxable  by  the  State  on  his  interest 
in  the  telephone  instruments,  leased  under  a  contract  granting 
the  exclusive  use  for  a  term  of  years.    The  court  said,  1.  c,  p.  130 : 

''The  distinction  was  between  the  incorporeal  rights  secured 
by  letters  patent  and  the  tangible  commodity  or  finished  product, 
which  is  its  fruit.  This  finished  product  or  fruit  is  merchandise, 
whether  it  takes  the  form  of  a  patent  reaper,  a  power  printing 


1  State  V.  Butler,  3  Lea  (Tenn.)  222;  People  v.  Assessors,  156  N.  Y. 
417,  and  42  L.  R.  A.  290;  Commonwealth  v.  Electric  Co.,  151  Pa.  265. 

2  People  V.  Roberts,  159  N.  Y.  70,  45  L.  R.  A.  126;  People  v.  Knight, 
73  N.  Y.  Supp.  745;  People  v.  Harkness,  44  N.  Y.  Supp.  51. 

3  Commonwealth  v.  Petty,  96  Ky.  452,  29  L.  R.  A.  786. 

4  Patterson  v.  Kentucky,  97  U.  S.  501,  24  L.  Ed.  1115  (1879). 

5  Webber  v.  Virginia,  103  U.  S.  344,  26  L.  Ed.  565   (1881). 

6  Commonwealth  v.  Central.  D.  &  P.  Co.,  145  Pa.  121. 


§    38  UNITED    STATES   AGENCIES    AND   PROPERTIES.  39 

press,  a  fountain  pen,  a  pencil  sharpener,  or  an  instrument  called 
a  telephone.^ 

§  37.  Corporate  Capital  Invested  in  Patent  Rights. — 'SYhere 
the  corporate  capital  is  invested  in  patent  rights,  it  would  follow 
from  the  rule  applied  in  the  ease  of  government  securities,  that 
the  validity  of  the  tax  depends  upon  whether  it  is  upon  corporate 
property  or  the  stock  as  representing  that  property,  and  that  if 
it  is  upon  either,  the  value  of  the  patent  rights  must  be  deducted, 
as  in  the  case  of  Federal  securities;  but  otherwise  if  the  tax  is 
upon  the  corporate  franchise,  or  upon  the  shares  of  stock  to  the 
holders.  Thus  in  a  Maryland  case,  it  was  held  that  as  the  tax 
was  levied  upon  the  owners  of  the  corporate  shares,  it  was  imma- 
terial what  the  assets  or  other  property  were,  which  made  up  the 
value  of  the  shares.  2 

§  38.  State  Tax  on  Bequests  to  United  States. — A  State  has 
the  power  to  levy  an  inheritance  tax  upon  the  right  of  inheritance 
which  is  in  effect  a  limitation  upon  the  power  of  the  testator  to 
bequeath  his  property  to  whom  he  pleases.  The  tax  is  not  upon 
the  property,  but  upon  its  transmission  by  will  or  descent.  This 
principle  was  first  decided  in  an  interesting  case  from  New  York, 
where  a  testator  devised  all  his  property  to  the  United  States 
government,  and  the  question  was  raised  whether  the  State  had 
the  power  to  tax  bequests  made  to  the  United  States.  The  court 
held  that  it  had  such  power  and  that  the  tax  must  be  paid  by  the 
United  States  before  it  could  receive  the  legacy. 3  It  was  also 
decided  that  the  Federal  government  was  not  organized 
for  a  religious,  charitable  or  reformatory  purpose  within  the 
meaning  of  the  New  York  statute  exempting  such  corporations 
from  paying  the  tax,  and  that  the  exemption  was  not  intended  to 
apply  to  a  purely  political  or  government  corporation  like  the 
United  States. 


1  See  also  Commonwealth  v.  Brush  Electric  Light  Co.,  145  Pa.  147. 

2  Crown  Cork  &  Seal  Co.  v.  Maryland,  87  Md.  687.    But  see  Common- 
wealth V.  Phila.  Co.,  107  Pa.  St.  n27. 

•■«  United    States   v.   Perkins,   163    U.    S.   625,   41    L.    Ed.   287    (1896), 
affirming  141  N.  Y.  479. 


40  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    40 

§  39.  United  States  Securities  Not  Exempt  From  State  In- 
heritance Tax. — A  legacy  of  United  States  bonds  is  not  exempt 
from  tlie  inheritance  tax  laws  of  New  York,  although  it  appears 
on  the  face  of  the  bonds  that  they  were  exempted  from  taxation 
in  any  form  by  State  authority.^  It  was  urged  that  such  a  tax 
impaired  the  borrowing  power  of  the  government.  This  was  too 
remote  in  effect  to  make  the  statute  invalid,  and  the  argu- 
ment would  apply  equally  to  State  taxation  of  corporate  fran- 
chises, measured  by  the  value  of  the  corporation 's  property  com- 
posed in  whole  or  part  of  United  States  bonds.  After  an  ex- 
haustive review  of  the  decisions  as  to  the  nature  of  an  inheritance 
tax,  the  court  said,  1.  e.  p.  134  : 

""We  think  the  conclusion,  fairly  to  be  drawn  from  the  State 
and  Federal  cases,  is,  that  the  right  to  take  property  by  will  or 
descent  is  derived  from  and  regulated  by  municipal  law;  that, 
in  assessing  a  tax  upon  such  right  or  privilege,  the  State  may 
lawfully  measure  or  fix  the  amount  of  the  tax  by  referring  to  the 
value  of  the  property  passing ;  and  that  the  incidental  fact  that 
such  property  is  composed  in  whole  or  in  part  of  Federal  securi- 
ties does  not  invalidate  the  tax  or  the  law  under  which  it  is  im- 
posed. ' ' 

§  40.  Treaty-Making-  Power  and  State  Taxation. — Treaties 
made  under  the  authority  of  the  United  States,  as  well  as  the 
Constitution  and  laws  of  the  United  States,  are  the  supreme  law 
of  the  land,  Article  VI.,  Section  2.  But,  it  would  seem,  a  treaty 
made  by  the  United  States  with  a  foreign  country  cannot,  any 
more  than  a  statute,  control  the  State  in  its  taxation  of  the  sub- 
jects of  taxation  within  its  jurisdiction,  and  that,  where  the 
treaty  contemplates  action  by  a  State  upon  a  subject  within  its 
jurisdiction,  the  State  must  itself  accept  the  terms  of  the  treaty. 
This  was  illustrated  in  the  case  of  the  inheritance  tax  law  of 
Louisiana,  but  the  point  was  not  definitely  decided  by  the  Su- 
preme Court.  The  laws  of  Louisiana  imposed  a  tax  of  ten  per 
cent  on  the  value  of  all  property  inherited  in  that  State  by  any 
person  not  domiciled  there,  and  not  being  a  citizen  of  any  State 


1  Plummer  v.   Coler,  178  U.  S.  115,  44  L.   Ed.   598    (1900),  Justice 
White  dissenting. 


§    40  UNITED    STATES   AGENCIES   AND   PROPERTIES.  41 

or  Territory  of  the  United  States.  The  treaty  with  France,  pro- 
claimed August  12,  1853,  provided  that  in  all  States  of  the 
Union,  whose  laws  permitted,  so  long  and  to  th©  same  extent  as 
said  laws  should  remain  in  force,  Frenchmen  should  enjoy  the 
right  of  possessing  personal  and  real  property  in  the  same  man- 
ner and  to  the  same  extent  as  citizens  of  the  United  States,  and 
that  in  no  case  should  they  be  subjected  to  taxes  on  transfers, 
inheritances  or  any  others,  different  from  those  paid  by  citizens 
of  the  United  States.  A  French  subject  inheriting  a  Louisiana 
estate  from  his  sister  who  died  prior  to  the  proclamation  of  the 
treaty,  contested  the  pajonent  of  this  tax.  The  Supreme  Court 
in  affirming  the  judgment  of  the  Supreme  Court  of  Louisiana;  ^ 
said  through  Chief  Justice  Taney,  that  the  law  applied  to  eases 
where  the  right  to  inherit  subsequently  accrued,  but  added  1.  c, 
p.7: 

"In  atSrming  this  judgment,  it  is  proper  to  say  that  the  obliga- 
tion of  the  treaty  and  its  operation  in  the  State,  after  it  was  made 
depend  upon  the  laws  of  Louisiana.  The  treaty  does  not  claim 
for  the  United  States  the  right  of  controlling  the  succession  of 
real  or  personal  property  in  a  State.  And  its  operation  is  ex- 
pressly limited  'to  the  States  of  the  Union  whose  laws  permit  it, 
so  long  and  to  the  same  extent  as  those  laws  shall  remain  in 
force.'  And,  as  there  is  no  act  of  the  legislature  of  Louisiana 
repealing  this  law  and  accepting  the  provisions  of  the  treaty,  so 
as  to  secure  to  her  citizens  similar  rights  in  France,  this  court 
might  feel  some  difficulty  in  saying  that  it  was  repealed  by  this 
treaty,  if  the  State  court  had  not  so  expounded  its  own  law,  and 
held  that  Louisiana  was  one  of  the  States  in  which  the  proposed 
arrangements  of  the  treat.y  were  to  be  carried  into  effect." 

As  to  the  treaty-making  power  with  reference  to  the  taxing 
power  of  Congress,  see  infra,  Sec.  578. 

In  a  later  case,  2  the  court  construed  the  treaty  with  Wurtem- 
burg  and  held  that  it  had  no  application  to  the  property  of  a 


1  Prevost  V.  Grenaux,  19  How.  1.  15  L.  Ed.  572  (1857).  The  courts 
of  Louisiana  seem  to  have  recognized  rights  of  aliens  under  treaty 
stipulations  with  reference  to  the  inheritance  tax,  see  Succession  of 
Rixner.  48  L.  Ann.  552,  32  L.  R.  A.  177   (1896). 

2  P^ederickson  v.  Louisiana,  23  How.  445,  16  L.  Ed.  577   (1860). 


42  UNITED    STATES   AGENCIES   AND   PROPERTIES.  §    41 

naturalized  citizen  of  the  United  States  dying  in  Louisiana.     It 
said,  p.  448: 

"It  has  been  suggested  in  the  argument  of  this  case,  that  the 
government  of  the  United  States  is  incompetent  to  regulate  tes- 
tamentary dispositions  or  laws  of  inheritance  of  foreigners,  in 
reference  to  property  within  the  States.  The  question  is  one  of 
great  magnitude,  but  it  is  not  important  in  the  decision  of  this 
cause,  and  we  consequently  abstain  from  entering  upon  its  con- 
sideration. ' ' 

§  41.  Tax  Evasion  Through  Investments  in  United  States 
Securities. — The  exemption  of  United  States  bonds  and  notes 
from  taxation  (now  repealed  as  to  notes)  afforded  opportunities 
for  tax  evasion,  which  however  found  no  favor  with  the  courts. 
Thus  where  a  citizen  of  Kansas  withdrew  his  money  from  bank 
on  the  day  before  the  annual  date  for  listing  for  taxation,  con- 
verted this  money  into  United  States  notes  and  deposited  them 
as  a  special  deposit,  the  court^  affirmed  a  judgment  of  the  Cir- 
cuit Court  of  Kansas  dismissing  the  bill  in  equity  to  restrain  the 
collection  of  the  tax.  It  said  that  a  court  of  equity  will  not 
knowingly  use  its  extraordinary  powers  to  promote  any  such 
scheme  as  this  plaintiff  devised  to  escape  his  proportionate  share 
of  the  burdens  of  taxation,  and  that  his  remedy,  if  he  had  any, 
was  in  a  court  of  law. 

But  a  party  who  sued  at  law  to'  recover  the  amount  of  taxes 
imposed  upon  him  under  somewhat  similar  circumstances  met 
with  the  same  fate.2  In  his  case  the  court  held  that  the  statute 
of  Ohio  did  not  tax  the  citizens  for  the  greenbacks  or  other  gov- 
ernment securities  which  they  might  have  held  at  any  time  dur- 
ing the  year,  but  taxed  upon  the  money,  credits  or  other  capital 
which  they  had  or  used  according  to  the  monthly  average  of  the 
preceding  year,  and  that  this  was  not  in  conflict  with  the  laws  of 
the  United  States  exempting  United  States  notes,  the  court  add- 
ing, 1.  c,  p.  599 : 


1  Mitchell  V.  Board  of  Commissioners,  91  U.  S.  206,  23  L.  Ed.  237 

(1875). 

2  Shotwell  V.  Moore,  129  U.  S.  590,  32  L.  Ed.  827   (1889),  affirming 

45  Ohio  St. 


§    42  UNITED   STATES   AGENCIES   AND   PROPERTIES.  43 

"It  needs  no  other  evidence  that  the  rule  adopted  by  the  State 
of  Ohio  is  the  better  one  than  the  case  before  us,  by  which  a 
possessor  of  large  means,  subject  to  taxation  during  every  day 
in  the  year  but  one,  may  escape  the  payment  of  any  tax  upon  all 
his  property,  if  the  trick  resorted  to  in  the  present  case  be  suc- 
cessful. ' ' 

Justice  Bradley,  however,  dissented,  saying  that  he  did  not 
wish  to  aid  the  plaintiff,  but  it  was  a  question  of  law,  and  the  law 
of  Ohio  seemed  to  him  repugnant  to  the  Act  of  Congress. 

§  42.  Pajmient  of  State  Taxes  in  Coin  Sustained. — Congress 
during  the  Civil  War  authorized  the  issue  of  the  so-called  "legal 
tender"  treasury  notes  and  made  them  legal  tender  in  payment 
of  all  debts,  public  and  private,  within  the  United  States,  except 
duties  on  imports  and  interest  on  bonds  and  notes  of  the  United 
States.  The  State  of  Oregon  required  the  payment  of  the  State 
and  school  taxes  in  gold  and  silver  coin.  The  Supreme  Court 
held  ^  that  this  act  was  valid,  and  affirmed  the  judgment  of  the 
Supreme  Court  of  Oregon  for  the  payment  in  coin  of  the  taxes 
for  the  year  1863,  coin  being  then  at  a  premium,  although  tender 
of  payment  had  been  made  in  United  States  notes,  which  were 
then  depreciated.  It  said  that  the  State  had  the  power  to  control 
the  payment  of  its  own  taxes,  and  that  there  was  nothing  in  the 
Constitution  which  contemplated  or  authorized  any  abridgment 
of  this  power  by  national  legislation.  The  Act  of  Congress  mak- 
ing the  United  States  notes  legal  tender  for  debts  had  no  refer- 
ence to  taxes  imposed  by  State  authority. 


1   Lane  County,  v.  Oregon,  7  Wall.  75.  19  L.  Ed.  101    (1869). 


CHAPTER  II. 

CONTRACTS  OF  EXEMPTION  FROM  TAXATION. 

.§     43.  Legislative  grants  held  to  be  contracts, 

44.  Grant  of  exemption  held  a  contract. 

45.  Contracts  of  exemption  not  implied. 

46.  The  validity  of  tax  exemption  contracts  established. 

47.  Application  to  consolidated  corporation. 

48.  Ohio  bank  tax  cases. 

49.  Missouri  exemptions  enforced  against  constitutional   repeal. 

50.  Opinion  in  the  Missouri  cases. — Consideration  required. 

51.  Northwestern  University  and  other  cases. 

52.  Bank  notes  and  coupons  made  receivable  for  taxes. 

53.  Tennessee  constitutional  amendment  held  void. 

54.  Mississippi  notes  in  aid  of  Confederacy  held  void. 

55.  Change  in  remedy  not  impairment  of  contract. 

56.  The  Virginia  Coupon  Cases. 

57.  Virginia  Coupon  Cases  under  Act  of  1882. 

58.  The  Supreme  Court  on  the  Eleventh  Amendment  of  the  U.  S. 

Constitution. 

59.  The  later  Virginia  Coupon  Cases. 

60.  The    Supreme    Court    on    Virginia    court    overruling    previous 

opinion. 

61.  The  Supreme  Court  determines  for  itself  whether  State  legis- 

lation constitutes  a  contract. 

62.  Illustrations  of  the  independent  judgment  as  to  contract. 

63.  Contract  must  be  properly  brought  before  the  court. 

64.  When  State  court  not  followed. 

65.  "When  concluded  by  decision  of  State  court. 

66.  Deference  to  opinion  of  State  court. 

67.  Limitation  of  independent  judgment. 

68.  Contract  only  impaired  by  law. 

69.  Impaired  by  municipal  ordinance  having  force  of  law. 

70.  The   Supreme   Court  determines   what  constitutes   impairment 

of  a  contract. 

71.  Adjudication  of  contract  impairment. 

72.  What  constitutes  a  contract  of  exemption. 

73.  Railroad  franchise  is  property. 

74.  Conditional  exemptions  from  taxation. 

75.  The  legislative  power  to  make  an  exemption  contract. 

(44) 


§  43       CONTRACTS  OF  EXEMPTION  FROM  TAXATION         45 

76.  Specific  exemptions  and  general  legislation  distinguished. 

77.  Contract  not  to  reduce  dividend  by  taxation  below  fixed  per 

cent  sustained. 

78.  Tax  on  foreign  held  securities. 

79.  Taxation  by  State  or  municipality  of  its  own  securities. 

80.  Contract  right  to  tax  as  a  remedy. 

81.  Remedy  may  be  changed,  if  substantial  right  not  impaired. 

82.  Contractual  and  governmental  legislation  distinguished. 

83.  Municipal  charter  powers  not  contractual. 

84.  State  exemption  of  municipal  property  not  contractual. 

85.  State  control  of  proceeds  of  municipal  taxation. 

86.  Retrospective  legislation  and  vested  rights. 

87.  Justice  Miller  on  legislative  contracts. 

88.  Tax  exemption  not  implied  from  license. 

89.  Bounties  and  privileges. 

90.  Consideration  for  exemption  essential. 

91.  Judgment  for  torts  not  contract. 

92.  Tax  exemption  repealed  under  general  power  reseryed  to  amend 

or  repeal. 

93.  Tax  exemptions  strictly  construed. 

94.  "Immunity"  and  "privilege"  distinguished. 

95.  Lost  by  change  of  corporate  business. 

96.  Lost  by  repeal  before  incorporation  or  issue  of  stock. 

97.  Tax  exemption  is  a  personal  immunity. 

98.  Exemption  not  assignable. 
Exemption,  when  applicable  to  lessee  or  assignee. 
Exemption  not  extended  to  party  not  entitled  to  rely  thereon. 

101.  Effect  of  railroad  consolidation  on  tax  exemptions. 

102.  Corporate  exemption  limited  to  specific  form  of  taxation. 

103.  Property  of  corporations  and  shareholders  distinguished  in  con- 

tracts of  exemption. 

104.  Capital  stock  and  surplus  of  corporations. 

105.  Special  assessments. 
The  impairment  of  the  obligation  of  private  contracts. 


99 

100 


106. 


§  43.  Legislative  Grants  Held  to  Be  Contracts.— The  Con- 
stitution of  the  United  States  provides,  Article  I.,  Sec.  10:  "No 
State  shall  pass  any  law  impairing  the  obligation  of  contracts." 
The  application  of  this  provision  to  legislative  grants  of  exemp- 
tion from  taxation  is  firmly  established  by  the  decisions  of  the 
Supreme  Court,  though  from  the  beginning  there  has  been  a 
series  of  dissents,  and  the  doctrine  of  the  earlier  decisions  has 
been  in  some  respects  materially  modified  in  later  years. 

The  foundation  of  the  doctrine  was  laid  in  one  of  the  notable 


46  CONTRACTS   OP   EXEMPTION   FROM    TAXATION  §    44 

opinions  of  Chief  Justice  Marshall,  Fletcher  v.  Peck,  in  1810,^ 
wherein  it  was  held  that  this  provision  of  the  Constitution  ex- 
tends to  contracts  to  which  the  State  is  a  party,  that  is,  to  legisla- 
tive grants.  The  court  said  that  while  one  legislature  is  com- 
petent to  repeal  any  act  of  general  legislation  which  a  former 
legislature  was  competent  to  pass,  yet  if  an  act  is  done  under  a 
law,  a  succeeding  legislature  cannot  undo  it.  "It  will  be  strange 
if  a  contract  to  convey  was  secured  by  the  Constitution,  while  an 
absolute  conveyance  remained  unprotected. ' ' 

§  44.  Grant  of  Exemption  Held  a  Contract. — Soon  after, 
the  same  principle  was  applied  by  the  court-  to  the  act  of  the 
legislature  of  New  Jersey  enacted  in  1758,  providing  that  lands 
purchased  from  the  Delaware  Indians,  and  set  apart  for  their 
use,  in  consideration  of  a  release  by  them  of  other  lands,  should 
not  thereafter  be  subject  to  any  taxation,  any  law  or  usage  or 
custom  to  the  contrary  notwithstanding,  and  further  restraining 
the  Indians  from  making  any  lease  or  sale.  Subsequently,  the 
legislature,  having,  at  the  petition  of  the  Indians,  authorized  a 
sale  by  an  act  making  no  reference  to  the  exemption  from  taxa- 
tion, the  land  in  1803  was  sold.  After  the  sale  the  legislature, 
in  1804,  passed  an  act  repealing  the  exemption  from  taxation.  It 
was  held  by  the  court  in  an  opinion  by  Chief  Justice  IMarshall, 
reversing  the  New  Jersey  court,  that  this  was  a  valid  contract 
protected  by  the  Constitution,  and  that  the  privilege,  though  for 
the  benefit  of  the  Indians,  was  annexed  by  the  terms  of  the  act  to 
the  land  and  not  to  the  persons.^ 


1  6  Cranch  87,  3  L.  Ed.  87. 

2  New  Jersey  v.  Vv^ilson,  7  Cranch  164,  3  L.  Ed.  164   (1810). 

3  Certain  of  the  lands  held  exempt  in  this  case  had  been  leased  out 
under  an  act  of  1796,  which  was  not  brought  to  the  attention  of  the 
court  in  the  Wilson  case,  and  subsequently  for  about  sixty  years  taxes 
were  regularly  assessed  upon  these  lands  and  paid.  It  was  held  by  the 
Supreme  Court  in  Given  v.  Wright,  117  U.  S.  648,  29  L.  Ed.  1021  (1886), 
that  this  probably  would  not  have  affected  that  decision,  which  had,  at 
all  events,  been  referred  to  and  relied  on  in  so  many  cases  from  the 
date  of  its  rendition  that  it  would  cause  a  shock  to  our  jurisprudence 
to  disturb  it,  and  added  at  p.  655:  "If  the  question  were  a  new  one  we 
might  regard  the  reasoning  of  the  New  Jersey  judges  as  entitled  to  a 


§    45  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  47 

§  45.  Contracts  of  Exemption  Not  Implied. — After  the  deci- 
sion in  the  Dartmouth  College  ease,  that  the  clause  of  the  Con- 
stitution under  consideration  applied  to  corporate  charters,  the 
claim  was  made  that  an  act  of  the  Rhode  Island  legislature  im- 
posing a  tax  on  every  bank  in  the  State  except  the  Bank  of  the 
United  States,  on  the  capital  stock  actually  paid  in,  impaired  the 
obligation  of  the  contract  created  by  the  charter  granted  by 
Rhode  Island  to  Providence  Bank.  The  court  declared,  by 
Chief  Justice  Marshall,  that  as  the  charter  contained  no  stip- 
ulation promising  exemption  from  taxation,  the  State  had  made 
no  express  contract,  and  hence  no  contractual  obligation  had 
been  impaired. 

It  was  argued  that  the  power  to  tax  involved  the  power  to  de- 
stroy all  the  profits  of  the  franchise,  and  therefore  was  incon- 
sistent with  the  gi*ant.  But  the  court  replied  that  the  relinquish- 
ment of  the  power  of  taxation  was  never  to  be  presumed,  and  that 
the  argument  logically  pursued  would  apply  with  equal  force  to 
every  incorporated  company  and  even  to  the  taxation  of  land. 
The  principle  applied  in  McCulloch  v.  Maryland  and  Osborn  v. 
Bank  of  the  United  States  had  no  application.  The  exemption 
there  was  founded  expressly  on  the  supremacy  of  the  laws  of 
Congress,  and  the  necessary  consequence  of  that  supremacy  was 
to  exempt  its  instrument  employed  in  the  execution  of  its 
powers  from  the  operation  of  any  interfering  power  whatever. 
The  vital  power  of  taxation  may  be  abused,  but  the  Constitution 
of  the  United  States  was  not  intended  to  furnish  the  correction 
of  every  abuse  of  power  which  may  be  committed  by  the  State 
governments.     The  court  saying: 

''The  interest,  wisdom  and  justice  of  the  representative  body 
and  its  I'clations  with  its  constituents  furnish  the  only  security, 


great  deal  of  weight,  especially  since  the  emphatic  declarations  made 
by.  this  court  in  Providence  Banlc  v.  Billings,  4  Peters,  514,  7  L.  Ed.  939 
(1830),  and  other  cases,  as  to  the  necessity  of  having  the  clearest  legis- 
lative expression  in  order  to  impair  the  taxing  power  of  the  State." 
But  apart  from  that,  the  court  held  that  long  acquiescence  under  the 
imposition  of  the  taxes  raised  the  presumption  that  the  exemption 
which  had  once  existed  had  been  surrendered. 


48  CONTRACTS   OP   EXEMPTION   FROM    TAXATION  §    46 

where  there  is  no  express  contract  acjainst  unjust  and  excessive 
taxation  as  well  as  against  unwise  legislation  generally."' 

§  46.  The  Validity  of  Tax  Exemption  Contracts  Estab- 
lished.— In  1845,  in  the  case  of  Gordon  v.  Appeals  Tax  Court, 2 
the  principle  that  contracts  to  which  the  State  is  a  party,  are 
protected  by  the  Federal  Constitution  from  impairment  of  their 
obligation,  was  enforced  for  the  first  time  by  the  Supreme  Court 
in  case  of  exemption  from  taxation  in  a  corporate  charter.  An 
act  of  Maryland  continuing  a  bank  charter,  upon  condition  that 
the  corporation  should  pay  certain  sums  for  public  purposes,  and 
declaring  that  upon  its  accepting  and  complying  with  the  provi- 
sions of  the  act,  the  faith  of  the  State  was  pledged  not  to  impose 
any  further  tax  or  burden  upon  the  corporation  during  the  con- 
tinuance of  the  charter,  was  held  to  exempt,  not  only  the  fran- 
chise, but  the  stockholders  from  a  tax  levied  upon  them  as  indi- 
viduals. It  has  been  ruled  in  later  cases  that  this  decision  turned 
upon  the  construction  of  the  act  of  Maryland  above  mentioned, 
exempting  the  bank  from  taxation  on  account  of  a  large  bonus 
to  the  State,  and  that  the  stockholders  upon  a  true  construction 
of  the  act  were  within  the  terms  of  the  exemption.s 


1  Providence  Bank  v.  Billings,  4  Pet.  514,  7  L.  Ed.  939  (1830),  Justice 
McLean,  in  delivering  the  opinion  of  the  court  in  Piqua  Branch  v.  Knoop, 
16  Howard  387  (in  1853),  says:  "In  the  argument  the  case  of  Providence 
Bank  v.  Billings,  was  referred  to.  This  reference  impresses  me  with 
the  shortness-  and  uncertainty  of  human  life.  Of  all  the  judges  on  this 
bench  when  that  decision  ■  was  given  I  am  the  only  survivor.  From 
several  circumstances  the  principles  of  that  case  were  strongly  im- 
pressed upon  my  memory,  and  I  was  surprised  when  it  was  cited  in 
support  of  the  doctrines  maintained  in  the  case  before  us.  The  prin- 
ciple held  in  that  case  was,  that  where  there  was  no  exemption  from 
taxation  in  the  charter,  the  bank  might  be  taxed.  This  was  the 
unanimous  opinion  of  the  judges,  but  no  one  of  them  doubted  that  the 
legislature  had  the  power,  in  the  charter  or  otherwise,  from  motives  of 
public  policy,  to  exempt  the  bank  from  taxation,  or  by  compact  to  im- 
pose a  specific  tax  upon  it."  See  also  Memphis  Gas  Co.  v.  Shelby  Co., 
109  U.  S.,  398,  27  L.  Ed.  398  (1883),  holding  that  exemption  from 
license  taxation  could  not  be  inferred. 

23  Howard,  133,  11  L.  Ed.  529   (1845). 

3  This  case  has  been  criticised  and  distinguished  on  the  proposition 
that  exemption  may  be  implied  from  the  payment  of  a  consideration 


§  48       CONTRACTS  OF  EXEMPTION  FROM  TAXATION         49 

§  47.  Application  to  Consolidated  Corporation. — Later  de- 
cisions of  the  court  applied  the  principle  to  the  case  of  a  con- 
solidated corporation  made  up  of  constituent  roads,  one  of  which 
had  a  chartered  exemption  from  taxation.  Thus,  the  exemp- 
tion must  be  strictly'  construed,  as  the  taxing  power  is 
never  presumed  to  have  been  relinquished  unless  the  intention 
to  relinquish  is  declared  in  clear  and  unambiguous  terms,  and 
such  of  the  property  of  the  consolidated  company  as  was 
subject  to  taxation  before,  continued  to  be  so  subject,  notwith- 
standing the  claim  to  exemption  of  part  of  it,  which  could  only 
apply  to  that  part.^ 

§  48.  Ohio  Bank  Tax  Cases. — In  a  series  of  decisions  the 
court  enforced  the  limitation,  contained  in  its  charter,  upon  the 
liability  to  taxation  of  the  State  Bank  of  Ohio.2  The  charter 
provision  was  declared  in  these  cases  to  be  in  lieu  of  all  taxes  to 
which  the  company  or  stockholders  would  be  otherwise  subject. 
In  Jefferson  Branch  Bank  v.  Skelly,3  decided  in  1861,  the  court 
reaffirmed  this  ruling,  refusing  to  conform  to  the  decision  of  the 
Supreme  Court  of  Ohio,  which,  it  seems,  had  changed  its  ruling 
upon  the  subject!  But  it  said  that  its  "appellate  power  would  be 
of  no  use  to  a  litigant  if  the  court  could  not  decide,  independently 
of  all  adjudication  of  the  Supreme  Court  of  the  State,  whether 
or  not  the  phraseology  of  the  instrument  in  controversy  was  ex- 
pressive of  a  contract  and  within  the  protection  of  the  Constitu- 


for  the  franchise.  See  New  Orleans,  Etc.,  Co.  v.  New  Orleans,  143  U. 
S.  192  and  195,  36  L.  Ed.  121  (1892);  also  upon  the  extension  of  an 
exemption  of  corporate  property  and  franchises  to  corporate  stock- 
holders, see  Shelby  County  v.  Union  Bank,  161  U.  S.  149  and  157,  40 
L.  Ed.  651  (1896);  see  also  dissenting  opinion  of  Justice  Catron  in 
Piqua  Branch  v.  Knoop,  16  Howard  401,  14  L.  Ed.  977  (1853),  supra. 
Sec.  45. 

1  Philadelphia  &  Wilmington  R.  Co.  v.  Maryland,  10  How.  376,  13  L. 
Ed.  461   (1850). 

2  Piqua  Branch  v.  Knoop,  supra,  three  judges,  Catron,  Daniel  and 
Campbell  dissenting.  Ohio  Life  Ins.  &  Trust  Co.  v.  Debolt,  16  How.  416, 
14  L.  Ed.  416  (1852);  Dodge  v.  Woolsey,  18  How.  331,  15  L.  Ed.  401 
(1856). 

3  1  Black  436,  17  L.  Ed.  173   (1862),  reversing  9  Ohio  606. 


50  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  §    49 

tion  of  the  United  States,  and  its  obligation  should  be  enforced, 
notwithstanding  a  contrary  conclusion  of  the  Supreme  Court  of 
the  State. ' '    And  the  court  added : 

"We  are  aware  that  the  very  stringent  rule  of  construction  of 
this  court  in  respect  to  taxation  by  a  State  has  not  been  satisfac- 
tory to  all  persons.  But  it  has  been  adhered  to  by  this  court  in 
every  attempt  hitherto  made  to  relax  it ;  and  we  presume  it  will 
be,  until  the  historical  recollections,  which  induced  the  framers 
of  the  Constitution  of  the  United  States  to  inhibit  the  States  from 
passing  any  law  impairing  the  obligation  of  contracts,  have  been 
forgotten.  This  court's  view  of  that  clausa  of  the  Constitution, 
in  its  application  to  the  States,  is  now,  and  ever  has  been,  that 
the  State  legislatures,  unless  prohibited  in  terms  by  State  con- 
stitutions, may  contract  by  legislation  to  release  the  exercise  of 
taxing  a  particular  thing,  corporation,  or  person,  as  that  may 
appear  in  its  act,  and  that  the  contrary  has  not  been  open  to  in- 
quiry or  argument  in  the  Supreme  Court  of  the  United  States." 

§  49.  Missouri  Exemptions  Enforced  Against  Constitutional 
Repeal. — The  general  subject  of  the  inviolability  of  charter 
exemptions,  particularly  with  reference  to  charitable  and  educa- 
tional corporations,  is  very  thoroughly  discussed  in  the  Home  of 
the  Friendless^  and  the  Washington  University2  cases  from  Mis- 
souri, decided  in  1869.  Both  of  these  corporations  had  been  char- 
tered by  the  State  of  Missouri,  and  their  charters  exempted  their 
property  from  taxation.  At  that  time  there  was  no  constitu- 
tional prohibition  of  such  exemptions.  Subsequently,  however, 
the  Missouri  constitution  of  1865  prohibited  all  exemptions  from 
taxation.  The  Supreme  Court  of  Missouris  held  that  the  prop- 
erty was  taxable,  and  said  in  the  University  case : 

"When  the  charter  of  the  university  was  granted,  the  legisla- 
ture might  have  considered  it  reasonable  to  foster  and  encourage 
it  in  its  infancy  and  confer  upon  it  privileges  and  immunities 
while  struggling  into  existence.  But  no  provision  is  made  in  ex- 
press terms,  or  by  reasonable  intendment,  that  those  immunities 
should  be  perpetual  and  have  the  effect  of  withdrawing  millions 
of  subsequently  acquired  property  from  taxation.    In  1853  taxes 


1  8  Wallace  430,  19  L.  Ed.  495   (1869),  reversing  42  Mo.  361. 

2  8  Wallace  439,  19  L.  Ed.  498  (1869),  reversing  42  Mo.  308. 

3  Washington  University  v.  Rowse,  42  Mo.  308,  1.  c.  p.  326. 


§    50  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  51 

were  light  and  the  State  debt  was  small,  and  exemptions  could  be 
made  without  great  detriment.  After  that  period  the  State  em- 
barked into  a  false  and  ruinous  system  of  loaning  its  credit  to 
corporations,  by  which  it  incurred  an  immense  debt;  then  fol- 
lowed the  Civil  War,  which  increased  its  already  burdensome 
obligations,  and  taxation  became  exceedingly  onerous. 

"In  this  condition  of  things  it  was  deemed  the  part  of  wisdom 
to  make  all  property  within  the  jurisdiction  of  the  State,  receiv- 
ing the  benefit  of  her  laws  and  protection,  contribute  its  proper 
proportion  and  share  the  common  burdens.  This  was  entirely  a 
matter  resting  in  the  sound  discretion  of  the  legislative  branch 
of  the  government,  and  we  have  been  unable  to  find  any  objection 
to  their  exercise  of  the  power. ' ' 

§  50.  Opinion  in  the  Missouri  Cases — Consideration  Re- 
quired.— These  cases  were  both  reversed  by  the  Supreme  Court 
which  said  that  the  question  was  no  longer  open  for  argument, 
for  it  was  settled  by  repeated  adjudications  of  the  court,  that  a 
State  may  by  contract  based  on  a  consideration  exempt  the  prop- 
erty of  an  individual  or  corporation  from  taxation  either  for  a 
specified  period  or  permanently,  and  that  it  was  not  necessary 
that  the  consideration  should  be  named  in  the  Act,  but  it  was 
sufficient  that  the  legislature  deemed  the  object  of  the  grant  to  be 
beneficial  to  the  community. 

To  the  argument  made  in  the  University  case  that  the  exemp- 
tion involved  a  dangerous  power  which  might  be  abused,  the 
court  replied  that  as  long  as  the  corporation  used  its  property  to 
support  the  educational  establishment  for  which  it  was  organized 
it  did  not  forfeit  its  right  of  exemption  under  the  contract.^ 

Nearly  thirty  years  later,  in  denying  a  claim  of  exemption,  the 
court  declared  that  the  same  necessity  for  a  consideration  exists 
for  the  purpose  of  a  contract  exempting  property  from  taxation 
than  there  would  be  if  it  were  a  contract  between  private  parties, 


1  A  dissenting  opinion  was  filed  in  both  cases  by  Justice  Miller, 
Chief  Justice  Chase  and  Field  concurring,  which  conceded  that  the 
majority  opinion  was  in  accord  with  the  prior  decisions  of  the  court, 
but  said  that  the  dissents  of  some  of  their  predecessors  showed  that 
the  doctrine  had  never  received  the  full  assent  of  the  court  and  that 
they  contented  themselves  with  reviewing  this  protest  against  the 
doctrine  which  they  thought  must  finally  be  abandoned. 


52  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  §    52 

and  the  absence  of  a  consideration  may  make  the  act  merely  a 
gratuit}^  which  is  subject  to  the  will  of  the  legislature,  and  there- 
fore may  be  withdrawn  at  any  time.  The  court  in  its  opinion 
cited  the  decision  in  the  Home  of  the  Friendless  case,  and  said 
■  that  the  recitals  in  the  preamble  of  that  case  showed  that  it  was 
granted  for  a  public  purpose,  and  to  induce  the  incorporators  to 
accept  the  charter  and  carry  out  their  purpose,  i 

§  51.  Northwestern  University  v.  People  and  Other  Cases. 
— In  Univei;sity  v.  People  of  Illinois,2  the  court,  in  an  opinion 
by  Justice  Miller,  held  that  the  statute  of  Illinois,  as  construed 
by  the  Supreme  Court  of  the  State,  limiting  the  chartered  ex- 
emptions of  the  Northwestern  University  to  the  lands  and  other 
property  in  the  immediate  use  of  the  institution,  was  erroneous 
and  that  the  exemption  extended  to  the  property,  the  annual 
profits  whereof  were  devoted  to  the  purposes  of  the  institution. 

In  the  case  of  St.  Ann's  Asylum  in  New  Orleans,  which  was 
exempted  from  taxation  as  to  all  of  its  property,  real  and  per- 
sonal, it  was  held  that  the  exemption  extended  to  the  devise  of 
certain  property,  i.  e.,  a  cotton  press,  the  revenues  whereof  were 
applied  to  asjdum  purposes.  ^  But  in  the  case  of  Christ  Church 
Hospital  of  Philadelphia, -1  it  was  held  that  there  was  no  con- 
tract for  perpetual  exemption,  but  only  a  gratuitous  concession 
on  account  of  temporary  conditions. 

§  52.  Bank  Notes  and  Coupons  Made  Receivable  for  Taxes. 
— The  charters  of  banks  of  some  of  the  Southern  States  provided 
that  their  bills  and  notes  should  be  receivable  in  payments  of  all 
taxes  and  other  moneys  due  the  States.  Such  charters  were  ad- 
judged contracts  on  the  part  of  the  States  with  all  subsequent 
holders  of  the  notes,  as    if    attached    to    the    notes    when    is- 


iSee  Grand  Lodge  v.  New  Orleans,  166  U.  S.  143,  41  L.  Ed.   951 
(1897). 

2  99  U.  S.  309,  25  L.  Ed.  387  (1878),  reversing  80  111.  333. 

3  Asylum  V.  New  Orleans,  105  U.  S.  362,  26  L.  Ed.  1128   (1882),  re- 
versing 31  La.  Ann.  292. 

4  Rector,  Etc.,  v.  County  of  Philadelphia,  24  Howard  300,  16  L.  Ed. 
602  (1861). 


§    54  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  53 

sued,    and   the    contract   right   to   tender  the  notes  in  payment 
of  taxes  continued  after  the  repeal  of  that  section  of  the  charter.^ 
The  court  said: 

"The  guaranty  is  in  no  sense  a  personal  one.  It  attaches  to 
the  note — is  a  part  of  it  as  much  so  as  if  written  on  the  back  of 
it,  and  goes  with  the  note  everywhere  and  invites  every  one  who 
has  taxes  to  pay  to  take  it. ' ' 

§  53.     Tennessee  Constitutional  Amendment  Held  Void. — 

In  Tennessee,  a  constitutional  amendment  adopted  in  1865  de- 
clared the  issues  of  the  Bank  of  Tennessee  during  the  Civil  War  to 
be  void,  and  forbade  their  receipt  for  taxes.  But  it  was  lield^ 
that  this  amendment  was  void,  for  there  was  only  one  State  of 
Tennessee  and  its  attempted  secession  was  ineffective.  The 
political  body  continued  as  a  State  in  the  Union  and  never  es- 
caped the  obligations  of  the  Constitution.  The  court  in  its 
opinion  cites  the  periods  of  the  Commonwealth  in  England  and  of 
the  Revolution  in  France  as  showing  that  the  acts  of  the  govern- 
ment were  upheld.  It  could  not  presume  that  the  notes  were 
issued  to  support  the  rebellion  because  issued  contemporaneously 
with  it,  and  the  tender  of  notes  in  payment  of  taxes  was  held 
good.  3 

§  54.    Mississippi  Notes  in  Aid  of  Confederacy  Held  Void.— 

But  where  notes  were  issued  by  the  legislature  of  Mississippi  in 
aid  of  the  Confederacy,  in  1861,  and  made  receivable  in  payment 
of  taxes,  they  were  void  and  not  receivable  in  payment  of  taxes, 
which  the  reorganized  State  government  directed  should  be  paitl 
in  the  currency  of  the  United  States.4 

The  court  said  that  the  judicial  and  legislative  acts  hostile  in 
their  purpose  and  mode  of  enforcement  to  the  authority  of  the 
national  government,  or  which  impair  the  rights  of  citizens  un- 

1  Woodruff  v.  Trapnall  (Arkansas),  10  How.  190,  13  L.  Ed.  383 
(1850),  reversing  8  Ark.  236;  Furman  v.  Nichol,  8  Wall.  44,  19  L.  Ed. 
370  (1869),  reversing  3  Caldwell,  432;  State  v.  Stoll  (S.  C),  17  Wall. 
42.5,  21  L.  Ed.  650  (1873). 

2  Keith  V.  Clark,  97  U.  S.  454,  24  L.  Ed.  1071   (1878). 

■i Chief  Justice  Waite  and  .Justices  Bradley  and  Harlan  dissenting. 
*Taylor  v.  Thomas,  22  Wallace  479,  22  L.  Ed.  789   (1875)-,  affirming 
42  Miss.  651. 


54         CONTRACTS  OF  EXEMPTION  PROM  TAXATION       §  56 

der  the  constitution  are  invalid  and  void,  and  therefore  no  valid 
claim  for  the  receipt  of  such  obligations  for  payment  of  taxes 
could  be  maintained. 

§  55.  Change  in  Remedy  Not  Impairment  of  Contract. — ^A 
State  having  contracted  for  the  receipt  of  its  bank  notes  in  pay- 
ment of  taxes  does  not  impair  the  obligation  of  a  contract  by  en- 
larging, limiting  or  altering  the  modes  of  procedure  for  enforc- 
ing it,  provided  the  remedy  be  not  withheld  or  embarrassed  with 
restrictions  which  seriously  impair  the  value  of  the  right.  Thus 
a  taxpayer  in  Tennessee,  who  was  limited  to  an  action  at  law 
against  the  tax  collector  to  recover  the  amount  of  taxes  paid  in 
money  under  protest,  was  held  to  have  an  ample  remedy,  i 

§  56.  The  Virginia  Coupon  Cases. — The  question  of  the  en- 
forcement of  a  State  contract  and  the  receipt  of  State  obligations 
in  payment  of  taxes,  particularly  with  reference  to  the  adequate 
remedies  provided  for  the  enforcement  of  such  contract,  was 
thoroughly  considered  in  every  possible  phase  by  the  Supreme 
Court  in  a  series  of  cases  known  as  the  Virginia  Coupon  Cases, 
involving  litigation,  which,  in  different  forms,  was  before  the 
court  during  a  period  of  twenty  years. 

The  State  of  Virginia  in  1871,  in  adjusting  its  debt  with  its 
creditors  on  account  of  the  separation  of  West  Virginia  during 
the  Civil  War,  provided  for  funding  two-thirds  of  its  outstanding 
debt  and  accrued  interest  in  bonds  and  coupons,  the  remaining 
one-third  to  be  represented  by  certificates  with  a  view  to  settle- 
ment with  West  Virginia.  To  facilitate  the  acceptance  of  this 
adjustment,  it  was  provided  that  the  coupons  should  be  receiv- 
able at  and  after  maturity  for  all  taxes,  debts,  dues*  and  demands 
due  the  State,  and  that  this  should  be  expressed  on  their  face. 
The  validity  of  this  contract  was  at  first  sustained  by  the  Court 
of  Appeals  of  Virginia,  which  held  invalid  an  act  repealing  the 
provision  for  the  receipt  of  coupons  for  taxes.  Thereafter,  how- 
ever, an  act  was  passed  providing  that  from  the  coupons  when 


1  Tennessee  v.  Sneed,  96  U.  S.  69,  24  L.  Ed.  610  (1877),  see  infra, 
change  in  remedy,  Sec.  81;  South  Carolina  v.  Gailard,  101  U.  S.  433,  25 
L.  Ed.  937   (1880). 


§  58       CONTRACTS  OP  EXEMPTION  FROM  TAXATION         55 

received  for  taxes  there  should  be  deducted  a  State  tax  equal  to 
fifty  cents  on  the  one  hundred  dollars  of  the  market  value  of  the 
bonds,  this  act  applying  in  terms  to  all  bonds  of  the  State, 
whether  held  by  her  own  citizens  or  by  non-residents  and  citizens 
of  other  States  and  countries.  The  Supreme  Court  hekP  that 
the  receivability  of  the  coupons  for  taxes  was  clearly  a  contract 
obligation  inuring  to  the  benefit  of  all  the  holders  of  the  bonds 
and  coupons;  that  the  coupons  were  distinct  and  independent 
contracts,  and  that  the  taxing  act  could  not  be  applied  to  coupons 
separated  from  the  bonds  and  held  by  different  owners  without 
impairing  the  contract  with  the  bondholder  and  the  bearers  of 
the  coupons,  as  contained  in  the  funding  act. 

§  57.    Virginia  Coupon  Cases  Under  Act  of  1882.— In  1882, 

the  State  enacted  a  law  providing  that  when  a  mandamus  was 
sued  out  against  the  collector  of  taxes  to  compel  the  receipt  of 
coupons  in  payment,  the  taxpayer  should  be  required  to  pay  the 
taxes  in  money  and  file  his  coupons  for  the  trial  of  the  issue  as  to 
their  genuineness.  If  the  issue  was  found  in  their  favor,  the 
money  paid  was  to  be  refunded  out  of  the  State  treasury  in  pre- 
ference to  all  other  claims.  The.  court,  reaffirming  its  opinion  as 
to  the  contract  right  to  pay  taxes  in  coupons,  held  that  the  remedy 
provided  by  this  act  was  adequate  and  efficacious,  and  substan- 
tially equivalent  to  that  which  existed  at  the  date  when  the 
coupons  were  issued.^  It  said,  however,  that  the  question 
whether  the  tax  collector  was  not  bound  in  law  to  receive  the 
coupons  when  tendered,  and  whether,  if  he  refused  them  and 
proceeded  with  the  collection  of  the  tax,  he  could  not  be  made 
personally  responsible  in  damages  was  not  before  them. 

§  58.  The  Supreme  Court  on  the  Eleventh  Amendment  of 
the  United  States  Constitution. — Tliis  question  did  come  later 
before  the  Supreme  Court  in  a  series  of  cases,  reported  as  the 
Virginia  Coupon  Cases.  ■■«  The  court  reaffirmed  its  previous 
opinion,  and  held  that  the  taxpayer  was  not  compelled  to  seek  the 


iHartman  v.  Greenhow.  102  U.  S.  672,  26  L.  Ed.  271   (1881). 
2Antoni  v.  Greenhow,  107  U.  S.  769,  27  L.  Ed.  468   (1883). 
3  114  U.  S.  269,  29  L.  Ed.  185   (1884). 


56  CONTRACTS   OF  EXEMPTION  FROM   TAXATION  §   59 

remedy  provided  by  the  act  of  1882.  He  could  tender  his  coupons 
and  such  tender  would  be  equivalent  to  payments,  so  far  as  con- 
cerned the  legality  of  all  subsequent  steps  by  the  collector  to  en- 
force payment  by  distraint  of  his  property.  The  coupons,  made 
receivable  for  taxes,  were  not  bills  of  credit  within  the  prohibi- 
tion of  the  Constitution,  nor  was  the  right  of  the  taxpayer  to  sue 
the  collecting  officer  for  the  recovery  of  property  seized  for  taxes, 
after  he  had  made  a  lawful  tender,  a  suit  against  the  State  within 
the  meaning  of  the  Eleventh  Amendment  of  the  Constitution  of 
the  United  States.  On  this  point  (four  judges  dissenting)  the 
court  said  that  there  was  a  distinction  between  the  government 
of  a  State  and  the  State  itself ;  that,  in  contemplation  of  law,  the 
State  had  not  passed  the  acts  violative  of  the  Constitution  of  the 
United  States,  as  they  were  void,  and  therefore  the  officer  had 
no  official  sanction  for  his  conduct  and  was  guilty  of  a  personal 
violation  of  the  plaintiff's  rights.  It  also  sustained  the  remedy 
by  injunction  against  the  collection  of  the  tax,  in  cases  where 
there  was  no  adequate  remedy  at  law,  but  held  that  a  coupon 
holder,  who  had  not  alleged  that  he  was  a  taxpayer,  was  not  en- 
titled to  any  relief.  No  direct  action  moreover  for  the  denial  of 
rights  secured  by  the  contract  would  lie  on  the  16th  clause  of 
Section  629  of  the  Revised  Statutes  of  the  United  States,  but  the 
remedy  must  be  a  judicial  determination  between  individuals  as 
to  the  validity  of  the  law,  under  cover  of  which  the  attempt  to 
collect  the  tax  had  been  made,  and  the  consequent  wrongful  dis- 
turbance of  property  rights  occasioned. 

One  having  tendered  coupons  in  payment  of  a  license  required 
for  the  practice  of  a  profession  could  go  on  practicing  his  pro- 
fession, and  any  law  of  the  State  subjecting  him  to  criminal  pro- 
ceedings therefor  was  invalid.  He  was  not  obliged  to  sue  out  a 
mandamus  to  compel  the  acceptance  of  the  coupons,  i 

§  59.  The  Later  Virginia  Coupon  Cases. — Another  series  of 
coupon  cases  came  up  for  decision  in  1889,'    and  the  court  ad- 


iRoyall  V.  Virginia,  116  U.  S.  572,  29  L.  Ed.  735  (1886),  and  Sands 
V.  Edmunds,  116  U.  S.  585,  29  L.  Ed.  739  (1886).  See  also  Willis  v. 
Miller,  29  Fed.  238. 

2  135  U.  S.  662,  34  L.  Ed.  304   (1890). 


§    60  CONTRACTS   OP    EXEMPTION    FROM    TAXATION  57 

judged  void  sundry  acts  of  the  Virginia  legislature  opposing  im- 
pediments and  obstructions  to  the  use  of  coupons,  on  the  ground 
that  these  materially  impaired  the  obligation  of  the  contract.  Thus 
the  provision  which  imposed  upon  the  taxpayer  the  duty  of  pre- 
senting the  bond,  from  which  the  coupons  were  cut,  at  the  time 
of  tendering  them  in  pa^-ment,  was  an  unreasonable  condition. 
Another  provision  also  was  invalid  which  iDrohibited  expert 
testimony  to  establish  the  genuineness  of  the  coupons.  A  spe- 
cial license  fee  of  one  thousand  dollars  required  for  the  right 
to  offer  tax  receivable  coupons  was  adjudged  a  material  inter- 
ference with  their  negotiability.  The  court  conceded  that  the 
rules  affecting  the  remedy  were  subject  at  all  times  to  modifica- 
tion and  control  by  the  legislature,  even  as  to  existing  causes  of 
action,  but  declared  that  no  legislature  had  the  power  to  establish 
rules  which,  under  the  pretense  of  regulating  evidence,  went  so 
far,  as  to  altogether  preclude  the  party  *'from  exhibiting  his 
rights."  It  was  ruled  also  that  the  coupons  were  lawfully  ten- 
dered in  payment  of  costs  of  suits,  as  well  as  in  pajonent  of 
taxes,  and  that  the  time-limit  of  one  year  for  tendering  coupons 
was.  under  the  circumstances,  unreasonable. 

On  the  other  hand,  the  requirement  that  the  taxes  for  licenses 
to  sell  liquors  and  school  taxes  should  be  paid  in  lawful  money, 
and  not  in  coupons,  did  not  impair  the  obligation  of  the  contract. 
As  to  the  liquor  license  this  decision  was  put  on  the  ground  that 
there  was  involved  the  principle  of  regulation  as  well  as  taxation ; 
and  the  act  of  1871,  as  applied  to  the  fund  for  maintaining 
schools,  was  contrary  to  the  Virginia  constitution  of  1869. 

The  court  remarks,  concluding  the  opinions  in  this  series  of 
cases,  at  p.  721 : 

"It  is  certainly  to  be  wished  that  some  arrangement  may  be 
adopted  which  will  be  satisfactory  to  all  parties  concerned  and 
relieve  the  courts  as  well  as  the  Commonwealth  of  Virgiana, 
whose  name  and  history  recall  so  many  interesting  associations, 
from  all  further  exhibitions  of  a  controversy  that  has  become  a 
vexation  and  a  regret." 

§  60.  The  Supreme  Court  on  Virginia  Court  Overruling- 
Previous  Opinion. — But  this  wish  was  not  gratified,  and  the 
next  step  was  a  decision  by  the  Court  of  Appeals  of  Virginia  re- 


58         CONTRACTS  OP  EXEMPTION  FROM  TAXATION       §  61 

versing  its  previous  opinions,  and  dismissing  the  petition  of  the 
plaintiff,  who  tendered  coupons  in  pa^yment  of  his  taxes,  on  the 
ground  that  the  coupon  provision  of  the  act  of  1871  was  void.i 

This  case  was  brought  by  writ  of  error  to  the  Supreme  Court, 
where  the  judgment  was  reversed,^  the  court  saying,  in  its 
opinion  by  Justice  Brewer,  1.  c,  p.  106 : 

' '  Perhaps  no  litigation  has  been  more  severely  contested  or  has 
presented  more  intricate  and  troublesome  questions  than  that 
which  has  arisen  under  the  coupon  legislation  of  Virginia. ' ' 

The  previous  decision  was  reaffirmed.  Under  the  circum- 
stances, said  the  court,  it  seemed  to  them  that  it  would  be  a  clear 
evasion  of  the  duty  cast  upon  them  by  the  Constitution  of  the 
United  States  to  treat  all  this  litigation  and  these  prior  decisions 
as  mere  nullity  and  consider  the  question  as  a  matter  de  novo. 
It  seemed  that  the  act  of  1882  for  testing  the  genuineness  of  the 
coupons  which  had  been  adjudged  an  adequate  and  efficacious 
remedy  in  Antoni  v.  Greenhow  had  been  repealed,  and  it  had  not 
been  determined  by  the  Court  of  Appeals  of  Virginia  whether 
the  remedy  of  mandamus  to  enforce  the  receipt  of  coupons  for 
taxes  existed.  The  court  said  that  if  it  should  be  finally  held  by 
that  court  that  the  remedy  of  mandamus  did  not  exist,  then  it 
would  be  a  question  for  further  consideration  whether  the  act 
repealing  the  act  of  1882  could  be  sustained. 

§  Gl.  The  Supreme  Court  Determines  for  Itself  Whether 
State  Legislation  Constitutes  a  Contract. — It  has  been  the  uni- 
form ruling  of  the  Supreme  Court  that  it  determines  for  itself 
whether  the  State  legislation  in  question  constitutes  a  contract, 
and  it  is  not  bound  by  the  decision  of  the  State  court  holding 
that  a  particular  charter  or  charter  provision  does  not  constitute 
a  contract.  This  is  an  exception  to  the  general  rule  that  the 
Federal  courts  accept  the  construction  placed  by  the  courts  of  a 
State  upon  its  statutes  and  constitution.  Thus  the  court  said,  in 
McGahey  v.  Virginia.^    1.  c,  p.  667 : 


iMcCullough  V.  Virginia,  90  Va.  597. 

2McCullough  V.  Virginia,  172   U.   S.   102,  43  L.   Ed.  382    (1898),  re- 
versing 90   Va.   597. 

3  135  U.  S.  662,  34  L.  Ed.  304   (1890). 


§    Q'2  CONTRACTS   OF   EXEMPTION    FROM    TAXATION  59 

' '  In  ordinary  cases  the  decision  of  the  highest  court  of  a  State 
with  regard  to  the  validity  of  one  of  its  statutes  would  be  binding 
upon  this  court ;  but  where  the  question  raised  is  whether  a  con- 
tract has  or  has  not  been  made,  the  obligation  of  which  is  alleged 
to  have  been  impaired  by  legislative  action,  it  is  the  prerogative 
of  this  court,  under  the  Constitution  of  the  United  States  and 
the  acts  of  Congress  relating  to  writs  of  error  to  the  judgments 
of  State  courts,  to  inquire,  and  judge  for  itself  with  regard  to 
the  making  of  such  contract,  whatever  may  be  the  views  or  deci- 
sions of  the  State  courts  in  relation  thereto. ' ' 

Thus  if  a  statute  of  a  State  creates  a  contract,  and  it  is  alleged 
that  a  subsequent  statute  impairs  the  obligation  of  that  contract, 
and  the  highest  court  in  the  State  construes  the  first  statute  in 
such  a  manner  that  the  second  statute  does  not  impair  it,  a  judg- 
ment of  the  State  court  sustaining  the  validity  of  the  second 
statute  on  account  of  its  construction  of  the  first  statute  will  be 
subject  to  review  on  writ  of  error  in  the  United  States  Supreme 
Court.  1 

§  62.  Illustrations  of  the  Independent  Judgment  As  to  Con- 
tract.— In  the  case  of  Mobile  &  Ohio  Railroad  Co.  v.  Tennes- 
see,- the  State  Supreme  Court  held  that  the  charter  exemption 
from  taxation  relied  on  as  a  contract  was  in  violation  of  the 
State  constitution.  Reversing  this  decision,  the  court  held,  p. 
492: 

''The  question  of  the  existence  or  non-existence  of  a  contract 
in  eases  like  the  present  is  one  which  this  court  will  de- 
termine for  itself,  tlie  established  rule  being  that  where  the  judg- 
ment of  the  highest  court  of  a  State,  by  its  terms  or  necessary 
operation,  gives  effect  to  some  provisions  of  the  State  law  which 
is  claimed  by  the  unsuccessful  party  to  impair  the  contract  set 
out  and  relied  on,  this  court  has  jurisdiction  to  determine  the 
question  whether  such  a  contract  exists  as  claimed,  and  whether 
the  State  law  complained  of  impairs  its  obligation." 

The  constitution  of  Mi.ssouri  of  1865  provided  for  a  tax  of  ten 
per  cent  upon  the  gross  earnings  of  certain  railroad  corporations. 


1  Bridge  Proprietors  v.   Hobokon  Co.,  1  Wallace  116,  17  L.   Ed.  571 
(1864). 

a  153  U.  S.  486,  38  L.  Ed.  793   (1894). 


60         CONTRACTS  OF  EXEMPTION  FROM  TAXATION       §  63 

As  to  one  company  it  was  held  that  this  tax  was  an  impairment  of 
the  obligation  of  a  contract,  i  but  in  the  case  of  another  company 
the  tax  was  sustained  because  the  court  found  that  the  contract 
of  exemption  had  expired  by  its  own  limitation.s 

§  63.    Contract  Must  Be  Properly  Brought  Before  the  Court. 

— The  Supreme  Court  will,  however,  decide  this  question  of  the 
existence  and  impairment  of  a  contract,  only  when  the  judgment 
of  the  State  court  is  brought  before  it  for  review.  If  the  decision 
of  the  State  Supreme  Court  is  in  favor  of  the  right  or  immunity 
claimed  under  the  United  States  Constitution,  it  is  final.  The 
same  question,  however,  may  be  brought  before  the  Supreme 
Court  from  one  of  the  United  States  Circuit  Courts  in  the  exer- 
cise of  its  appellate  jurisdiction.  In  such  case  the  court  exer- 
cises its  independent  judgment,  and  may  determine  that  there 
was  no  contract  of  exemption  fcom  taxation,  notwithstanding  a 
prior  judgment  of  the  State  court  to  the  contrary.  Thus  in  a 
case  from  Tennessee  on  appeal  from  the  United  States  Circuit 
Court,^  the  prior  judgment  of  the  State  Supreme  Court,  sustain- 
ing the  claim  of  exemption  was  urged,  but  the  court  said,  1.  c,  p. 
151: 

* '  In  such  a  case  as  this  where  we  are  to  construe  the  meaning 
of  the  clause  of  the  statute  as  to  what  contract  is  contained  there- 
in, and  whether  the  State  has  passed  any  law  impairing  its  ob- 
ligation, we  are  not  bound  by  the  previous  decisions  of  the  State 
courts,  except  when  they  have  been  so  long  and  so  firmly  estab- 
lished as  to  constitute  a  rule  of  property  (which  is  not  the  case 
here) ,  and  we  decide  for  ourselves  independently  of  the  decisions 
of  the  State  courts,  whether  there  is  a  contract  and  whether  its 
obligations  are  impaired. ' ' 


1  Pacific  Railroad  Co.  v.  Maguire,  20  Wallace  36,  22  L.  Ed.  282 
(1874),  reversing  51  Mo.  142. 

2  North  Missouri  R.  R.  Co.  v.  Maguire,  20  Wallace  46,  22  L.  Ed. 
287   (1874),  affirming  49  Mo.  490. 

3  Shelby  County  v.  Union,  Etc.,  Bank,  161  U.  S.  149,  40  L.  Ed.  650 
(1896).  See  also  Bank  of  Commerce  v.  Tennessee,  161  U.  S.  134,  144,  40 
L.  Ed.  645  (1896),  modifying  95  Tenn.  221;  also  L.  &  N.  R.  R.  Co.  v. 
Palmes,  109  U.  S.  245,  27  L.  Ed.  922,  affirming  19  Fla.  231. 


§    65  CONTRACTS   OF   EXEMPTION    PROM    TAXATION  61 

§  64.  When  State  Court  Not  Followed. — In  a  Kentucky 
case,  however,  the  State  court  overruled  its  decision  that  the  act 
constituted  a  contract  in  the  ease  of  another  party,  so  that  the 
question  came  before  the  Supreme  Court,  i  It  was  urged  upon 
that  tribunal  that  it  should  follow  the  first  decision  of  the  State 
court  construing  the  State  statute,  but  it  said,  pp.  647-8 : 

''Undoubtedly  in  the  Bank  Tax  eases,  97  Kentucky,  597,  the 
Court  of  Appeals  of  Kentucky  decided  that  the  Hewitt  law 
created  an  irrevocable  contract,  and  that  the  general  assembly  of 
that  State  could  not  repeal,  alter  or  amend  it  without  impairing 
the  obligation  of  the  contract,  despite  the  existence  of  the  act  of 
1856,  and  despite  the  circumstances  that  that  act  was  in  express 
terms  incorporated  in  and  made  part  of  the  Hewitt  law.  But  the 
reasoning  by  which  the  court  reached  this  conclusion  is  directly 
in  conflict  with  the  settled  line  of  decisions  of  this  court  just  re- 
ferred to,  and  the  case  has  been  specifically  overruled  by  the 
opinion  announced  by  the  Kentucky  Court  of  Appeals  in  the 
case  now  under  review,  ...  In  determining  whether,  in  any 
given  case,  a  contract  exists,  protected  from  impairment  by  the 
Constitution  of  the  United  States,  this  court  forms  an  independ- 
ent judgment.  As  we  conclude  that  the  decision  in  the  Bank  Tax 
cases  abov^e  cited,  upon  the  question  of  contract,  was  not  only 
in  conflict  with  the  settled  adjudications  of  this  court,  but  also 
inconsistent  with  sound  principle,  we  will  not  adopt  its  conclu- 
sions. ' ' 

As  the  court  decides  for  itself  whether  a  legislative  act  or 
charter  constitutes  a  contract  and  will  not  be  concluded  f)y  the 
decision  of  the  State  court,  a  fortiori  it  will  not  follow  the  State 
court  when  the  latter  reverses  its  previous  judgment  that  the 
act  constituted  a  contract.  2 

§  65.    When  Concluded  By  Decision  of  State  Court.— The 

Supreme  Court,  however,  adopts  the  ruling  of  the  State  court  on 
points  relating  to  the  construction  of  the  State  constitution  and 
statutes,  other  than  as  to  the  existence  of  a  contract  and  the  im- 
pairment of  its  obligation.    Thus  on  the  question  whether  a  cora- 


1  Citizens'  Savings  Bank  v.  Owensboro,  173  U.  S.  636,  43  L.  Ed.  840 
(ISftT)),  affirming  102  Ky.  174.  See  also  Stone  v.  Bank  of  Commerce, 
174  U.  S.  412,  43  L.  Ed.  1028  (1899),  reversing  288  Fed.  398. 

2  Jefferson  Branch  Bank  v.  Skelly,  supra. 


62  CONTRACTS   OP   EXEMPTION   FROM    TAXATION  §    66 

pany  was  doing  business  in  the  State  within  the  meaning  of  its 
statute,  the  court  is  concluded  bj  the  judgment  of  the  State 
court.    Thus  in  Erie  Railroad  Co.  v.  Pennsylvania,!    it  is  said: 

''The  Supreme  Court  of  that  State  has  held  that  this  'company 
was  doing  business  in  the  State  in  the  sense  of  that  act.'  This 
construction  of  a  State  statute  by  the  Supreme  Court  of  the 
State,  involving  no  question  under  the  laws  or  Constitution  of 
the  United  States,  is  conclusive  upon  us.  We  accept  the  con- 
struction of  State  statutes  by  the  State  courts,  although  we  may 
doubt  the  correctness  of  such  construction.  "We  accept  and 
adopt  it,  although  we  may  have  already  accepted  and  adopted  a 
different  construction  of  a  similar  statute  of  another  State,  in. 
deference  to  the  Supreme  Court  of  that  State. ' ' 

'iThus  on  the  question  whether  the  act  done  by  or  under  the 
authority  of  the  State  impairs  the  obligation  of  a  contract,  the 
effect  of  the  act  must  be  determined  in  the  light  of  the  construc- 
tion given  by  the  State  court.  If  that  act  as  construed  and  en- 
forced in  the  State  court  impairs  contract  rights,  then  the  Fed- 
eral court  has  Jurisdiction,  to  determine,  not  the  correctness  of 
the  construction,  but  whether  the  effect  of  the  act  as  construed 
is  to  impair  the  contract  right. 

§  66.  Deference  to  Opinion  of  State  Court. — In  a  later  case  2 
the  court  said  that  although  it  is  its  duty  to  exercise  an  inde- 
pendent judgment  as  to  the  nature  and  extent  of  a  contract,  when 
its  jurisdiction  is  invoked,  because  of  the  asserted  impairment  of 
contract  rights  from  the  effect  given  to  subsequent  legislation, 
nevertheless,  when  the  contract  alleged  to  have  been  impaired 
arises  from  a  State  statute,  the  Federal  court,  for  the  sake  of 
harmony  and  to  avoid  confusion,  will  lean  towards  an  agreement 
with  the  State  court,  if  the  question  seems  balanced  with  doubt. 
The  constitutional  question  was  held  to  be  sufficiently  raised  by  a 
public  board,  which  the  €tate  court  had  held  to  have  enough 
fiduciary  capacity  for  that  purpose,  since  this  power  of  the  State 
board  was  a  matter  of  local  law,  on  which  the  decision  of  the 
State  court  would  be  accepted. 


121  Wallace  492,  497,  22  L.  Ed.  595  (1875). 

2  Board  of  Liquidation  v.  Louisiana,  179  U.  S.  622;   45  L.  Ed.  347 
(1901). 


§    66  CONTRACTS    OF    EXEMPTION    FROM    TAXATION  63 

This  deference  to  the  ruling  of  the  Supreme  Court  of  the  State 
was  forcibly  illustrated  by  the  decision  of  the  Supreme  Court 
holding  that  a  charter  exemption  of  the  Chicago  Theological 
Seminary  from  taxation  of  "all  its  property  of  whatever  kind 
and  description, ' '  did  not  include  property  owned  by  it  as  an  in- 
vestment, the  income  thereof  being  used  for  the  purposes  of  the 
school,  was  not  so  obviously  erroneous  as  to  require  reversal,  al- 
though the  charter  provided  that  "the  act  should  be  construed 
liberally  in  all  the  courts  for  the  purposes  therein  expressed."  i 
The  court  in  its  opinion  distinguished  this  case  from  that  of  the 
Northwestern  University  v.  Illinois  {supra,  Sec.  51),  saying  that 
in  that  case  there  was  provision  specifically  exempting  "all  the 
property  owned  by  such  corporation,"  while  in  the  Chicago 
Theological  Seminary  case  the  provision  used  the  term  "belong- 
ing or  appertaining  to  said  Seminary." 

This  deference  to  the  opinion  of  the  State  court  was  also  illus- 
trated in  the  case  where  an  act  supplementary  of  the  charter 
of  a  college  had  granted  the  same  exemption  from  taxation  which, 
had  been  granted  to  another  educational  institution,  when  a 
State  statute  was  in  force  making  all  corporate  charters  subject 
to  amendment  or  repeal.  The  court  said  that,  bearing  in  mind 
its  own  right  of  independent  judgment,  it  was  jinable  to  say  that 
the  conclusion  reached  by  the  State  Supreme  Court,  holding  that 
there  was  no  irrepealable  contract,  was  not  well  founded  in  law 
and  in  fact. 2 


1  Board  of  Directors  of  Chicago  Theol.  Seminary  v.  Raymond,  188 
U.  S.  662,  47  L.  Ed.  641  (1903),  affirming  189  111.  439,  Judges  White, 
Brown  and  Holmes  dissenting. 

In  Treat  v.  Grand  Canon  R.  R.  Co.,  222  U.  S.  448,  56  L.  Ed.  265,  1912, 
affirming  12  Ariz.  117,  the  Court  affirmed  the  decision  of  the  Supreme 
Court  of  the  Territory  of  Ariaona  in  sustaining  a  limited  exemption  of 
the  railroad  property  bought  at  foreclosure,  saying  it  was  not  so  clearly 
erroneous  as  to  require  reversal  by  the  Supreme  Court.  See  also  New 
York  ex  rel  Interborough  Rapid  Transit  Co.  v.  Sohmer,  237  U.  S.  226, 
59  L.  Ed.  951,  affirming  207  N.  Y.  270,  holding  that  a  corporation  formed 
to  operate  the  subway  was  not  exempted  from  a  tax  measured  by 
capital  stock  and  gross  earnings  imposed  under  the  New  York  tax 
law. 

2  See  Seton  Hall  College  v.  Village  of  South  Orange,  242  U.  S.  54, 
61  L.  Ed.  — ,  afllrming  86  N.  J.  L.  365   (1916). 


64  CONTRACTS   OP   EXEMPTION   PROM   TAXATION  §    68 

§  67.  Limitation  of  Independent  Judgment. — The  "inde- 
pendent judgment"  of  the  Supreme  Court  was  materially  limited 
under  the  decision  in  a  ease  where  the  charter  of  a  ]\Iississippi 
railroad  -granted  in  1882  contained  an  exemption  from  taxation 
for  twenty  years,  i  The  State  constitution  then  in  force  had 
been  construed  by  the  State  Supreme  Court  as  authorizing 
exemptions  from  taxation,  but  also  making  them  repealahle.  It 
was  held  that  this  ruling  of  the  Mississippi  court  that  the  consti- 
tution only  authorized  repealahle  exemptions  involved  a  local  and 
not  a  Federal  question,  and  the  Supreme  Court  therefore  could 
not  review  the  action  of  the  State  court  iu  holding  the  exemption 
to  have  been  repealed  by  a  subsequent  statute ;  and,  further,  that 
this  ruling  applied  both  to  privilege  taxes  and  property  taxes, 
since  both  were  repealable  exemptions, 

§  68.  Contract  Only  Impaired  By  Law. — Limits  are  also  set 
to  the  independent  judgment  of  the  Supreme  Court  in  deciding 
a  case  of  alleged  impairment  of  contract,  by  the  jurisdiction  of 
the  State  court  to  determine  the  construction  of  the  subsequent 
act  by  which  the  contract  is  claimed  to  have  been  impaired.  A 
contract  can  only  be  impaired  under  this  provision  of  the  Con- 
stitution by  a  Imv;  that  is,  a  law  subsequently  enacted.  In  the 
language  of  the  Supreme  Court : 

"The  State  court  may  erroneously  determine  questions  arising 
under  a  contract  which  constitutes  the  basis  of  the  suit  before 
it ;  it  may  hold  a  contract  void,  which  in  our  opinion  is  valid ;  it 
may  adjudge  a  contract  to  be  valid,  which  in  our  opinion  is  void ; 
or  its  interpretation  of  the  contract  may,  in  our  opinion,  be 
radically  wrong;  but  in  neither  of  these  cases  would  the  judg- 
ment be  reviewable  by  this  court  under  the  clause  of  the  Con- 
stitution protecting  the  obligation  of  contracts  against  impair- 
ment by  State  legislatior^,  and  under  the  existing  statutes  defining 
and  regulating  its  jurisdiction,  unless  that  judgment  in  terms 
or  by  its  necessary  operation  gives  effect  to  some  provision  of  the 
State  constitution,  or  some  legislative  enactment  of  the  State, 


1  Gulf  &  Ship  Island  R.  R.  Co.  v.  Hewes,  183  U.  S.  66;    46  L.  Ed. 
86  (1901). 


§    70  CONTRACTS   OP   EXEMPTION   PROM   TAXA.TION  65 

which  is  claimed  by  the  unsuccessful  party  to  impair  the  obliga- 
tion of  the  particular  contract  in  question. '  'i 

§  69.  Impaired  By  Municipal  Ordinance  Having  Force  of 
Law. — But  the  term  *'law"  includes  not  only  a  provision  of  the 
State  constitution  or  State  statute,  but  also  a  municipal  ordi- 
nance having  the  force  of  law.  Thus  a  tax  levied  by  a  municipali- 
ty under  its  chartered  power,  is  a  law  in  this  sense.^  But 
whether  the  ordinance  of  a  municipality  has  the  force  of  law  so 
as  to  constitute  an  impairment  of  the  contract,  is  a  question  in- 
volving the  construction  of  local  law,  whereon  the  Supreme 
Court  will  follow  the  ruling  of  the  State  court.  3 

§  70.  The  Supreme  Court  Determines  What  Constitutes  Im- 
pairment of  a  Contract. — The  Supreme  Court  determines  for 
itself,  on  writ  of  error  to  the  State  court,  whether  a  contract 
right  has  been  impaired  by  the  enforcement  of  a  tax.  A  contract 
may  be  impaired  by  a  wrongful  judicial  construction  of  the  con- 
tract, as  well  as  by  an  unconstitutional  statute  attempting  a  direct 
repeal.  In  the  exercise  of  its  appellate  jurisdiction  over  State 
courts,  therefore,  the  Supreme  Court  is  required  to  determine 
by  its  independent  judgment:  (1)  was  there  a  contract;  (2) 
if  so,  what  obligation  arose  from  it ;  (3)  has  that  obligation  been 
impaired  by  subsequent  legislation  ? 

Thus,  whether  or  not  municipal  taxation  under  a  subsequent 
statute  is  a  public  tax  within  the  meaning  of  the  covenant  by  the 
lessee  from  the  municipality  to  pay  the  public  taxes  which  will 
becoine  due  upon  the  land,  is  a  question  which  the  Federal  Su- 
preme Court  will  determine  for  itself  on  writ  of  error  to  the 
State  court  in  a  case  involving  the  impairment  of  contract  ob- 
ligation by  the  enforcement  of  the  tax.* 


1  Lehigh  Water  Co.  v.  Easton,  121  U.  S.  388,  392,  30  L.  Ed.  1059 
(1887),  affirming  102  Pa.  515. 

2  Murray  v.  Charleston,  96  U.  S.  432,  440,  24  L.  Ed.  764  (1878). 

8  New  Orleans  Water  Works  Co.  v.  Louisiana  Sugar  Refining  Co., 
125  U.  S.  18,  31  L.  Ed.  607  (1888),  dismissing  writ  of  error  in  35  La. 
Ann.  1111. 

4  J.  W.  Perry  Co.  v.  Norfolk,  220  U.  S.  473,  65  L.  Ed.  548  (1911). 
affirming  108  Va.  28. 


66         CONTRACTS  OF  EXEMPTION  FROM  TAXATION       §  72 

While  the  contract  clause  in  the  Constitution  is  not  addressed 
to  such  impairment  of  contract  obligations  as  may  arise  by  mere 
judicial  decisions  of  the  State  courts  without  action  by  the  legis- 
lative authority  of  the  State, i  it  is  also  true  that  the  jurisdiction 
of  the  court  does  not  depend  upon  the  form  in  which  the  legisla- 
tive action  is  expressed,  but  rather  upon  its  practical  effect  and 
operation  as  construed  and  applied  by  the  State  court;  in  other 
words,  impairment  of  the  contract  right  may  result  from  such 
construction  by  the  State  court  of  the  State  legislation.a 

§  71.  Adjudication  of  Contract  Impairment. — The  adjudi- 
cation of  a  State  court  that  a  bank  has  a  contract  of  exemption 
from  taxation  on  its  capital  stock  is  not  res  adjudicata  in  the 
Federal  Court  as  to  taxes  for  years  other  than  the  one  directly 
involved  in  the  judgment  where  by  the  statute  law  of  the  State 
the  adjudication  with  respect  to  taxation  for  one  year  could  not 
be  completed,  and  especially  in  suits  involving  taxes  for  other 
years.  3 

All  defenses  then  existing  to  a  contract  of  exemption  from 
State  taxation  asserted  in  the  suits  in  the  Federal  court  to  en- 
join the  collection  of  the  tax,  whether  drawn  to  the  attention  of 
the  court  or  waived,  are  foreclosed  fcy  the  decree  establishing 
such  exemption  and  the  decree  in  such  case  enjoining  the  collec- 
tion of  the  tax  because  of  a  contract  of  exemption  from  taxation 
is  as  controlling  on  future  taxation  as  on  the  particular  tax  to 
which  the  suit  relates.* 

§  72.  What  Constitutes  a  Contract  of  Exemption.— A  legis- 
lative grant  may  constitute  a  contract,  if  the  contract  is  clearly 
expressed  in  it,  and  the  right  of  contract  may  be  based,  not  only 
upon  what  is  actually  contained  in  the  act  itself,  but  also  upon 


1  See  Cross  Lake  Shooting  &  Fishing  Club  v.  La.,  224  U.  S.  632,  56 
L.  Ed.  924. 

2  See  Detroit  Union  Railway  v.  Michigan,  242  U.  S.  238,  61  L.  Ed. 
— ,  reversing  162  Mich.  460,  173  Mich.  314,  not  a  taxation  case,  but  in- 
volving contract  right  of  a  street  railway  company  to  charge  certain 
rates  of  fare  in  annexed  territory,  which  was  sustained  by  the  court. 

3  Covington  v.  National  Bank,  198  U.  S.  100,  49  L.  Ed.  963  (1905). 
4Gunter  v.  Atlantic  Coast  Line,  200  U.  S.  273,  50  L.  Ed.  477  (1906). 


§   73  CONTRACTS   OF   EXEMPTION   PROM   TAXATION  67 

what  by  reference  is  made  part  of  it.  i  The  exemption,  however, 
must  be  clearly  stated,  and  cannot  be  established  by  implication.  2 
The  grant  of  all  the  powers,  rights  and  privileges  granted 
by  the  charter  of  another  corporation  carries  with  it  an  exemp- 
tion from  taxation  included  in  such  charter.  The  court  said,  1.  c, 
p.  247 : 

"A  more  important  or  more  comprehensive  privilege  than  a 
perpetual  immunity  from  taxation  can  scarcely  be  imagined. 
It  contains  the  essential  idea  of  a  peculiar  benefit  or  advantage, 
of  a  special  exemption  from  a  burden  falling  upon  others. ' '  3 

The  charter  of  the  Louisiana  Bank  provided  that  the  capital 
of  said  bank  should  be  exempt  from  any  taxation.  This  did 
not  include  exemption  from  the  imposition  of  a  license  tax  for 
the  carrying  on  of  the  banking  business,  especially  since  the  bank 
was  incorporated  to  aid  the  agricultural  interests  of  the  State, 
and  the  State  assisted  the  bank  by  the  loan  of  its  credit  and  re- 
tained partial  control  of  the  bank's  directorate.4 

§  73.  Railroad  Franchise  Is  Property. — The  exemption  of 
the  property  of  a  railroad  company  and  the  shares  thereof 
''from  any  public  charge  or  tax  whatsoever,"  includes  the 
exemption  of  the  franchise  from  taxation,  the  court  saying, 
1.  c,  p.  267  -^ 


1  Humphrey  v.  Pegues,  16  Wallace  244,  21  L.  Ed.  326  (1873). 

2  Memphis  Gas  Co.  v.  Shelby  Co.,  109  U.  S.  398,  27  L.  Ed.  976 
(1883),  and  cases  cited. 

3  But  see  later  case  of  Phoenix  Ins.  Co.  v.  Tennessee,  161  U.  S.  174, 
40  L.  Ed.  660  (1896),  to  effect  that  there  must  be  other  language  than 
the  word  "privilege,"  or  other  provisions  in  the  statute  removing  all 
doubt  as  to  the  intention  of  the  legislature  before  the  exemption  will 
be  admitted.    Infra,  Sec.  94. 

♦  Citizens  Bank  v.  Parker,  192  U.  S.  73,  48  L.  Ed.  346  (1904),  re- 
versing 52  La.  Ann.   1086. 

5  Wilmington  R.  R.  Co.  v.  Reid,  13  Wallace  264,  20  L.  Ed.  568 
(1872),  reversing  64  N.  C.  226.  This  case  was  distinguished  in  Wil- 
mington Railroad  Co.  v.  Alsbrook,  146  U.  S.  301,  36  L.  Ed.  972  (1892), 
affirming  110  N.  C.  137,  holding  that  this  exemption  did  not  cover  a 
branch  line  constructed  by  another  company  under  a  different  charter. 


68  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  §    75 

' '  Property  is  a  word  of  large  import,  aud  in  its  application  to 
this  company  included  all  the  real  and  personal  estate  required 
by  it  for  the  successful  prosecution  of  its  business.  .  .  . 
Nothing  is  better  settled  than  that  the  franchise  of  a  private  cor- 
poration— which  in  its  application  to  a  railroad  is  the  privilege 
of  running  it  and  taking  fare  and  freight — is  property,  and  of 
the  most  valuable  kind,  as  it  cannot  be  taken  for  public  use  even 
without  compensation.  It  is  true  it  is  not  the  same  sort  of  prop- 
erty as  the  rolling  stock,  roadbed  and  depot  grounds,  but  it  is 
equally  with  them  covered  by  the  general  term  'the  property  of 
the  company, '  and  therefore  equally  within  the  protection  of  the 
charter. ' ' 

§  74.  Conditional  Exemptions  From  Taxation. — The  power 
to  make  exemption  from  taxation  includes  the  power  to  make  it 
subject  to  conditions,  or  to  limit  to  some  specific  form  of  taxa- 
tion. Thus  a  railroad  company  may  by  grant  of  the  legislature 
be  entitled  to  the  taxation  of  its  property,  land  included,  upon 
the  basis  of  a  per  cent  upon  the  gross  earnings,  and  this  right 
will  be  impaired  by  an  act  withdrawing  the  lands  from  this  ar- 
rangement and  subjecting  them  to  taxation  according  to  their 
cash  value.i  The  exception  may  be  limited  to  a  term  of  years, 
or  conditioned  upon  the  completion  of  a  railroad  wholly  or  in 
part.2 

§  75.  The  Legislative  Power  to  Make  An  Exemption  Con- 
tract.— The  determination  of  the  question  of  a  valid  contract 
of  exemption  may  involve  the  further  question  whether  the  legis- 
lature had  the  power  under  the  State  constitution  or  under  the 
organic  act  of  a  territory  to  make  such  a  contract  of  exemption. 
It  was  said  by  the  Supreme  Court  that  the  rule  of  strict  construc- 
tion is  just  as  applicable,  when  determining  whether  words  of  re- 
striction found  in  the  fundamental  law  are  intended  to  operate 
as  a  limitation  on  the  legislative  power  to  gi-ant  contract  exemp- 


1  Stearns  v.  Minnesota,  179  U.  S.  223,  45  L.  Ed.  162  (1900),  re- 
versing 72  Minn.  200;  Duluth  and  Iron  Range  R.  R.  Co.  v.  Minnesota, 
179  U.  S.  302,  45  L.  Ed.  302  (1900),  reversing  77  Minn.  433. 

2  For  furttier  illustration  of  the  enforcement  of  a  partial  exemption 
from  taxation  for  a  limited  term,  see  Wright  v.  Georgia  R.  R.  Co.,  216 
U.  S.  420,  54  Lr.  Ed.  544   (1910),  aflarming  132  Fed.  912. 


§    76  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  69 

tions  from  taxation,  as  where  the  question  is  whether  the  partic- 
ular terms  of  the  alleged  contract  did  or  did  not  embrace  an 
exemption  from  taxation.  Thus  the  organic  act  of  Washing- 
ton territory  providing  that  the  territorial  legislature  should 
not  grant  private  charters  or  special  privileges  precluded 
the  power  to  grant  a  contract  exemption  from  taxation.i 

Where  a  State  constitution  prohibits  the  exemption  of  prop- 
erty from  taxation,  such  exemption  cannot  be  secured  by  giving 
it  the  guise  of  a  contract.2 

A  decision  of  the  highest  court  of  a  State,  refusing  to  recognize 
the  existence  of  alleged  property  rights  of  a  development  com- 
pany in  the  bed  of  a  river,  is  not  reviewable  in  the  Supreme 
Court  on  the  theory  that  contract  obligations  were  impaired  by 
the  effect  given  by  the  State  court  to  a  repealing  act,  where  such 
decision  was  based  upon  the  ground  that,  irrespective  of,  and 
without  reference  to,  the  subsequent  repealing  legislation,  the 
original  grant  was  an  unconstitutional  attempt  by  the  State  to 
bargain  away  lands  under  navigable  waters  to  a  private  corpora- 
tion ;  and  the  writ  of  error  was  dismissed,  the  Supreme  Court  de- 
clining to  take  jurisdiction.3 

§  76.  Specific  Exemptions  and  General  Legislation  Distin- 
guished.— The  distinction  between  an  exemption  from  taxation 
contained  in  a  special  charter  and  general  legislation  enacted 
from  considerations  of  the  general  good,  encouraging  all  persons 
to  engage  in  a  certain  enterprise,  is  obvious.  In  the  latter  case 
the  legislature  is  not  making  promises  but  framing  a  scheme  of 
public  revenue  and  public  improvements,  and  while  it  may  oj)en 
chances  which  may  involve  benefits,  no  promises  are  made  to  any 
individual.  This  distinction  was  illustrated  by  the  ruling  of  the 
court  that  no  contract  of  exemption  from  taxation  was  made  by 
the  act  of  Michigan,  May,  1893,  that  the  rate  of  taxation  fixed 


1  Bcrryman  v.  Whitman  College,  222  U.  S.  333,  56  L.  Ed.  225   (1912), 
reversing  156  Fed.  112. 

2  Forshaw  v.  Layman,  182  Fed.  193,  C.  C.  A.  8th  Cir.,  construing  the 
Constitution  of  Arkansas. 

3  Long   Sault   Developing   Co.    v.    Call,   242    U.    S.    272,   61    L.    Ed.    — 
(1916),  dismissing  for  want  of  jurisdiction,  writ  of  error,  212  N.  Y.  1. 


70         CONTRACTS  OP  EXEMPTION  FROM  TAXATION       §  77 

bj  that  act  or  any  other  law  of  the  State  should  not  apply  to  any 
railroad  company  thereafter  building  and  operating  a  line  of 
railroad  within  the  State  north  of  the  Forty-fourth  parallel  of 
latitude,  until  the  same  had  been  operated  for  ten  years,  unless 
the  gross  earnings  equaled  a  specific  sum  per  mile.i 

But  where  the  statute  is  a  special  one  which  provides  a  certain 
tax  and  in  consideration  thereof  a  company  formally  accepts  and 
makes  large  expenditures  to  induce  which  was  the  motive  of  the 
exemption,  a  repealable  contract  was  held  to  be  created. 2 

This  distinction  was  also  emphasized  by  the  court  in  the  Seton 
Hall  College  cases  where  the  court  found  that  the  college  had 
made  no  new  promises  and  assumed  no  new  burdens  and  there- 
fore had  done  nothing  in  reliance  upon  the  alleged  tax  exemp- 
tion, the  court  saying: 

' '  To  all  claims  of  contract  exemptions  must  be  applied  the  well 
settled  rule  that,  as  the  power  to  tax  is  an  exercise  of  the  sover- 
eign authority  of  the  State  essential  to  its  existence,  the  facts  of 
its  surrender  in  favor  of  a  corporation  or  an  individual  must  be 
shown  in  language,  which  cannot  be  otherwise  reasonably  con- 
strued, and  ail  doubts  which  arise  as  to  the  intent  to  make  such 
contract  are  to  be  resolved  in  favor  of  the  State. ' ' 

§  77.  Contract  Not  to  Reduce  Dividend  By  Taxation  Below 
Fixed  Per  Cent  Sustained. — In  a  Tennessee  case  the  road  with 
its  fixtures,  including  workshops,  warehouses  and  vehicles  of 
transportation  was  exempted  from  taxation  for  a  period  of  years, 
and  it  was  further  provided  that  no  tax  should  ever  be  laid  on 
said  railroad  or  its  fixtures,  which  would  reduce  its  dividend  to 
below  eight  per  cent.4  The  court  held  that  this  exemption  thus 
limited  was  valid;  that  the  word  "dividend"  had  reference  to 
dividends  on  the  capital  stock  of  the  company  held  and  owned 
bv  its  shareholders,  and  that  the  term  profits  out  of  which  alone 


1  Wisco  &  M.  R.  Co.  V.  Powers,  191  U.  S.  379,  48  L.  Ed.  329  (1903). 

2  Powers  V.  Detroit,  Etc.,  R.  Co.,  201  U.  S.  543,  50  L.  Ed.  860,  affirming 
138  Fed.  264    (1906). 

3  See  Sec.  66,  supra. 

4  Mobile  &  Otiio  R.  R.  Co.  v.  Tennessee,  153  U.  S.  486,  38  L.  Ed.  793 
(1894). 


§  78       CONTRACTS  OP  EXEMPTION  FROM  TAXATION         71 

dividends  can  be  declared  denoted  what  remained  after  defraying 
every  expense,  including  loans  falling  due  as  well  as  the  interest 
on  such  loans. 

It  was  claimed  that  the  exemption  clause  had  no  operation  if 
the  company  earned  no  money  for  a  dividend,  because  in  that 
event  the  dividends  could  not  be  reduced.  But  the  court  said 
that  this  theory  was  wholly  wanting  in  plausibility,  as,  accord- 
ing to  it,  the  company  would  be  taxable  when  it  made  no  profits, 
and  only  get  the  benefit  of  the  exemption  when  profits  of  a  cer- 
tain amount  were  realized.  In  answer  to  the  objection  that  the 
company  could  so  keep  its  accounts  or  water  its  stock  that  it 
would  never  earn  any  dividends  of  eight  per  cent,  the  cou)*t 
said,  p.  506  (four  judges  dissenting)  : 

"In  dealing  with  an  exemption  from  taxation,  like  that  under 
consideration,  good  faith  is  required  on  the  part  of  both  parties 
to  the  contract.  While  the  State  may  not  impair  or  restrict  its 
operation,  neither  may  the  railroad  company  enlarge  it  at  will 
and  without  limitation.  It  is  not  shown  that  the  railroad  com- 
pany has  made  any  improper  or  fictitious  increase,  either  of  its 
capital  stock  or  of  its  bonded  indebtedness.  On  the  contrary,  the 
proof  establishes  that  the  par  value  of  the  53,206  shares  of 
capital  stock  outstanding  was  realized  therefor,  dollar  for  dollar, 
and  this  amount  of  capital  stock,  together  with  the  bonded  in- 
debtedness of  the  company,  represents  the  cost  of  constructing 
and  equipping  the  railroad.  The  legislature,  in  granting  the 
exemption  in  question,  doubtless  had  in  contemplation  the  cost 
of  the  enterprise,  and  may  have  intended  the  immunity  from 
taxation  to  be  estimated  on  that  basis,  as  in  the  Mississippi  char- 
ter. 

But  however  this  may  be.  in  sustaining  the  validity  of  the 
exemption  in  the  present  case,  we  do  not  mean  to  be  understood 
as  holding  that  the  railroad  company  has  the  right  in  its  discre- 
tion, hereafter,  to  issue  additional  capital  stock,  or  to  increase  its 
bonded  indebtedness,  even  for  legitimate  purposes,  and  have  the 
same  taken  into  consideration  upon  the  (|uestiou  of  its  liability  for 
taxation  under  the  eight  per  cent  dividend  clause  of  the  char- 
ter." 

§  78.  Tax  on  Foreig'n  Held  Securities. — In  another  class  of 
cases,  the  right  of  protection  against  taxation  as  an  impairment 
of  a  contract  has  been  sustained  as  necessarily  implied  in  tlic  con- 


72  CONTRACTS   OP   EXEMPTION"   FROM    TAXATION  §    79 

tract,  though  not  expressly  stated.     This  includes  the  levy  of  a 
tax  by  a  State  or  municipality  upon  foreign  held  securities. 

The  question  was  presented  in  the  case  of  the  Foreign  Held 
Bonds,  ^  where  it  was  held  that  the  law  of  Pennsylvania  requir- 
ing the  treasurer  of  a  railroad  company  incorporated  and  doing 
business  within  the  State,  to  retain  five  per  cent  of  the  interest 
due  on  bonds  of  the  road  payable  out  of  the  State  to  non-resi- 
dents of  the  (State  and  held  by  them,  was  a  law  interfering  be- 
tween the  company  and  the  bondholder,  and,  under  the  pretense 
of  levying  a  tax,  impairing  the  obligation  of  the  contract  between 
the  parties.  The  court  said  that  the  bonds  issued  by  the  railroad 
company  were  undoubtedly  property,  but  property  in  the  hands 
of  the  holders,  not  property  of  the  obligors,  and  that  so  far  as 
they  were  held  by  non-residents  of  the  State  they  were  property 
beyond  the  jurisdiction  of  the  State.  It  said  further  that  the 
obligation  of  a  contract  depends  upon  its  terms  and  the  means 
which  the  law  in  existence  at  the  time  it  was  made,  affords  for  its 
enforcement.  A  law,  which  alters  the  terms  of  a  contract,  by  im- 
posing new  conditions  or  dispensing  with  those  expressed,  im- 
pairs its  obligation,  for  as  stated  on  another  occasion,  such  a  law 
relieves  the  parties  from  the  moral  duty  of  performing  the 
original  stipulations  of  the  contract  and  it  prevents  their  legal 
enforcement.  ^ 

§  79.  Taxation  By  State  or  Municipality  of  Its  Own  Securi- 
ties.— The  same  principle  was  applied  in  the  case  of  an  at- 
tempted taxation  by  a  municipality  of  its  own  securities  held  by 
non-residents.  ^  Such  a  tax  was  levied  by  the  city  of  Charleston, 
and  it  was  provided  by  the  ordinance  that  the  treasurer  should 
retain  this  tax  out  of  the  interest  payable  to  the  security  holders. 


115  Wallace  300,  21  L.  Ed.  179  (1872).  This  case  has  been  ques- 
tioned on  another  point,  1.  e.,  as  to  the  situs  of  a  mortgage  for  taxa- 
tion, see  Savings  Society  v.  Multonomah  County,  169  U.  S.  421,  42  L. 
Ed.  803  (1898),  affirming  60  Fed.  31.     Sec.  458  infra. 

2  Murray  v.  Charleston,  96  U.  S.  432,  24  L.  Ed.  760  (1878).  This 
case  was  distinguished  in  People  v.  Commissioners,  76  N.  Y.  77,  hold- 
ing bonds  issued  by  the  city  of  New  York  in  the  hands  of  residents  of 
the  State  not  exempt. 

3  Murray  v.  Charleston,  supra. 


§    79  CONTRACTS   OP   EXEMPTION   FROM    TAXATION  73 

But,  as  to  a  non-resident  holder,  the  tax  was  void.i     It  was  said 
at  p.  445 : 

' '  The  truth  is,  States  and  cities,  when  they  borrow  money  and 
contract  to  repay  it  with  interest,  are  not  acting  as  sovereignties. 
They  come  down  to  the  level  of  ordinary  individuals.  Their 
contracts  have  the  same  meaning  as  that  of  similar  contracts  be- 
tween private  persons.  Hence,  instead  of  there  being  in  the  un- 
dertaking of  a  State  or  city  to  pay,  a  reservation  of  a  sovereign 
right  to  withhold  payment,  the  contract  should  be  regarded  as  an 
assurance  that  such  a  right  will  not  be  exercised.  A  promise  to 
pay,  with  a  reserved  right  to  deny  or  change  the  effect  of  the 
promise,  is  an  absurdity." 

The  court  in  this  opinion  says  that  it  was  referred  to  decisions 
in  Ohio  and  California,2  in  which  the  power  of  the  State  to  tax 
its  own  bonds  was  sustained.  But  they  were  not  in  point  on  the 
question  at  issue,  which  was  the  right  of  a  municipality  to  tax  its 
own  securities  held  by  non-residents,  by  withholding  the  amount 
of  the  tax  from  the  interest ;  and  even  if  they  were  in  conflict  with 
the  decision  of  the  case  at  bar,  they  would  not  control  the  judg- 
ment of  the  court,  on  the  meaning  and  extent  of  the  Federal 
Constitution.  The  opinion  was  confined  to  holding  that  no  mu- 
nicipality can  by  its  ordinances,  under  the  guise  of  taxation,  re- 
lieve itself  from  performing  to  the  letter  all  that  it  expressly 
promises  to  its  creditors.  The  court  said  that  it  did  not  care  to 
enter  upon  the  consideration  of  the  question  whether  a  State  can 
tax  a  debt  due  by  one  of  its  own  citizens  or  municipalities  to  a 
non-resident  creditor,  or  whether  it  has  any  jurisdiction  over 
such  a  creditor,  or  over  the  credit  he  owns.3 

In  a  later  ease  this  question  was  again  considered  by  the 
court,  in  one  of  the  Virginia  coupon  cases,  supra.  It  held  that 
the  act  of  Virginia  requiring  the  tax  on  the  bonds  to  be  deducted 
from  the  coupons  when  tendered  in  payment  of  taxes  could  not 
be  applied  to  coupons  separated  from  the  bonds  and  held  by  dif- 


1  See  infra.  Chapter  14,  "Situs  of  Property  for  Taxation." 

2  Champaign  County  Bank  v.  Smith,  7  Ohio  St.  42;   People  v.  Home 
Ins.  Co.,  29  Cal.  533. 

3  Justice  Miller  and  Justice  Hunt  dissented,  supra. 

4  Ilartman  v.  Groenhow,  supra. 


74  CONTRACTS   OF   EXEMPTION  FROM   TAXATION  §    79 

ferent  owners,  without  impairing  the  contracts  made  in  the 
funding  act,  see  supra,  Sec.  56.  The  court  remarked  further,  at 
p.  683: 

* '  The  power  of  the  State  to  impose  a  tax  upon  her  own  obliga- 
tions is  a  subject  upon  which  there  has  been  a  difference  of 
opinion  among  jurists  and  statesmen.  On  the  one  hand,  it  has 
been  contended  that  such  a  tax  is  in  conflict  with  and  contrary  to 
the  obligation  assumed ;  that  the  obligation  to  pay  a  certain  sum 
is  inconsistent  with  a  right,  at  the  same  time,  to  retain  a  portion 
of  it  in  the  shape  of  a  tax,  and  that  to  impose  such  a  tax  is, 
therefore,  to  violate  a  promise  of  the  government." 

It  cited  Hamilton  on  Public  Credit,  3d  vol.,  pp.  514-518,  i  and 
added  that  "on  the  other  hand  it  is  urged  that  the  bonds  of 
every  State  are  property  in  the  hands  of  its  creditors  and  as  such 
they  should  bear  their  due  proportion  of  the  public  burdens." 
But  this  question  was  not  necessarily  involved  in  the  disposition 
of  the  case.    The  court  continued: 

''"Whatever  may  be  the  wise  rule — ^looking  at  the  necessity  of  a 
commercial  country  for  its  prosperity,  that  its  public  credit 
should  never  be  impaired,  as  to  the  taxability  of  the  public  secu- 
rities, it  is  settled  that  any  tax  levied  upon  them  cannot  be  with- 
held from  the  interest  payable  thereon. ' ' 

This  principle  was  applied  in  the  United  States  Circuit  Court 
of  Louisiana,2  where  an  injunction  was  granted  restraining  the 
assessment  and  collection  of  taxes  upon  judgments  held  by  non- 
residents against  the  city  of  New  Orleans,  that  is,  an  attempt  by 
the  city  to  collect  taxes  upon  judgments  against  itself.  The  bonds 
on  which  the  judgments  had  been  recovered  were  specially  ex- 
empted from  taxation  by  the  city  charter,  and  the  court  held 
that  the  judgments  were  entitled  to  the  same  exemption,  and  that, 
independently  of  this,  in  the  absence  of  any  provisions  in  the 
contract  giving  the  right  to  impose  a  tax,  it  could  not  be  im- 
posed upon  non-residents  without  impairing  the  obligation  it- 
self. 


1  See  Murray  v.  Charleston,  96  U.  S.  432,  supra,  and  Foreign  Held 
Bands  Case,  15  Wall.  300,  suj)ra.  Sec.  78. 

2  De  Vignler  v.  New  Orleans,  16  Fed.  Rep.  11. 


§  80       CONTRACTS  OF  EXEMPTION  PROM  TAXATION         75 

§  80.  Contract  Right  to  Tax  As  a  Remedy. — The  contract 
clause  of  the  Constitution  has  been  applied  to  another  class  of 
cases,  where  parties  have  been  adjudged  entitled  to  a  levy  of 
taxes  in  the  enforcement  of  claims  against  municipalities.  Here 
was  involved  the  same  principle  which  was  enforced  in  the  Vir- 
ginia coupon  cases,  as  the  principle  applied  in  both  classes  of 
eases  is  the  familiar  rule  that  the  remedy  for  the  enforcement  of 
the  contract  existing  when  it  is  made  enters  into  it,  and  cannot 
be  destroyed  or  prejudicially  affected,  without  impairing  its  ob- 
ligation. 1  Thus  when  a  municipality  is  authorized  to  incur  debts 
and  issue  bonds,  the  power  of  taxation  then  existing  is  part  of  the 
contract  within  the  meaning  of  the  Constitution,  and  a  subse- 
quent statute  which  repeals  or  restricts  the  power  of  taxation  is 
an  impairment  of  such  contract. 

The  leading  case  on  this  subject  is  Von  Hoffman  v.  Quincy,^ 
where  the  statute  of  Hlinois  at  the  time  the  bonds  were  issued 
authorized  the  levying  of  a  sufficient  special  tax  to  pay  the 
coupons  as  they  fell  due,  and  this  law  was  subsequently  repealed, 
so  that  the  only  tax  allowed  to  be  levied  was  insufficient  to  meet 
the  debt  and  current  expenses  of  the  city.  The  court  said  that 
the  power  of  taxation  thus  given  was  a  contract  within  the  mean- 
ing of  the  Constitution  and  could  not  be  withdrawn  until  the 
contract  was  satisfied,  and  that  it  was  the  duty  of  the  city  to  im- 
pose and  collect  the  taxes  in  all  respects  as  if  the  second  statute 
had  not  been  passed,  and  this  duty  would  be  enforced  by  man- 
damus. This  ruling  has  been  followed  in  numerous  cases  involv- 
ing the  enforcement  of  taxation  for  the  payment  of  municipal 
bonds.  3 

In  the  case  last  cited  it  was  argued  that  the  power  of  taxation 
belongs  exclusively  to  the  legislative  department  of  the  govern- 
ment, that  the  extent  to  which  it  may  be  delegated  to  municipal 
bodies  is  a  matter  of  discretion,  and  that  in  general  the  power 
may  be  revoked  at  the  pleasure  of  the  legislature.    But  the  court 


1  Rronson  v.  Kinzie,  1  How.  311,  11  L.  Ed.  143   (1843). 

2  4  Wallace  535,  18  L.  Ed.  403   (1867). 

•Wolff    V.    New    Orleans,    103    U.    S.    358,    26    L.    Ed.    395    (1881); 
Louisiana  v.  Pilsbury,  105  U.  S.  278,  26  L.  Ed.  1090  (1882). 


76  CONTRACTS   OF   EXEMPTION    FROM    TAXATION  §    81 

said  that  legislation  revoking  the  power  of  taxation  was  subject 
to  the  qualification  that  attends  all  State  legislation,  that  it  shall 
not  conflict  with  the  prohibitions  of  the  Constitution  of  the 
United  States,  and,  among  other  things,  shall  not  operate  di- 
rectly upon  contracts  of  the  corporation,  so  as  to  impair  their 
obligation  by  abrogating  or  lessening  the  means  of  their  enforce- 
ment. It  was  urged  in  Louisiana  v.  Pilsbury  that  the  people  of 
New  Orleans  had  been  impoverished  by  the  abolition  of  slavery 
and  disabled  from  performing  the  contract  according  to  its  terms. 
The  court  said  that  the  obligation  of  the  city  to  perform  its  con- 
tract was  no  more  lessened  by  the  fact  that  there  were  no  longer 
slaves  to  be  taxed,  than  it  would  be  by  the  destruction  of  any 
other  portion  of  the  taxable  property,  although  the  taxation  on 
what  was  left  might  be  thereby  increased. 

Thus  a  statute  of  Missouri  providing  that  no  tax  other  than 
for  current  expenditures  and  schools  and  interest  on  the  State 
bonds  should  be  levied  without  an  order  of  the  Circuit  Court, 
was  void  as  to  bonds  issued  prior  to  its  enactment,  i 

§  81.  Remedy  May  Be  Changed,  if  Substantial  Right  Not 
Impaired. — The  principle  repeatedly  enforced  by  the  court  has 
been  declared  in  these  words  (122  U.  S.,  p.  2&4)  : 

"  It  is  competent  for  the  States  to  change  the  form  of  the  rem- 
edy, or  to  modify  it  otherwise  as  they  may  see  fit,  provided  no 
substantial  right  secured  by  the  contract  is  thereby  impaired.  No 
attempt  has  been  made  to  fix  definitely  the  line  between  altera- 
tions of  the  remedy  which  are  to  be  deemed  legitimate  and  those 
which,  under  the  form  of  modifying  the  remedy,  impair  substan- 
tial rights.  Every  case  must  be  determined  upon  its  own  circum-- 
stances.  Whenever  the  result  last  mentioned  is  produced  the  act 
is  within  the  prohibition  of  the  Constitution,  and  to  that  extent 
void.  "2 


1  United  States  v.  Lincoln  County,  5  Dillon  184;  United  States  v. 
Johnson  County,  5  Dillon  207;  Ralls  County  Court  v.  United  States,. 
105  U.  S.  733,  26  L.  Ed.  1220  (1882);  see  author's  "Taxation  in  Mis- 
souri," pp.  71  to  81,  as  to  conflict  between  State  and  Federal  courts  on 
this  question  in  State  of  Missouri. 

2  Seibert  v.  Lewis,  122  U.  S.  284,  30  L.  Ed.  1161  (1887),  Louisiana 
V.  New  Orleans,  102  U.  S.  203,  26  L.  Ed.  132  (1880),  affirming  32  La. 
Ann.  493;  Von  Hoffman  v.  Quincy,  4  Wall.  535,  18  L.  Ed.  403   (1867); 


§    81  CONTRACTS   OP   EXEMPTION   PROM    TAXATION  77 

But  where  the  charter  of  the  city  was  repealed  and  the  State 
had  taken  control  and  custody  of  her  public  property  and  as- 
sumed the  collection  of  the  taxes  previously  levied,  the  Supreme 
Court  held  that  the  taxes  levied  before  the  repeal  of  the  charter 
that  were  not  paid  could  not  be  collected  through  the  instru- 
mentality of  a  court  of  chancery  at  the  instance  of  creditors  of 
the  city.  Such  taxes  could  only  be  collected  under  authority  of 
the  legislature.^ 

On  the  other  hand,  contract  obligations  created  by  State  stat- 
ute, exempting  a  bank  from  any  other  taxes  than  those  therein 
prescribed,  are  not  impaired  by  a  subsequent  statute  changing 
the  date  when  the  bank  is  to  report  its  property  for  assessment ; 
the  effect  of  which  is  to  impress  a  lien  upon  its  property  which 
continues,  notwithstanding  the  repeal  of  its  charter  before  lia- 
bility under  the  former  statute  attached,  and  the  transfer  of  its 
assets  to  another  bank  organized  for  the  purpose  of  taking  them 
over.  2 

Where  therefore  a  municipal  corporation  is  authorized  to  eon- 
tract  and  exercise  the  power  of  local  taxation  to  meet  such  con- 
tractual engagements,  this  power  must  continue  until  the  con- 
tracts are  satisfied,  and  it  is  an  impairment  of  the  obligation  of 
the  contract  to  destroy  or  lessen  the  means  by  which  it  can  be  en- 
forced.'J 

It  was  said  by  the  Supreme  Court  :* 

"The  obligation  of  a  contract,  in  its  contractual  sense,  is  the 
means  provided  by  law  by  which  it  can  be  enforced — by  which 
the  parties  can  be  obliged  to  perform  it.  Whatever  legislation 
lessens  the  efficacy  of  these  means  impairs  the  obligation.    .    .    . 


Morgan  v.  Town  Clerk,  7  Wall.  610,  19  L.  Ed.  204  (1869);  Morgan  v. 
Beloit,  7  Wall.  613,  19  L.  Ed.  203  (1869);  Stuart  v.  Jefferson  Police 
Jury,  116  U.  S.  135,  29  L.  Ed.  588  (1885),  affirming  34  La.  Ann.  673. 

1  Meriwether  v.  Garrett,  102  U.  S.  472,  26  L.  Ed.  197  (1880),  Justices 
Strong,  Swayne  and  Harlan  dissenting. 

2  Bank    of    Kentucky    v.    Kentucky,    207    U.    S.    258,    52    L.    Ed.    197 
(1907),  affirming  29  Ky.  Law  Rep.  643. 

3  Louisiana  ex  rel  v.   New  Orleans,   215   U.   S.   170,   54   L.   Ed.   144 
fl909),  reversing  119  La.  623. 

♦  Louisiana  v.  New  Orleans,  102  U.  S.  203,  26  L.  Ed.  132  (1880). 


78  CONTRACTS  OP   EXEMPTION  FROM  TAXATION  §   83 

Any  authorization  of  the  postponement  of  payment,  or  of  means 
by  which  such  postponement  may  be  effected,  is  in  conflict  with 
the  constitutional  inhibition." 

This  principle  has  been  applied  in  compelling  the  assessment 
of  property  at  its  full  value,  so  that  sufficient  taxes  can  be 
raised  thereunder  to  pay  the  judgment,  i 

§  82.  Contractual  and  Governmental  Legislation  Distin- 
guished.— While  the  State  may  by  legislative  act  exempt  from 
taxation,  if  not  prohibited  by  the  State  constitution,  such  exemp- 
tion can  only  be  effected  by  contractual,  as  distinguished  from 
governmental,  legislation. 

Thus  a  statute  of  a  State  taxing  inheritances  does  not  impair 
any  contract  rights  of  inheritance,  even  if  such  an  act  could  be 
construed  as  a  change  in  the  law  of  succession,  rather  than  as  a 
fiscal  imposition,  and  could  not  be  held  to  violate  the  Constitu- 
tion of  the  United  States.2  Neither  does  the  enactment  of  an 
inheritance  tax  law  constitute  a  contract  between  the  State  and 
the  person  living  at  the  time  of  its  enactment,  that  if  he  shall  die 
while  the  law  is  in  full  operation  and  unchanged,  he  may  dispose 
of  his  estate  without  the  imposition  of  any  further  tax  upon  any 
rights  or  interests  acquired  under  his  will  than  the  tax  imposed 
by  law.^ 

§  83.  Municipal  Charter  Powers  Not  Contractual. — An  act 
of  New  Jersey,  providing  that  certain  property  of  New  Bruns- 
wick, used  for  charitable  purposes,  should  be  subject  to  taxation 
by  the  township  in  which  it  was  located,  was  an  exercise  of  gov- 
ernmental power  and  subject  to  repeal.^      It  did  not  create  a 


1  Huidekoper  v.  Hadley,  177  Fed.  1,  40  L.  R.  A.  505,  C.  C.  A.  8th  Cir. 
(1910),  and  same  court  in  U.  S.  ex  rel  v.  Jimmerson,  222  Fed.  489, 
(1915).  Also  City  of  Cleveland,  Tenn.  v.  U.  S.  (1909)  C.  C.  A.  6th  Cir. 
106  Fed.  677.    See  infra.  Sec.  552. 

2  Carpenter  v.  Pennsylvania,  17  How.  456,  15  L.  Ed.  127  (1855), 
affirming  16  Pa.  63;  Orr  v.  Oilman,  183  U.  S.  278,  46  L.  Ed.  196  (1902), 
affirming  167  N.  Y.  227,  52  L.  R.  A.  433. 

3  In  re  Vanderbilt,  50  N.  Y.  App.  Div.  246. 

4 Williams  v.  New  Jersey,  130  U.  S.  189,  32  L.  Ed.  915  (1888). 


§    84  CONTRACTS   OF    EXEMPTION    PROM    TAXATION  79 

contract  between  the  State  and  the  township.  The  conferring 
such  rights  of  taxation  is  the  exercise  by  the  legislature  of  a 
public  and  governmental  power ;  it  is  the  imparting  to  the  town- 
ship of  a  portion  of  the  power  belonging  to  the  State,  which  it 
can  lawfully  impart  to  a  subordinate  municipal  corporation.  But 
from  the  very  character  of  the  power  it  cannot  be  imparted  in 
perpetuity,  and  is  always  subject  to  revocation,  modification  and 
control  by  the  legislative  authority  of  the  State. 

There  is  no  contract  between  citizens  and  taxpayers  of  a 
municipal  corporation  and  the  corporation  itself  that  the  former 
shall  be  taxed  only  for  the  use  of  this  corporation,  which  is  im- 
paired by  subjecting  them  to  taxation  for  the  use  of  a  new  muni- 
cipality formed  by  the  annexation  of  other  property  under  au- 
thority of  law  of  an  adjoining  municipality.! 

§  84.  State  Exemption  of  Municipal  Property  Not  Contrac- 
tual.— An  act  of  Kentucky  exempted  from  State,  county  and 
city  taxation  the  water  works  of  the  city  of  Covington.  The 
Kentucky  Court  of  Appeals  held  that  the  water  works  were  the 
proprietary  property  of  the  citizens  as  distinguished  from  the 
property  held  for  public  or  governmental  purposes,  and  were 
therefore  subject  to  taxation  under  the  new  constitution,  not- 
withstanding the  exemption  of  all  public  property  used  for  pub- 
lic purposes.  The  Supreme  Court2  accepted  this  construction  of 
the  Kentucky  statute,  though  it  doubted  the  soundness  of  the 
ruling  that  the  water  works  were  not  held  for  governmental  pur- 
poses. But  it  agreed  with  the  Kentucky  court  that  the  exemp- 
tion from-  taxation  by  the  terms  of  the  act,  was  not  irrepealable ; 
and  said  further  that,  if  the  property  was  held  in  a  governmental, 
not  a  proprietary  sense,  the  power  of  the  legislature  as  to  such 
property  was  still  supreme,  and  that  the  charter  of  a  municipal 
corporation  is  in  no  s(?nse  a  contract  between  the  State  and  the 
corporation. 


1  Hunter  v.  Pittsburgh,  207  U.  S.  171  (1907),  53  L.  Ed.  151,  affirming 
217  Pa.  27. 

2  Covington  v.  Kentuclty,   173   U.   S.   231,   38  L.   Ed.   962    (1894),  ro- 
Tersing  15  Ky.  L.  Rep.  320. 


80  CONTRACTS  OP   EXEMPTION  FROM   TAXATION  §    86 

§  85.  State  Control  of  Proceeds  of  Municipal  Taxation. — 
The  distinction  between  the  relation  of  the  State  to  municipal 
corporations  and  to  individuals  was  illustrated  in  a  decision  of 
the  Supreme  Court/  that  a  State,  unless  restrained  by  the 
provisions  of  its  constitution,  can  direct  a  restitution  to  the 
taxpayers  of  a  county  or  other  municipal  corporation  of  prop- 
erty exacted  from  them  by  taxation,  in  whatever  form  the  prop- 
erty may  be  changed,  so  long  as  it  remains  in  the  possession  of 
the  municipality.  The  county  in  that  case  had,  under  legislative 
authority,  subscribed  to  stock  in  a  railroad  company  to  be  paid 
by  a  special  tax  levied  for  that  purpose.  The  legislature  enacted 
a  law  providing  that  the  railroad  company  should  issue  to  the 
taxpayers  certificates  for  the  taxes  paid,  which  were  made  as- 
signable, and  it  was  made  the  duty  of  the  company  to  issue  cer- 
tificates of  paid-up  capital  stock  to  the  amount  of  the  certificates 
of  taxes  paid  when  surrendered.  The  stock  unclaimed  was  is- 
sued to  the  common  school  fund.  The  act  declared  that  the  is- 
suing of  the  stock  to  the  individuals  or  townships  should  cancel 
pro  tanto  the  stock  held  by  the  county.  The  county  claimed  that 
the  act  impaired  the  obligation  between  it  and  the  railroad,  but 
the  Supreme  Court  held  that  it  was  within  the  constitutional 
power  of  the  State,  although  the  invalidity  of  the  act  would  not 
be  a  matter  of  serious  doubt  between  the  State  and  private  indi- 
viduals. 

§  86.  Retrospective  Legislation  and  Vested  Rights. — ^This 
principle  of  distinguishing  between  governmental  and  contrac- 
tual legislation  has  been  applied  in  numerous  cases.  Thus,  the 
holders  of  tax  certificates  have  no  vested  rights  impaired  by  re- 
quiring them  to  give  written  notice  to  the  occupants  of  the  land 
of  application  for  tax  deeds.     The  court  saying  :^ 

"That  a  statute  is  not  void  because  it  is  retrospective  has  been 
repeatedly  held  by  this  court,  and  the  feature  of  the  act  of  1867, 


1  Board  of  Commissioners  v.  Lucas,  93  U.  S.  108,  23  L.  Ed.  823 
(1876). 

2  Curtis  V.  Whitney,  13  Wall.  68,  20  L.  Ed.  513  (1871),  affirming 
24  Wise.  664.  See  Coulter  v.  Stafford,  6  C.  C.  A.  18,  56  Fed.  564;  also 
Essex  Public  Road  Board  v.  Skinkle,  140  U.  S.  334,  35  L.  Ed.  446 
(1891),  affirming  49  N.  J.  L.  641. 


§    87  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  81 

whieli  makes  it  applicable  to  certificates  already  issued  for  tax 
sales,  does  not  of  itself  conflict  with  the  Constitution  of  the 
United  States.  Nor  does  every  statute  which  affects  the  value  of 
a  contract  impair  its  obligation.  It  is  one  of  the  contingencies 
to  which  parties  look  now  in  making  a  large  class  of  contracts, 
that  they  may  be  affected  in  many  ways  by  State  and  national 
legislation.  For  such  legislation  demanded  by  the  public  good, 
however  it  may  retroact  on  contracts  previously  made  and 
enhance  the  cost  and  difficulty  of  performance,  or  diminish 
the  value  of  such  performance  by  the  other  party,  there  is 
no  restraint  in  the  Federal  Constitution,  so  long  as  the  obliga- 
tion of  performance  remains  in  full  force." 

This  principle  is  further  illustrated  by  a  ease  from  New 
York,i  where  a  statute  modified,  in  the  taxpayers'  favor,  prev- 
ious laws  of  limitation  concerning  lands  sold  for  non-payment 
of  taxes.  The  statute  had  therefore  provided  that  any  person 
might,  at  the  sale  for  taxes,  on  advancing  the  amount  of  the 
unpaid  taxes,  have  a  lease  of  the  premises  for  a  stated  number  of 
years.  This  was  amended  by  providing  that,  where  the  sale 
for  taxes  had  been  made  more  than  eight  years  prior  to  the 
passage  of  the  act,  no  action  should  be  maintained  to  compel 
the  delivery  of  a  lease  unless  commenced  within  six  months 
after  the  date  of  passage.  This  was  claimed  to  be  an  impair- 
ment of  a  contract  right,  but  the  Supreme  Court  said  that 
there  was  nothing  in  the  Constitution  of  the  United  States 
which  prevented  the  legislature  of  New  York  from  prescribing 
the  limitation  for  bringing  suits  where  none  had  previously 
existed,  or  from  shortening  the  time  within  which  suits  should 
be  commenced  to  enforce  existing  rights  under  tax  sales,  provid- 
ed the  time  prescribed  by  the  new  law  was  a  reasonable  one. 

§  P>7.  Justice  Miller  on  Legislative  Contracts.— Tn  another 
f-aso  where  tlie  court  found  a  contract  in  a  railroad  charter, 
it  was  said, 2    opinion  by  Justice  Miller,  1.  c.  p.  113 : 


1  Wheeler  v.  Jackson,  137  U.  S.  245,  34  L.  Ed.  659  (1890),  affirming 
105  N.  Y.  681. 

2  New  Jersey  v.  Yard,  95  U.  S.  104,  24  L.  Ed.  352  (1887),  reversing 
38  N.  J.  L.  472;  N.  Y.  ex  rel.  Schurz  v.  Cook,  148  U.  S.  397,  37  L.  Ed. 
498  (1893).  affirming  110  N.  Y.  443;  Marx  v.  Hanthorn,  30  Fed. 
579.  In  this  last  case,  held  that  while  the  legislature  may  make  recitals 


82  CONTRACTS   OF    EXEMPTION    FROM    TAXATION  §    87 

"It  may  safely  be  said  that  in  far  the  larger  number  of  > 
cases  brought  to  this  court  under  that  clause  of  the  Consti- 
tution, the  question  has  been  as  to  the  existence  and  nature 
of  the  contract,  and  not  the  construction  of  the  law  which 
is  supposed  to  impair  it;  and  the  greatest  trouble  we  have 
had  on  this  point  has  been  in  regard  to  what  may  be  called 
legislative  contracts, — contracts  found  in  statute  laws  of  the 
State,  if  they  existed  at  all.  It  has  become  the  established  law 
of  this  court  that  a  legislative  enactment,  in  the  ordinary 
form  of  a  statute,  may  contain  provisions  which,  when  accepted 
as  the  basis  of  action  by  individuals  or  corporations,  become 
contracts  between  them  and  the  State  within  the  protection 
of  the  clause  referred  to  of  the  Federal  Constitution." 

After  saying  that  it  is  always  difficult  to  determine  when  a 
statute  constitutes  a  contract,  the  court  said: 

* '  This  has  always  been  a  very  nice  point ;  and,  when  the 
supposed  contract  exists  only  in  the  form  of  a  general  statute, 
doubts  still  recur,  after  all  our  decisions  on  that  class  of  ques- 
tions."    ... 

"Statutes  fixing  the  taxes  to  be  levied  on  corporations,  par- 
take, in  a  striking  manner,  of  this  dual  character,  and  require 
for  their  construction  a  critical  examination  of  their  terms,  and 
of  the  circumstances  under  which  they  are  created. 

"The  writer  of  this  opinion  has  always  believed,  and  be- 
lieves now,  that  one  legislature  of  a  State  has  no  power  to  bar- 
gain away  the  rights  of  any  succeeding  legislature  to  levy  taxes 
in  as  full  a  manner  as  the  Constitution  will  permit.  But,  so  long 
as  the  majority  of  this  court  adhere  to  the  contrary  doctrine,  he 
must,  when  the  question  arises,  join  with  the  other  judges  in 
considering  whether  such  a  contract  has  been  made." 


of  regularity  of  prior  proceedings  in  tax  deeds  prima  facie  evidence,  it 
cannot  make  them  conclusive  evidence  of  those  proceedings,  which  are 
essential  to  the  validity  of  the  transaction,  without  impairing  the 
obligation  of  the  contract  with  the  purchaser  of  the  property;  but 
aliter  as  to  non-essentials  or  matters  of  routine.  Sioux  City  R.  R.  Co. 
v.  Sioux  City,  138  U.  S.  98,  34  L.  Ed.  898  (1891),  affirming  78  Iowa  367; 
Garrison  v.  City  of  New  York,  21  Wall.  196,  22  L.  Ed.  612  (1875); 
Armstrong  v.  Athens  County,  16  Peters  281,  10  L.  Ed.  965  (1842), 
affirming  10  Ohio  235;  Covington  v.  Kentucky,  supra,  Sec.  84;  State 
v.  Weyerhauser,  72  Minn.  519,  holding  that  a  statute  providing  for  the 
taxation  of  property  previously  unlawfully  omitted  from  the  assess- 
ment, or  grossly  undervalued,  does  not  impair  the  obligation  of  a  con- 
tract. 


§  88        CONTRACTS  OF  EXEMPTION  FROM  TAXATION  83 

§  88.  Tax  Exemption  Not  Implied  From  License. — A  con- 
tract right  of  exemption  cannot  be  implied  from  the  grant  of 
a  ferry  license, i  nor  from  an  exclusive  street  railway  fran- 
chise, 2  nor  for  a  license  to  practice  law,'3  nor  from  a  State 
license  to  an  insurance  company  to  do  business  in  the  State.  4 

An  inviolable  contract  between  a  municipality  and  street 
railway  companies  which  will  prevent  the  exaction  of  a  license 
tax  under  the  acknowledged  power  of  the  municipality,  is  not 
created  by  ordinance  passed  in  the  exercise  of  authority  to 
grant  the  use  of  the  streets  in  which  the  companies  have  agreed 
to  pay  a  certain  sum  for  the  use  of  such  streets  for  a  period, 
where  such  ordinance  did  not  expressly  relinquish  the  right  to 
exact  license  fees  or  tax.5 

The  special  municipal  tax  imposed  by  tbe  laws  of  New  York 
of  1899,  Chapter  712,  does  not  impair  the  obligation  of  the  con- 
tracts by  which  the  State  or  municipality  granted  the  right  to 
construct,  operate  and  maintain  street  railways  in  the  City  of 
New  York  in  consideration  of  the  payment  of  a  gross  sum,  or  of 
the  annual  payment  of  a  fixed  amount,  or  a  fixed  percentage  of 
the  earnings  where  such  payments  are  nowhere  declared  by  any 
law  a  substitution  for  taxation.s 

No  exemption  from  the  rnunicipal  taxation  of  the  business  of 
a  street  railway  company  results  from  the  provisions  in  its 
agreement  with  the  municipality,  preserving  its  easement  for 
railway  purposes  in  land  to  be  conve^^ed  by  it  to  the  city  grant- 
ing it  the  right  to  lay  down,  construct,  maintain  and  operate 


1  Wiggins  Ferry  Co.  v.  East  St.  Louis,  107  U.  S.  365,  27  L.  Ed.  419 
(1883)  affirming  102  111.  560. 

2  New  Orleans  Railroad  Co.  v.  New  Orleans,  143  U.  S.  192,  36  L.  Ed. 
121  (1892),  disapproving  on  this  point  Gordon  v.  Appeals  Tax  Court, 
supra. 

3  Baker  v.  Lexington  (Ky.),  21  Ky.  Law  Rep.  809. 

4  Home  Insurance  Co.  v.  Augusta,  93  U.  S.  116,  23  L.  Ed.  825  (1876), 
affirming  50  Ga.  530. 

c  St.  Louis  V.  United  Railways  Co.,  210  U.  S.  60,  52  L.  Ed.  1054 
(1908). 

«Ncw  York  ex  rel  Metropolitan  Street  Ry.  Co.  v.  State  Board  of 
Tax  Commissioners,  199  U.  S.  1,  50  L.  Ed.  65  (1905),  affirming  174 
N.  Y.  417. 


84  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  §    90 

its  lines  of  railway  through  certain  streets,  subject  to  the  con- 
trol of  the  IMayor  and  Aldermen.i 

The  same  principle  applies  in  the  case  of  other  municipal 
grants  and  franchises  not  relating  to  taxation,  but  to  the  exer- 
cise of  the  police  power,  and  the  general  principle  has  been 
affirmed  that  general  implication  may  not  be  resorted  to  for  the 
purpose  of  converting  a  grant  of  the  municipality,  which  is 
upon  its  face  a  mere  license,  into  a  contract  for  a  stated  period 
or  perpetuity. 2 

§  89.  Bounties  and  Privileges. — Legislative  grants  of  boun- 
ties or  privileges,  involving  no  reciprocal  contractual  obliga- 
tions on  the  part  of  the  grantee,  confer  no  contractual  rights. 
Thus  the  bounty  and  tax  exemption  granted  to  salt  manufac- 
turers in  Michigan  was  held  repealable,^  as  was  also  the  ex- 
emption granted  to  manufacturers  in  the  District  of  Columbia.* 

§  90.  Consideration  for  Exemption  Essential. — If  the  laAv 
is  a  mere  offer  of  a  bounty,  it  may  be  withdrawn  at  any  time, 
although  the  recipients  may  have  incurred  expense  on  the  faith 
of  the  offer.  Thus  an  act  of  Louisiana,  in  exempting  the  hall  of 
a  Grand  Lodge  from  State  and  parish  taxes,  as  long  as  it  was 
occupied  as  a  Grand  Lodge,  was  a  mere  continuing  gratuity 
which  the  State  had  a  right  to  withdraw  by  the  adoption  of  a 
Constitution   which   in   effect   repealed   the   exemption. s       The 


1  Savannah,  Etc.,  R.  R.  Co.  v.  Savannah,  198  U.  S.  892,  49  L.  Ed. 
109,  1905,  affirming  115  Ga.  137. 

3  Seaboard  Air  Line  Railway  v.  Raleigh,  242  U.  S.  15,  61  L.  Ed. 
(1916). 

For  a  case  where  a  contract  claim  was  sustained  as  to  the  rate  of 
fare  in  annexed  territory,  see  Detroit  United  Railway  v.  People  of 
State  of  Michigan,  supra,  Sec.  70. 

3  Salt  Co.  V.  East  Saginaw,  13  Wallace  373,  20  L.  Ed.  611  (1872). 

4  Welch  V.  Cook,  97  U.  S.  541,  24  L.  Ed.  1112   (1878). 

5  Grand  Lodge  v.  New  Orleans,  166  U.  S.  143,  41  L.  Ed.  951  (1897), 
affirming  46  La.  Ann.  717.  See  also  Rector  of  Christ  Church  v.  Phila- 
delphia, 24  Howard  300,  16  L.  Ed.  302  (1860);  Tucker  v.  Ferguson,  22 
Wallace  527,  22  L.  Ed.  805  (1875);  West  Wisconsin  R.  R.  Co.  v.  Super- 
visors, 93  U.  S.  595,  23  L.  Ed.  814  (1876),  affirming  35  Wis.  257;  New- 
ton V.  Commissioners,  100  U.  S.  548,  25  L.  Ed.  710  (1888),  affirming  26 
Ohio  S.  618. 


§    92  CONTRACTS   OF    EXEMPTION   FROM    TAXATION  85 

court  said  there  was  the  same  necessity  for  a  consideration 
to  make  a  contract  of  exemption  as  there  would  be  if  it  were  a 
contract  between  private  parties.    See  Sec.  50,  supra. 

§  91.    Judgment  for  Torts  Not  Contract.— Judgments  were 

recovered  against  the  city  of  New  Orleans  for  damages  done 
to  property  by  a  mob,  the  statutes  of  the  State  making  munici- 
palities liable  for  such  damages.  The  new  constitution,  there- 
after adopted,  so  limited  the  taxing  power  of  the  city  as  to  pre- 
vent the  plaintiffs  from  collecting  their  judgments,  the  funds 
receivable  having  been  exhausted  by  current  expenses.^  This 
right  to  reimburse  for  damages  caused  by  a  mob,  while  a  statu- 
tory right,  was  not  founded  upon  any  contract  of  the  city  and 
did  not  become  a  contract  by  being  merged  in  a  judgment,  the 
court  saying: 

"The  term  'contract'  is  used  in  the  Constitution  in  its  ordin- 
ary sense,  as  signifying  the  agreement  of  two  or  more  minds  for 
considerations  proceeding  from  one  to  the  other,  to  do  or  not 
to  do  certain  acts.  Mutual  assent  to  its  terms  is  of  its  very 
essence. ' ' 

§  92.  Tax  Exemption  Repealed  Under  General  Power  Re- 
served to  Amend  or  Repeal. — After  the  decision  in  the  Dart- 
mouth College  case,  holding  that  corporate  charters  are  con- 
tracts protected  by  the  Constitution,  the  practice  became  gen- 
eral in  the  States  of  inserting  in  corporate  charters,  whether 
contained  in  special  acts  or  in  general  corporation  laws,  the 
reservation  of  the  power  to  alter,  amend  or  repeal.  Where,  in 
a  charter  granting  an  exemption  from  taxation,  such  reserva- 
tion is  made,  whether  it  is  contained  in  the  act  itself,  or  in  the 
State  statute  controlling  the  terms  of  the  act,  it  preserves  to  the 
State  the  right  of  amending  or  repealing  the  tax  exemption, 
whenever  the  public  interest  as  determined  by  the  legislature 
requires. 

Thus  in  a  case  from  South  Carolina,  where  the  immunity 
from  taxation  was  granted  by  an  amendment  of  the  original 


1  Louisiana  v.  Mayor  of  New  Orleans,  109  U.  S.  285,  27  L.  Ed.  937 
(1883). 


86  CONTRACTS   OP   EXEMPTION   FROM    TAXATION  §    92 

charter  of  the  railroad,  and  at  the  same  time  a  general  law 
of  the  State  was  in  existence,  providing  that  any  charter  sub- 
sequently granted,  or  any  renewal,  amendment  or  modification 
of  a  charter,  should  be  subject  to  amendment,  alteration  or 
repeal  by  legislative  authority,  the  court  said,^  that  the  original 
incorporators  and  the  subsequent  stockholders  took  their  inter- 
ests with  the  knowledge  of  the  existence  of  this  power  and  of  the 
possibility  of  its  exercise  at  any  time,  at  the  discretion  of  the 
legislature.  The  object  of  the  reservations,  just  as  is  true  of 
similar  reservations  in  other  charters,  was  to  prevent  a  grant  of 
corporate  rights  and  privileges  in  any  form  which  would  pre- 
clude legislative  interference  with  their  exercise,  if  the  public 
interest  should  at  any  time  require  such  interference.  The 
court  added  however,  as  to  the  effect  of  this  reserved  power,  at 
page  459 : 

''Rights  acquired  by  third  parties,  and  which  have  become 
vested  under  the  charter,  in  the  legitimate  exercise  of  its  powers 
stand  upon  a  different  footing;  but  of  such  rights  it  is  unneces- 
sary to  speak  here.  The  State  only  asserts  in  the  present  case 
the  power  under  the  reservation  to  modify  its  own  contract  with 
the  incorporators ;  it  does  not  contend  for  a  power  to  revoke  the 
contracts  of  the  corporation  with  other  parties,  or  to  impair  any 
vested  rights  thereby  acquired." 

This  ruling  has  been  followed  in  a  number  of  cases.^ 
Whether  an  exemption  from  State  taxation  has  been  repealed 
by  a  subsequent  State  statute  is  a  matter  of  State  law  upon 

iTomlinson  v.  Jessup,  15  Wall.  454,  21  L.  Ed.  204  (1873). 

2  Louisville  Water  Co.  v.  Clark,  143  U.  S.  1,  36  L.  Ed.  55,  affirming 
90  Ky.  915  (1892);  Railroad  Co.  v.  Maine,  96  U.  S.  499,  24  L.  Ed.  836 
(1878);  Hoge  v.  Railroad  Co.,  99  U.  S.  348,  25  L.  Ed.  303  (1879);  New 
York,  Etc.,  Railroad  Co.  v.  Bristol,  151  U.  S.  556,  38  L.  Ed.  269  (1894), 
affirming  62  Conn.  527.  In  the  last  case  the  court  repeated  what  had 
been  said  in  previous  cases,  p.  567:  That  a  power  reserved  to  the 
legislature  to  alter,  amend  or  repeal  charters,  authorizes  it  to  make 
any  alteration  or  amendment  of  a  charter  granted  subject  to  it,  which 
will  not  defeat  or  substantially  impair  the  object  of  the  grant  or  any 
rights  vested  under  it  and  which  the  legislature  may  deem  necessary 
to  secure  that  object  or  any  public  right.  The  power  of  alteration  and 
amendment  is  not  without  limitation,  but  must  be  in  good  faith  and 


§    93  CONTRACTS   OP   EXEMPTION    FROM    TAXATION  87 

which  the  decisions  of  the  highest  courts  of  the  State  in  the 
absence  of  any  errors,  are  binding  upon  the  Federal  courts.^ 

§  93.  Tax  Exemptions  Strictly  Construed.— A  contract  for 
exemption  from  taxation  must  not  only  be  founded  upon  a  con- 
sideration, but  it  must  be  clearly  stated  and  will  not  be  inferred 
from  facts  which  do  not  irresistibly  point  to  the  existence  of  a 
contract.  2  This  principle  has  been  applied  in  numerous  eases. 
Thus  the  exemption  of  a  railroad  from  taxation  does  not  extend 
to  the  branches  of  the  road  constructed  under  a  subsequent  act.-  3 
The  exemption  of  the  property  and  effects  of  a  railroad  com- 
pany does  not  extend  to  property  other  than  that  used  in  the 
business  of  the  company,  nor  to  the  land  of  the  company.  4 
Where  a  bank  was  to  pay  an  annual  tax  upon  its  shares,  which 
was  to  be  in  lieu  of  all  other  taxes,  and  it  was  authorized  to  hold  ♦ 
real  estate  sufficient  for  its  place  of  business,  the  immunity  from 
taxation  extended  only  to  so  much  of  the  building  as 
was  required   for   the   actual   wants  of  the  bank.^      Where  the 

consistent  with  the  specified  object  of  the  charter.  See  Jackson,  J., 
afterwards  Justice  of  the  Supreme  Court  in  Hill  v.  Railroad  Co.,  41 
Fed.  610;  San  Joaquin  &  Kangs  River  Co.  v.  Stanislaus  County, 
113  Fed.  930,  in  the  Circuit  Court  Northern  District  of  California; 
Shields  v.   Ohio,  95  U.   S.  319,  24  L.  Ed.  357    (1877). 

See  also  Northern  R.  R.  Co.  v.  Maryland,  187  U.  S.  258,  47  L.  Ed.  167 
(1902),  affirming  93  Md.  737,  where  a  statute  fixing  the  rate  of  taxation 
in  the  settlement  of  a  pending  controversy  was  held  subject  to  the 
State  Constitution  reserving  the  power  to  repeal,  alter,  or  amend  cor- 
porate charters. 

1  Wycomico  Co.  Com.  v.  Bancroft,  203  v:  S.  102,  51  L.  Ed.  112,  re- 
versing 135  Fed.  977   (1906). 

2  Wells  V.  Savannah,  181  U.  S.  531,  45  L.  Ed.  986  (1901),  affirming 
107  Ga.  1. 

3  C.  B.  &  Kansas  City  R.  Co.  v.  Guffey,  120  U.  S.  569,  30  L.  Ed  732 
(1887),  affirming  89  Mo.  523;  Ford  v.  Delta  &  Pine  Land  Co,  164  U  S 
662,  41  L.  Ed.  590  (1897),  affirmin,g  43  L.  Ed.  181  (1897);  Southwestern 
R.  Co.  V.  Wright,  116  U.  S.  231,  29  L.  Ed.  626,  affirming  68  Ga.  311  (1885) 
Wilmington  &  Weldon  R.  Co.  v.  Alsbrook,  146  U.  S.  279,  36  L  Ed  97'>' 
(1892),  affirming  110  N.  C.  137. 

4  Ford  V.  Delta  &  Pine  Land  Co.,  supra;  Tucker  v.  Ferguson,  supra; 
Railroad  Co.  v.  Loftin,  105  U.  S.  258,  26  L.  Ed.  1042  (1882) 

5  Bank  V.  Tennessee,  104  U.  S.  493,  26  L.  Ed.  801  (1882). 


88         CONTRACTS  OP  EXEMPTION  FROM  TAXATION       §  94 

exemption  from  taxation  is  limited  in  time,  or  is  to  continue  only 
until  the  happening  of  a  certain  event,  as  the  completion  of  the 
railroad,  such  limitation  is  strictly  enforced.^ 

An  exemption  for  a  definite  time  is  equivalent  to  the  express 
power  to  tax  after  that  time.2 

§  94.    "Immunity"  and  "Privilegfe"  Disting-uished. — The 

later  decisions  of  the  court  in  requiring  that  the  contract  of 
exemption  must  be  clearly  stated,  are  materially  more  stringent. 
It  was  said  by  the  court,^  1.  c.  page  179 : 

"It  cannot  be  denied  that  the  decisions  of  this  court  are  some- 
what involved  in  relation  to  this  question  of  exemption.  It  is 
difficult  in  some  cases  to  distinguish  the  language  used  in  each 
so  far  as  the  results  arrived  at  by  the  court  can  be  seen  to  be 
founded  on  a  real  difference  in  the  meaning  of  such  language." 

In  this  case  the  plaintiff  had  been  chartered  with  "all  the 
rights  and  privileges"  of  another  company,  which  in  turn, 
had  been  granted  "all  the  rights,  privileges  and  immunities" 
of  a  third  company,  the  last  having  a  limited  exemption  from 
taxation.  The  court  said  that  this  did  not  give  the  first  named 
company  any  exemption.  Exemption  from  taxation  is  more 
accurately  described  as  an  "immunity"  than  as  a  "privi- 
lege," and  the  later  opinions  of  the  court  show  that  there 
must  be  other  language  than  the  mere  word  "privilege,"  or 
other  provisions  in  the  statute  removing  all  doubt  as  to  the 
intention  of  the  legislature,  before  the  exemption  will  be  ad- 
mitted. The  court  conceded  that  some  of  its  earlier  decisions  are 
inconsistent  with  this  ruling. 4  It  laid  stress  in  this  case  upon 
the  absence  of  the  word  "immunity." 

In  another  case  decided  at  the  same  time  s      the  court  held 


1  Bailey  v.  Magwire,  22  Wallace  215,  22  L.  Ed.  850  (1874). 

2  Railroad  Co.  v.  Gaines,  97  U.  S.  697,  24  L.  Ed.  1091  (1878); 
Vicksburg  R.  Co.  v.  Dennis,  116  U.  S.  665,  29  L.  Ed.  770  (1885),  affirm- 
ing 34  La.  Ann.  954. 

3  Phoenix  Fire  &  Marine  Ins.  Co.  v.  Tennessee,  161  U.  S.  174,  40  L. 
Ed.  660  (1896). 

•*  Humphreys  v.  Pegues,  supra;  Tennessee  v.  Whitworth,  in^ra. 
5  Home  Insurance  Co.  v.  Tennessee,  161  U.  S.  198,  40  L.  Ed.  669 
(1896). 


§    97  CONTRACTS   OF   EXEMPTION   PROM    TAXATION  89 

that,  where  a  company  was  organized  wdth  "all  the  powers, 
rights,  reservations  and  liabilities  of  another  company,"  the 
former  was  not  entitled  to  the  limitation  of  taxation  provided 
in  the  charter  of  the  latter  company. 

Incorporating  a  railroad  company  with  power  to  exercise  all 
the  powers  and  privileges  conferred  by  an  earlier  act  incorporat- 
ing another  railway  company  does  not  confer  upon  the  new 
corporation  any  immunity  from  taxation  enjoyed  by  the  earlier 
company  under  its  charter.^ 

§  95.  Lost  by  Change  of  Corporate  Business. — So  also  an 
exemption  granted  to  a  corporation  for  the  transaction  of  a 
particular  business,  is  lost  by  a  charter  change  in  the  business 
accepted  by  the  corporation.  Thus  an  insurance  company  with 
a  chartered  limitation  of  taxation,  secured  a  change  of  its  cor- 
porate business  and  objects  to  those  of  a  bank.  Prior  to  this 
the  new  constitution  of  the  State  had  prohibited  all  exemption. 
This  change  from  insurance  to  banking  was  material  and  radical 
and  the  exemption  was  lost.^ 

§  96.  Lost  by  Repeal  Before  Incorporation  or  Issue  of 
Stock. — A  corporation  chartered  before  the  adoption  of  a  new 
constitution  but  not  actually  organized  until  after  its  adoption, 
was  subject  to  the  provisions  of  the  new  constitution,  which 
nullified  the  tax  limitation  contained  in  the  charter. 3 

And  new  stock  issued  after  the  adoption  of  a  constitution  for- 
bidding tax  exemptions  is  not  entitled  to  the  exemption  from 
taxation  granted  to  the  original  stockholders.^ 

§  97.  Tax  Exemption  is  a  Personal  Immunity. — A  contract 
of  tax  exemption  is  an  immunity  personal  to  the  grantee,  and 


1  Wright  V.  Georgia,  Etc.,  R.  R.  Co.,  216'  U.  S.  420,  54  L.  Ed.  544 
(1910),  modifying  the  decision  on  this  point  of  132  Fed.  912. 

2  Memphis  City   Bank  v.   Tennessee,  161   U.   S.   186.   40  L.  Ed.   664 
(1896). 

3  Planters'  Insurance  Co.  v.  Tennessee,  161  U.  S.  193,  40  L.  Ed.  667, 
affirming  95  Tenn.  203  (1896). 

4  Bank  of  Commerce  v.  Tennessee,  163  U.  S.  416,  41  L.  Ed.  211 
(1897). 


90  CONTRACTS   OP   EXEMPTION   PROM    TAXATION  §    97 

cannot  be  enforced  by  an  assignee  or  purchaser  at  foreclosure 
sale  or  otherwise,  unless  the  right  to  assign  such  immunity  is 
clearly  given  in  the  grant.^ 

Thus  in  the  case  of  a  railroad  corporation  exempted  from 
taxation  upon  its  property  and  purchased  at  sale  in  foreclosure 
by  a  company  declared  by  statute  to  succeed  to  all  the  fran- 
chises, rights  and  privileges  of  the  first  company,  the  immunity 
from  taxation  did  not  pass  to  the  purchaser.  2  It  was  urged 
that  it  passed  under  the  word  ''franchise;"  but  on  this  point  the 
court  said,  quoting  Morgan  v.  Louisiana,  93  U.  S.  217,  223,  1.  c. 
page  185 : 

"Much  confusion  of  thought  has  arisen  in  this  ease  and  in 
similar  cases  from  attaching  a  vague  and  undefined  meaning  to 
the  term  'franchises.'  It  is  often  used  as  synonymous  with 
rights,  privileges,  and  immunities,  though  of  a  personal  and 
temporary  character ;  so  that,  if  any  one  of  these  exists,  it  is 
loosely  termed  a  'franchise,'  and  is  supposed  to  pass  upon  a 
transfer  of  the  franchises  of  the  company.  But  the  term  must 
always  be  considered  in  connection  with  the  corporation  or 
property  to  which  it  is  alleged  to  appertain.  The  franchises  of 
a  railroad  corporation  are  rights  or  privileges  which  are  essential 
to  the  operation  of  the  corporation,  and  without  which  its 
road  and  works  would  be  of  little  value ;  such  as  the  franchise 
to  run  cars,  to  take  tolls,  to  appropriate  earth  and  gravel  for 
the  bed  of  its  road,  or  water  for  its  engines,  and  the  like. 
They  are  positive  rights  or  privileges,  without  the  possession 
of  which  the  road  of  the  company  could  not  be  successfully 
worked.  Immunity  from  taxation  is  not  one  of  them.  The 
former  may  be  conveyed  to  a  purchaser  of  the  road  as  part  of 
the  property  of  the  company ;  the  latter  is  personal  and  incapa- 
ble of  transfer  without  express  statutory  direction." 


11' Trask  v.  Maguire,  18  Wall.  391;  Morgan  v.  Louisiana,  93  U.  S, 
222,  23  L.  Ed.  860  (1876),  affirming  28  La.  Ann.  482;  Railroad  Co.  v. 
Hamblen,  102  U.  S.  273,  26  L.  Ed.  152  (1880);  Wilson  v.  Gaines,  103 
U.  S.  417,  26  L.  Ed.  401  (1881) ;  L.  &  N.  R.  R.  Co.  v.  Palmes.  109  U.  S. 
244,  27  L.  Ed.  922  (1883),  affirming  19  Fla.  231;  Memphis  Railroad  Co. 
v.  Commissioners,  112  U.  S.  609,  28  L.  Ed.  837  (1884),  affirming  41  Ark. 
436;  Picard  v.  Tennessee,  Etc.,  R.  Co.,  130  U.  S.  637,  32  L.  Ed.  1051, 
reversing  20  Fed.  614  (1889);  C.  &  O.  R.  R.  Co.  v.  Miller,  114  U.  S. 
176,  29  L.  Ed.  121  (1885),  affirming  19  W.  Va.  408. 

118  C.  &  O.  R.  R.  Co.  V.  Miller,  supra. 


§    99  CONTRACTS   OP   EXEMPTION    FROM    TAXATION  91 

§  98.  Exemption  not  Assignable. — The  rule  concerning  the 
transfer  of  an  immunity  from  the  exercise  of  tlie  governmental 
power,  was  thus  declared  by  the  Supreme  Court: 

''  'Although  the  obligations  of  such  a  contract  are  protected 
by  the  Federal  Constitution  from  impairment  by  the  State,  the 
contract  itself  is  not  property  which,  as  such,  can  be  transferred 
by  the  owner  to  another,  because,  being  personal  to  him  with 
whom  it  was  made,  it  is  incapable  of  assignment.  The  person 
with  whom  the  contract  is  made  by  the  state  may  continue  to 
enjoy  its  benefits  unmolested  as  long  as  he  chooses,  but  there  his 
rights  end,  and  he  cannot  by  any  form  of  conveyance  transmit 
the  contract  or  its  benefits,  to  a  successor.  .  .  .  But  the 
State,  by  virtue  of  the  same  power  which  created  the  original 
contract  of  exemption,  may  either  by  the  same  law,  or  by  subse- 
quent laws,  authorize  or  direct  the  transfer  of  the  exemption  to 
a  successor  in  title.  In  that  case  the  exemption  is  taken  not  by 
reason  of  the  inherent  right  of  the  original  holder  to  assign  it, 
but  by  the  action  of  the  State  in  authorizing  or  directing  its 
transfer.  As  in  determining  whether  a  contract  if  exemption 
from  a  governmental  power  was  granted,  so  in  determining 
whether  its  transfer  to  another  was  authorized  or  directed, 
every  doubt  is  resolved  in  favor  of  the  continuance  of  the  gov- 
ernmental power,  and  clear  and  unmistakable  evidence  of  the 
intent  to  part  with  it  is  required.'  "^ 

This  was  said  by  the  court  with  reference  to  an  exemption  of 
a  canal  company  from  a  paving  obligation,  and  it  was  held  that  a 
transfer  under  legislative  authority  of  the  "estate,  property, 
privileges,  and  franchises"  of  one  corporation,  did  not  vest  in 
the  transferee  the  freedom  from  exercise  of  governmental  power 
whicli  the  former  enjoyed  under  its  charter. 

This  language  was  subsequently  quoted  in  extevf^o  and  adopted 
by  the  court  as  "lucidly  stating"  the  rule  concerning  the  trans- 
fer of  rights  of  exemption  from  taxation.  ^ 

§  Of).    Exemption,  When  Applicable  to  Lessee  or  Assignee. 

While  the  law  is  thus  settled  tliat  tax  exemptions  or  tax  limita- 


1  Rochester  R.  Co.  v.  Rochester,  205  U.  S.  236,  51  L.  Ed.  784,  affirm- 
ing  182   N.    Y.   99,   70   L.   R.   A.   773    (1907). 

2  Morris  Canal  &  Banking  Co.  v.  Baird,  239  U.  S.  126,  60  L.  Ed.  177 
(1915). 


92  CONTRACTS   OF   EXEMPTION    FROM    TAXATION  §    100 

tions  are  personal  to  the  grantee,  that  is,  are  not  transferable  and 
do  not  run  with  the  property  unless  the  sovereign  granting  the 
exemption  has  explicitly  provided  otherwise,  it  is  also  a  well 
recognized  exception,  as  set  forth  in  the  preceding  section,  that 
this  exemption  may  be  extended  to  a  lessee  or  other  assignee  by 
the  authority  granting  the  same.  In  the  absence  of  such  authority 
in  case  of  a  lease  the  exemption  extends  only  to  the  interest 
of  the  lessor,^  and  in  such  case,  the  interest  of  the  lessee  is  sub- 
ject to  taxation  w^hen  the  law  provides  therefor.  Where,  how- 
ever, the  state  granting  the  exemption  directly  authorizes  the 
lease,  and  continues  thereafter  to  collect  taxes  under  the  limita- 
tion set  forth  in  the  original  charter,  where  that  provided  a 
distinct  limitation  of  the  tax,  and  this  practical  construction  was 
given  to  the  law  for  nearly  half  a  century,  the  court  said  that 
this  warranted  the  conclusion  that  the  exemption  extended  in 
favor  of  the  lessees  as  well  as  the  lessors.  ^ 

This  did  not  mean  that  the  exemption  in  tjie  charter  passed  by 
assignment  to  the  lessees,  or  that  the  property  was  exempted 
generally  into  whosever  hands  it  might  come. 

The  railway  property  exempted  from  other  than  a  specified 
tax  on  annual  income  in  the  possession  of  certain  railways, 
under  a  lease  permitted  and  encouraged  by  the  lessor's  charter, 
included  betterments  and  improvements  of  the  demised  road  ac- 
quired to  meet  the  necessities  of  its  business.3 

§  100.  Exemption  Not  Extended  to  Party  Not  Entitled  to 
Rely  Thereon. — Although  a  charter  contract  express  in  its  char- 
acter may  arise  from  the  acceptance  of  or  an  action  under  the  char- 
ter which  grants  such  exception,  the  principle  does  not  extend  to 
a  ease  where  incorporation  was  made  under  no  promise  of  such 
an  exemption  and  it  could  not  have  been  relied  upon,  in  under- 
taking the  work  for  which  the  company  was  organized.     This 


1  Jettson  V.  University  of  the  South,  208  U.  S.  582,  52  L.  Ed.  481 
(1908),  reversing  155  Fed.  182. 

2  Wright  v.  Central  of  Georgia  R.  Co.,  236  U.  S.  674,  59  L.  Ed.  781, 
affirming  206  Fed.  107. 

3  Wright  V.  L.  &  N.  R.  Co.,  286  U.  S.  687,  59  L.  Ed.  788    (1915), 
modifying  and  affirming  201  Fed.  1023. 


§  101      CONTRACTS  OP  EXEMPTION  FROM  TAXATION         93 

principle  was  applied  to  a  ease  where  a  statute  extended  to 
a  college  in  New  Jersey  the  privilege  which  had  been  granted 
to  another  institution  which  had  been  exempted  from  taxation. 
This,  however,  was  at  a  time  when  an  act  was  in  force  provid- 
ing that  any  charter  should  be  subject  to  alteration,  suspension 
and  repeal  in  the  discretion  of  the  legislature.  The  court 
said  that  after  this  privilege  was  extended  to  the  Seton  Hall  Col- 
lege it  made  no  new  promises  and  assumed  no  new  burdens. 
The  Supreme  Court  therefore  affirmed  the  judgment  of  the 
State  court  that  no  repealable  contract  had  been  entered  into.* 

§  101.     Railroad  Consolidations  and  Tax  Exemptions. — 

This  principle  has  been  applied  in  numerous  cases  of  railroad 
consolidations.  If  the  consolidation  of  two  companies  does  not 
necessarily  work  a  dissolution  of  both  and  the  creation  of  a  new 
corporation,  and  the  two  companies  retain  their  original  status 
toward  the  public  and  the  State,  the  exemption  may  continue  as 
if  the  consolidation  had  not  taken  place,  limited  however,  to  the 
corporate  property  on  which  it  was  originally  granted^  ^ 

Thus  where  two  railroad  corporations,  whose  shares  are  by 
a  State  statute  exempt  from  taxation  in  the  State,  consolidate 
themselves  into  a  new  company  under  a  State  law  which  makes 
no  provision  to  the  contrary,  and  issue  shares  in  the  new 
company  in  exchange  for  shares  in  the  old  companies,  the 
same  exemption  applies.s 

The  same  exemption  applies  where  two  companies,  whose 
stock  was  exempt  in  one  State,  consolidated  with  a  third 
company  created  under  the  laws  of  another  State.  The  new 
stock  issued  is  exempt  from  taxation  in  the  former  State, 
in  the  absence  of  a  statute  there  to  the  contrary. 4     if  the  stock 


1  Seton  Hall  College  v.  Village  of  South  Orange,  supra,  Sees.  66,  76. 

2  Central  Railroad  &  Banking  Co.  v.  Georgia,  92  U.  S.  665,  23  L. 
Ed.  757,  reversing  54  Ga.  401  (1876);  Branch  v.  City  of  Charleston,  92 
U.  S.  677,  23  L.  Ed.  750  (1876). 

8  Tennessee  v.  Wliitworth,  117  U.  S.  129,  29  L.  Ed.  830,  affirming  22 
Fed.  75  (1885).  See  also  Tominson  v.  Branch,  15  Wall.  460,  21  L.  Ed. 
189  (1873). 

*  Tennessee  v.  Whitworth,  117  U.  S.  139,  29  L.  Ed.  833,  affirming  22 
Fed.  81  (1885). 


94  ■  CONTRACTS   OF   EXEMPTION   FROM    TAXATION  §    10^ 

of  only  one  of  the  roads  is  exempt,  however,  the  exemption  will 
be  limited  to  that  part  of  the  consolidated  road. 

But  where  the  company  enjoying  an  exemption  is  consolidat- 
ed with  another  and  dissolved  in  the  new  corporation,  so  that  a 
new  grant  of  the  corporate  franchise  is  made,  such  new  corpora- 
tion becomes  subject  to  the  provisions  of  the  State  statute  pro- 
hibiting exemptions.^ 

A  charter  exemption  from  taxation  which  has  ceased  and 
become  void  for  failure  to  construct  the  railroad  within  the  time 
required  by  its  charter  cannot  be  revived  by  subsequent  statute 
enacted  when  the  State  Constitution  prohibited  the  granting  of 
special  privileges  with  respect  to  taxation,  recognizing  the  legal 
existence  of  the  railroad  company  at  that  time  and  waiving  the 
right  to  declare  a  forfeiture.  ^ 

§  102.  Corporate  Exemption  Limited  to  Specific  Form  of 
Taxation. — ^In  a  series  of  cases  known  as  the  Tennessee  Bank 
and  Insurance  Cases,  the  subject  of  the  application  of  contract 
exemption  to  the  different  forms  of  corporate  taxation  was 
thoroughly  considered. 

Where  the  charter  of  a  bank  provided  that  it  should  pay  a  cer- 
tain tax  to  the  State  on  each  share  "which  should  be  in  lieu 
of  all  other  taxes,"  a  subsequent  law  imposing  an  additional  tax 
on  the  shares  in  the  hands  of  the  shareholders  was  void.  ^  The 
court  enumerated  in  its  opinion  some  of  the  different  subjects 
of  corporate  taxation,  and  said  that  this  enumeration  shows  the 
searching  and   comprehensive   taxation   to  which   such   institu- 


1  St.  Louis,  Iron  Mtn.  &  So.  R.  Co.  v.  Berry,  113  U.  S.  465,  28  L. 
Ed.  1055,  affirming  41  Arli.  509  (1884);  Railroad  Co.  v.  Georgia,  98  U. 
S.  359,  25  L.  Ed.  185  (1879);  Yazoo  &  Miss.  Val.  R.  Co.  v.  Adams,  181 
U.  S.  580,  45  L.  Ed.  1011  (1901);  Keokuk  &  Western  R.  R.  Co.  v.  Mis- 
souri, 152  U.  S.  301,  38  L.  Ed.  450,  affirming  99  Mo.  30   (1894). 

2  Great  Western  R.  R.  Co.  v.  Minnesota,  216  U.  S.  206,  54  L.  Ed.  446 
(1910),  affirming  106  Minn.  303.  See  also  Yazoo,  Etc.,  R.  R.  Co.  r. 
Vicksburg,  209  U.  S.  358,  52  L.  Ed.  833  (1908). 

3  Farrington  v.  Tennessee,  95  U.  S.  679,  24  L.  Ed.  558,  reversing 
8  Baxter  539  (1877) ;  three  judges  dissented,  holding  that  the  exemption 
was  of  the  stock  and  property  of  the  corporation  and  not  of  the  share- 
holders. 


§  103      CONTRACTS  OP  EXEMPTION  FROM  TAXATION         95 

tions  are  subjected  where  there  is  no  protection  by  previous  com- 
pact. In  another  ease,  Chief  Justice  Waite,  for  the  court, 
said  :^ 

"In  corporations  four  elements  of  taxable  value  are  soms- 
times  found :  1,  franchise ;  2,  capital  stock  in  the  hands  of  the 
corporation ;  3,  corporate  property ;  and  4,  shares  of  the  cap- 
ital stock  in  the  hands  of  the  indi\^dual  stockholders." 

§  103.  The  Property  of  Corporations  and  Shareholders  Dis- 
tingTiished  in  Contracts  of  Exemption. — The  disposition  of 
the  Supreme  Court  in  later  eases  to  construe  strictly  all  con- 
tracts of  exemption  is  illustrated  by  its  recognition  and  enforce- 
ment of  the  legal  fiction  of  the  distinction  between  the  property 
of  the  corporation  and  the  rights  of  the  shareholders  in  such 
property.  Thus,  the  court  said2  that,  although  there  were  ex- 
pressions  in  the  former  opinions  lending  color  to  another  view, 
there  is  a  distinction  between  the  capital  stock  of  a  corporation 
and  the  shares  of  stock  of  the  shareholders,  and  the  taxation  of 
one  is  not  the  taxation  of  the  other.  So,  where  the  charter  re- 
quired a  banking  corporation  to  pay  to  the  State  a  certain  annual 
tax  on  each  share  of  capital  stock,  which  should  be  in  lieu  of  all 
other  taxes,  it  was  held  that  while  this  limited  the  amount  of  tax 
on  each  share  of  stock  in  the  hands  of  the  shareholders,  it  did  not 
apply  to  nor  cover  the  case  of  the  capital  stock  of  the  corpora- 
tion or  its  surplus  or  accumulated  profits.  On  the  contrary 
such  capital  stock,  surplus  and  accumulated  profits  were  liable 
to  be  taxed  to  the  corporation  as  the  State  might  determine. 

It  was  claimed  that  a  different  ruling  had  been  made  in  the 
ease  of  Gordon  v.  Appeals  Tax  Court,  supra,  page  47,  where  it 
was  said  with  reference  to  the  taxation  of  the  bank  and  the 
stockholders,  "the  aggregate  could  not  be  taxed  without  its  having 
the  same  effect  upon  the  parts  that  the  tax  upon  the  parts  would 
have  upon  the  whole."  The  court  said  that  there  was  a  difference 
in  the  language  of  the  charter  in  the  two  cases. 


1  Tennessee  v.  Whitworth,  117  U.  S.  136,  supra. 

2  Shelby  County  v.  Union  &  Planters'  Bank,  161  U.  S.  149;  40  L.  Ed. 
650  (1896) ;  Union  &  Planters'  Bank  r.  Memphis,  49  C.  C.  A.  455. 


96  CONTRACTS   OP   EXEMPTION   FROM    T.VXATION  §    104 

''Giving  to  the  Gordon  ease  the  full  weight  of  authority  for 
the  point  actually  decided,  it  does  not  hold  that  language,  such 
as  we  have  in  the  case  under  consideration,  operates  to  exempt 
both  the  capital  stock  of  the  corporation  and  the  shares  of  stock 
in  the  hands  of  its  shareholders  from  all  taxation  beyond  that 
mentioned  in  the  charter,  and  we  are  entirely  unwilling  to  un- 
necessarily extend  the  authority  of  that  case  so  as  to  cover  the 
question  here.  "^ 

The  same  principle  has  been  applied  when  the  capital  of 
the  bank  has  been  exempted  from  taxation,  so  that  this  ex- 
emption did  not  extend  to  the  property  right  of  the  share- 
holders. 2 

The  act  of  Michigan  of  1911  imposing  a  tax  on  the  owners 
of  stocks,  bonds  and  other  evidences  of  indebtedness  of  spe- 
cially chartered  railroads  and  requiring  the  railroads  to  pay  the 
tax  and  to  deduct  the  same  from  the  interest,  was  held  to  impair 
the  contract  liability  between  the  railroad  company  and  the 
holders  of  its  securities.  3 

§  104.  Capital  Stock  and  Surplus  of  Corporations. — In  an- 
other case,  the  charter  provided  for  a  tax  of  a  certain  amount 
on  each  share  of  stock,  which  should  be  in  lieu  of  all  other  taxes, 
and  the  court  said*  that  this  only  limited  the  amount  of  tax 
on  each  share  of  stock  in  the  hands  of  the  shareholders,  and  did 
not  prevent  the  taxation  of  the  surplus  of  the  corporation. 

The  court  said  that  the  surplus  is  corporate  property,  and  as 
distinct  from  the  capital  stock  in  the  hands  of  the  corporation. 
The  exemption  was  not  greater  in  its  scope  than  the  subject  of 
the  tax,  it  said,  and  added,  page  147 : 

"Recognizing,  as  we  do,  that  there  is  a  different  property  in 
that  which  is  described  as  capital  stock  from  that  which  is  des- 
cribed as  corporate  property  other  than  capital  stock,  and  re- 
membering the  necessity  there  is  for  a  clear  expression  of  the 


1  Mr.  Justice  White  dissenting.     42   L.  Ed.   202,  reversing  54  Fed. 
73   (1897). 

2  New  Orleans  v.  Citizens'  Bank,  167  U.  S.  371;  Tennessee  v.  Whit- 
worth,  22  Fed.  Rep.  75. 

s    Detroit,  Etc.,  R.  R.  Co.  v.  Fuller,  205  Fed.  86   (1913). 
*  Bank  of  Commerce  v.  Tennessee,  161  U.  S.  134,  supra. 


§  106      CONTRACTS  OF  EXEMPTION"  FROM  TAXATION         97 

intention  to  exempt  before  the  exemption  will  be  granted,  we  must 
hold-  that  the  surplus  has  not  been  granted  exemption  by  the 
clause  contained  in  the  charter  under  discussion.  The  very  name 
of  surplus  implies  a  difference.  There  is  capital  stock  and  there 
is  a  surplus  over,  above  and  beyond  the  capital  stock,  which  sur- 
plus is  the  property  of  the  bank  until  it  is  divided  among 
stockholders. '  '^ 

§  105.  Special  Assessments. — The  State  of  Arkansas  in  or- 
der to  encourage  the  reclamation  of  swamp  and  overflow  lands, 
provided  that  they  should  be  exempt  from  taxation  for  the  term 
of  ten  years,  or  until  they  should  be  reclaimed,  and  issued  trans- 
ferable scrip  receivable  in  payment  for  them.  Subsequently 
they  were  subjected  to  both  general  and  special  taxes.  The 
Supreme  Court  held  that  the  exemption  was  valid  as  to  both 
forms  of  taxation,  and  that  the  repeal  impaired  a  contract  made 
with  the  holders  of  the  scrip  issued  by  the  State.  It  said  that  the 
law  itself  contemplated  the  building  of  levees  and  drains,  and  the 
exemption  was  intended  to  be  exemption  from  taxation  there- 
for. 2  But  it  was  held  in  a  later  case  ^  that  this  case  was  decided 
on  its  special  facts,  because  special  taxes  were  in  contemplation 
of  the  parties  in  making  the  contract  of  exemption,  and  that  it 
was  competent  for  the  State  to  exempt  any  particular  property 
from  the  burden  of  either  kind  of  taxation.  But  an  exemp- 
tion from  taxation  as  a  rule  relates  only  to  the  burden  of  ordin- 
ary taxes,  and  does  not  include  the  cost  of  local  improvements. 

§  106.  The  Impairment  of  the  Obligation  of  Private  Con- 
tracts.— "While  the  litigated  cases  concerning  the  legislative  im- 
pairment of  the  obligation  of  contracts  relate,  as  a  rule,  to 
legislative  contracts  of  exemptions  from  taxation,  the  consti- 
tutional protection,  of  course,  extends  to  all  contracts.  It  was 
held  by  the  Supreme  Court  that  the  obligation  of  a  contract  of 
employment  by  a  non-resident  meat  packing  house  to  the  resi- 


8  As  to  enforcing  the  fiction  of  the  distinct  property-rights  of  the 
corporation  and  sliareholders  in  respect  to  the  taxation  of  Federal 
securities,  see  supra,  Sec.  19. 

2  McGee  r.  Mathis,  4  Wallace  143. 

1  111.  Central  R.  Co.  v.  Decatur,  147  U.  S.  204,  37  L.  Ed.  132  (1893). 


98  CONTRACTS   OP   EXEMPTION    PROM    TAXATION  §    106 

dent  managing  agent  at  a  weekly  wage  was  not  substantially  im- 
paired by  the  imposition  upon  him  in  the  Georgia  act  of  Decem- 
ber, 1900,  of  a  license  tax  of  $200.00  upon  the  domestic  business 
carried  on  by  liim.'^ 

A  contract  of  exemption  from  municipal  taxation  cannot  be 
deduced  from  the  covenant  of  a  perpetual  leaseholder  that  his 
municipal  lessor  is  to  pay  the  taxes  which  are  to  become  due  on 
the  land,  although  the  municipality  possesses  no  power  of  tax- 
ation when  the  lease  was  made.2 

The  reduction  of  the  estate  resulting  from  the  imposition  of 
a  transfer  tax  under  the  authority  of  the  amendment  to  the 
general  transfer  tax  law  of  1897,  upon  which  exercise  by  wnll  of 
the  power  of  assessment  conferred  by  a  deed  executed  prior  to 
the  passage  of  the  act,  does  not  involve  the  impairment  of  the 
obligation  of  a  contract.3 


1  Kehrer  v.  Stewart,  197  U.  S.  60,  49  L.  Ed.  663,  affirming  117  Ga. 
969,  decided  1905,  the  court  saying  the  claim  was  hardly  worthy  of 
serious  consideration. 

2  J.  W.  Perry  Co.  v.  Norfolk,  220  U.  S.  472,  54  L.  Ed.  548,  affirming 
108  Va.  35  (1910).  • 

3  Chandler  v.  Kelsy,  205  U.  S.  466,  51  L.  Ed.  882  (1907). 


CHAPTER    III. 

REGULATION   OP    COMMERCE. 

§  107.  Express  restraint  upon  taxing  power  of  State. 

108.  Necessity  for  national  control  over  commerce. 

109.  Mr.  Madison  on  necessity  of  national  control  of  commerce. 

110.  National  control  of  commerce,  the  comprehensive  limitation. 

111.  Gibbons  v.  Ogden. 

112.  Brown  v.  Maryland, 

113.  Original  package  rule. 

114.  License  tax  on  importer  also  void  as  regulation  of  commerce. 

115.  Regulation  of  commerce  during  non-action  of  Congress. 

116.  Freedom  of  interstate  commerce. 

117.  Consent  of  Congress  to  State  regulation. 

118.  Judicial  construction  of  "arrival"  in  State. 

119.  Duties  on  imports  relate   only  to  foreign  imports. 

120.  Woodruff  v.  Parham. 

121.  Importations  from  other  States  taxable  in  original  packages. 

122.  Tax  must  be  without   discrimination. 

123.  Taxability  of  goods  from  other  States  not  affected  by  Leisy  v. 

Hardin. 

124.  Original  packages  in  interstate  commerce  as  to  State  police 

authority. 

125.  What  is  an  original  package? 

126.  Theory  of  exemption  of  original  packages  from  State  laws. 

127.  The  definition  of  "Original  Package"  reaffirmed. 

128.  Exemption   only   extends   to   importer. 

129.  Form  of  tax  is   immaterial. 

130.  Intent  to  export  is  insufficient  to  exempt  from  taxation. 

131.  Property  in  commercial  transit. 

132.  Coe  V.   Errol. 

133.  Products  moved  in  Interstate  Commerce  may  be  given  a  tax- 

able situs  in  State. 

134.  Same  rule  in  interstate  as  in   foreign  shipments. 

135.  Termination  of  commercial  transit. 

136.  Inheritance   tax   on    aliens   not   tax   on    exports. 

137.  License  tax  on  foreign-exchange  broker  not  tax  on  exports. 

138.  State  taxing  power  in  relation  to  imports  and  exports. 

139.  State  tax  on  alien  passengers  is  void. 

140.  State  inspection   laws  and   interstate   commerce. 

(99) 


100  REGULATION    OP    COMMERCE  §    IQg 

"The  Congress  shall  have  power  ...  to  regulate  commerce 
with  foreign  nations  and  among  the  several  States  and  with  the 
Indian  tribes."  Const.  U.  S.,  Art.  I,  Sec.  8,  Par.  3. 

"No  State  shall,  without  the  consent  of  Congress,  lay  any  imposts  or 
duties  on  imports  or  exports,  except  what  may  be  absolutely  necessary 
for  executing  its  inspection  laws;  and  the  net  produce  of  all  duties  and 
imports  laid  by  any  State  on  imports  or  exports  shall  be  for  the  use  of 
the  treasury  of  the  United  States;  and  all  such  laws  shall  be  subject  to 
the  revision  and  control  of  the  Congress."  Const.  U.  S.,  Art.  I,  Sec.  10, 
Par.  2. 

§  107.    Express  Restraint  Upon  Taxing  Power  of  State. — 

The  strong  feeling  of  jealousy  against  the  national  power  w^hich 
confronted  the  framers  of  the  Constitution  is  illustrated  in  the 
fact  that  the  only  specific  restraint  upon  the  taxing  power  of 
the  States,  that  against  imposts  or  duties  on  imports  and  exports, 
is  qualified  by  the  provision  that  such  imposts  or  duties  may  be 
laid  with  the  consent  of  Congress  and  for  the  benefit  of  the 
national  treasury.  This  qualified  right  to  the  States  of  levy- 
ing duties  and  imposts  may  have  been  adopted  as  one  of  the 
compromises  of  the  Constitution  in  overcoming  the  strong  objec- 
tion made  by  the  States  to  the  power  of  internal  taxation 
given  to  Congress.  But  whatever  the  purpose,  it  has  proven 
wholly  superfluous,  as  no  such  duties  and  imposts  have  been  laid 
since  the  foundation  of  the  government.  In  view  of  the  tre- 
mendous development  of  national  commerce,  it  seems  unlikely 
that  this  power  will  ever  be  exercised. 

§  108.    Necessity  for  National  Control  Over  Commerce.— 

The  necessity  for  national  control  over  commerce,  both  inter- 
state and  foreign,  was  the  immediate  occasion,  and  indeed  the 
moving  purpose,  in  the  adoption  of  the  Constitution  of  the 
United  States.    In  the  words  pf  Chief  Justice  Marshall  :^ 

''From  the  vast  inequality  between  the  different  States  of  the 
confederacy  as  to  the  commercial  advantages,  few  subjects  were 
viewed  with  deeper  interest,  or  excited  more  irritation,  than  the 
manner  in  which  the  several  States  exercised,  or  seemed  dis- 
posed to  exercise,  the  power  of  laying  duties  on  imports.  From 
motives  which  were  deemed  sufficient  by  the  statesmen  of  that 

iBrown  v.  Maryland,  12  Wheat,  420,  1.  c.  438,  6  L.  Ed.  678  (1827). 


§    109  REGULATION   OF    COMMERCE  101 

day,  the  general  power  of  taxation,  indispensably  necessary  as  it 
was,  and  jealous  as  the  States  were  of  any  encroachment  on  it, 
was  so  far  abridged  as  to  forbid  them  to  touch  imports  or  ex- 
ports, with  the  single  exception  which  has  been  noticed.  Why 
are  they  restrained  from  imposing  these  duties?  Plainly  be- 
cause, in  the  general  opinion,  the  interest  of  all  would  be  best 
promoted  by  placing  that  whole  subject  under  the  control  of 
Congress." 

In  Cook  V.  Pennsylvania,!  Justice  Miller  in  the  opinion  of 
the  Court  says: 

"A  careful  reader  of  the  history  of  the  times  which  im- 
mediately preceded  the  assembling  of  the  convention  that  framed 
the  American  Constitution  cannot  fail  to  discover  that  the 
need  of  some  equitable  and  just  regulation  of  commerce  was 
among  the  most  influential  causes  which  led  to  its  meeting. 
States  having  fine  harbors  imposed  unlimited  tax  on  all  goods 
reaching  the  continent  through  their  ports.  The  ports  of  Bos- 
ton and  New  York  were  far  behind  Newport,  in  the  State  of 
Rhode  Island,  in  the  value  of  their  imports;  and  that  small 
State  was  paying,  all  the  expenses  of  her  government  by  the 
duties  levied  on  the  goods  landed  at  her  principal  ports.  And 
so  reluctant  was  she  to  give  up  this  advantage,  that  she  refused 
for  nearly  three  years  after  the  other  twelve  original  States 
had  ratified  the  Constitution  to  give  it  her  assent. 

"In  granting  to  Congress  the  right  to  regulate  commerce 
wath  foreign  nations,  and  among  the  several  States,  and  with 
the  Indian  tribes,  and  in  forbidding  the  States  without  the 
consent  of  that  body  to  levy  any  tax  on  imports,  the  framers 
of  the  Constitution  believed  that  they  had  sufficiently  guarded 
against  the  dangers  of  any  taxation  by  the  States  which  -would 
interfere  with  the  freest  interchange  of  commodities  among  the 
people  of  the  different  States,  and  by  the  people  0*  the  States 
with  citizens  and  subjects  of  foreign   governments." 

§  109.  Mr.  Madison  on  Necessity  of  National  Control  of 
Commerce. — The  necessity  of  giving  the  central  government 
the  control  over  foreign  commerce  seems  to  have  been  con- 
ceded, even  by  the  opponents  of  the  Constitution.  It  was  pointed 
out  by  :Mr.  Madison  in  the  Federalist^  that    the  national  control 

197  U.  S.  566,  1.  c.  p.  574,  24  L.  Ed.  1015    (1879). 
2 Federalist,  No.  42. 


102  REGULATION    OF    COMMERCE  §    110 

over  interstate  eommerce  was  essential  to  make  the  control 
over  foreign  commerce  complete  and  effectual.  Thus  he  said 
(pp.  -262-263)  : 

"The  defect  of  power  in  the  existing  confederacy  to  regu- 
late the  commerce  between  its  several  members,  is  in  the  number 
of  those  which  have  been  clearly  pointed  out  by  experience.  To 
the  proofs  and  remarks  which  former  papers  have  brought  into 
view  on  this  subject,  it  may  be  added  that  without  this  supple- 
mental provision,  the  great  and  essential  power  of  regulating 
foreign  commerce  would  have  been  incomplete  and  ineifectual. 
A  very  material  object  of  this  power  was  the  relief  of  the  States, 
which  import  and  export  through  other  States,  from  the  im- 
proper contributions  levied  on  them  by  the  latter.  Were  these 
at  liberty  to  regulate  the  trade  between  State  and  State,  it  must 
be  foreseen  that  ways  would  be  found  out  to  load  the  articles 
of  import  and  export,  during  the  passage  through  their  juris- 
diction, with  duties  M^hich  would  fall  on  the  makers  of  the  lat- 
ter and  the  consumers  of  the  former.  We  may  be  assured  by 
past  experience,  that  such  a  practice  would  be  introduced  by 
future  contrivances;  and  both  by  that  and  a  common  knowl- 
edge of  human  affairs,  that  it  would  nourish  unceasing  animosi- 
ties, and  not  improbably  terminate  in  serious  interruptions  of 
the  public  tranquility.  To  those  who  do  not  view  the  question 
through  the  medium  of  passion  or  of  interest,  the  desire  of  the 
commercial  States  to  collect,  in  any  form,  an  indirect  revenue 
from  their  uncommercial  neighbors,  must  appear  not  less  im- 
politic than  it  is  unfair;  since  it  would  stimulate  the  injured 
party,  by  resentment  as  well  as  interest,  to  resort  to  less  con- 
venient channels  for  their  foreign  trade.  But  the  mild  voice  of 
reason,  pleading  the  cause  of  an  enlarged  and  permanent  inter- 
est,^ is  but  too  often  drowned,  before  public  bodies  as  well  as  in- 
dividuals, by  the  clamors  of  an  impatient  avidity  for  immediate 
and  immoderate  gain." 

.§  110.     National  Control  of  Commerce,  the  Comprehensive 

Limitation. — ^Although  the  regulation  of  commerce  was  thus 
the  great  moving  cause  for  the  adoption  of  the  Constitution, 
and  was  thoroughly  discussed  in  the  proceedings  of  the  conven- 
tion and  in  the  Federalist,  we  find  in  neither  any  reference  to 
any  possible  interference  with  the  taxing  power  of  the  States 
growing  out  of  such  regulation.  The  far-reaching  importance 
of  national  control  over  interstate  and  foreign  commerce  was 


§    111  REGULATION    OP    COMMERCE  103 

not,  and  could  not  be,  foreseen.  Tf  there  had  been  no  provision 
in  the  Federal  Constitution  specifically  restraining  the  States 
from  levying  duties  or  imposts  on  imports  and  eixports,  such 
limitation  would  have  been  implied,  and  would  necessarily  have 
grown  out  of  the  exclusive  power  given  to  Congress  to  regulate 
such  commerce.  This  is  clearly  shown  by  the  reasoning  in  Mc- 
Culloch  V.  Maryland  and  Brown  v.  ]\Iaryland.  In  like  manner, 
the  power  to  levy  duties  upon  foreign  commerce  would  possibly 
be  held  included  in  the  grant  to  Congress  of  exclusive  jurisdic- 
tion over  such  commerce. 

The  important  and  comprehensive  limitation  upon  the  taxing 
power  of  the  States  therefore  is  that  which  is  implied  from  and 
grows  out  of  the  control  given  by  the  Constitution  to  Congress 
over  interstate  and  foreign  commerce.  As  to  the  latter,  we  have 
the  express  prohibition  against  levying  duties  on  imports  or  ex- 
ports, and  also  the  implied  limitation  growing  out  of  the  national 
control  over  foreign  commerce.  Commerce  with  foreign  nations 
includes  importing  and  exporting,  and  a  State  tax  on  imports 
or  exports  is  necessarily  an  interference  with  foreign  commerce. 
Thus,  the  great  leading  case  of  Brown  v.  Maryland,  infra,  is  de- 
cided upon  both  of  these  grounds. 

§  111.  Gibbons  v.  Ogden. — The  relation  of  the  commerce 
clause  of  the  Constitution  to  the  taxing  power  of  the  State  can- 
not be  understood  without  a  clear  apprehension  of  the  judicial 
construction  of  that  clause,  and  this  begins  with  the  great 
opinion  of  Chief  Justice  Marshall  in  Gibbons  v.  Ogden.i  In  this 
opinion,  as  in  that  of  McCulloch  v,  Maryland,  he  cites  no  authori- 
ties, for  there  were  none  to  cite.  The  grant  by  the  State  of  New 
York  of  the  exclusive  right  to  navigate  the  waters  of  that  State 
with  boats  propelled  by  fire  or  steam  was  held  void,  on  the 
ground  that  it  was  against  the  coasting  license  granted  by  Con- 
gress, and  was  an  interference  with  commerce  between  the 
States. 

The  opinion  gave  a  broad  and  comprehensive  construction  of 
the  term  "commerce,"  which  has  been  the  basis  of  all  subsequent 


19  Wheaton,  1,  6  L.  Ed.  23   (1824). 


104  REGULATION    OF    COMMERCE  §    112 

adjudications.  The  Constitution  is  one  of  enumeration,  and  not 
of  definition.  The  power  to  regulate  is  the  power  to  prescribe 
the  rules  by  which  commerce  is  to  be  governed,  and  this  power, 
like  all  others  vested  in  Congress,  is  complete  in  itself,  may  be 
exercised  to  its  utmost  extent,  and  acknowledges  no  limitations 
other  than  are  prescribed  in  the  Constitution. 

As  to  the  extent  of  the  power  of  Congress  in  regulating  com- 
merce with  foreign  nations,  it  was  said  it  would  be  very  useless 
if  it  did  not  pass  State  lines.  The  commerce  of  the  United 
States  with  foreign  nations  was  that  of  the  whole  United  States. 
If  Congress  had  the  power  to  regulate  commerce,  that  power 
must  be  exercised  wherever  this  subject  existed. 

It  was  argued  there  was  a  concurrent  power  to  regulate  com- 
merce among  the  States  as  there  was  a  concurrent  power  over 
internal  affairs  vested  in  the  State  and  Federal  governments.  But 
the  court  said  that  the  two  grants  were  not  similar  in  their  terms 
or  nature.  In  imposing  taxes  for  State  purposes,  the  States 
were  not  doing  what  Congress  was  empowered  to  do,  but  when 
the  State  proceeded  to  regulate  commerce  with  foreign  nations, 
or  among  the  several  States,  it  was  exercising  the  very  power 
granted  to  Congress  and  doing  the  very  thing  which  Congress 
was  authorized  to  do. 

The  Court  said  therefore  that  in  any  case  of  conflict  in  the 
regulation  of  commerce,  the  act  of  Congress  was  supreme  and 
the  law  of  the  State,  though  enacted  in  the  exercise  of  powers 
not  controverted,  must  yield  to  it.  It  was  conceded  that  com- 
merce between  the  several  States  was  restricted  to  that  which 
concerned  more  than  one,  as  that  internal  commerce  completed 
in  the  State  could  be  considered  as  reserved  for  the  regulation 
of  the  State  itself. 

§  112.  Brown  v.  Maryland.— The  first  application  of  these 
clauses  of  the  Constitution  to  the  taxing  power  of  the  State  was 
in  1837  in  the  case  of  Brown  v.  Maryland,  wherein  another  great 
opinion  of  Chief  Justice  Marshall  declared  the  line  of  limitation 
between  the  exercise  of  State  and  Federal  authority.  In  McCul- 
loch  v.  Maryland,  the  exemption  from  State  taxation  of  the 
means  employed  by  the  general  government  had  been  declared; 


§    112  REGULATION   OF   COMMERCE  105 

and  in  this  case  the  same  principle  of  Federal  supremacy  was 
extended  to  justify  the  limitation  of  a  State's  taxing  authority 
by  the  national  control  over  commerce. 

The  State  of  Maryland  passed  an  act  requiring  every  im- 
porter of  foreign  merchandise  to  take  out  a  license,  paying 
therefor  fifty  dollars.  Conviction  under  the  act  was  sustained 
by  the  Court  of  Appeals  of  Maryland,  but  it  was  declared  un- 
constitutional by  the  Supreme  Court,  and  the  requirement  of  a 
license  for  conducting  the  business  of  an  importer  was  held  to 
come  within  the  prohibition  of  a  tax  on  imports,  and  to  be  also 
an  attempted  regulation  of  commerce.!  As  to  the  limitation  of 
the  State's  taxing  power  by  the  paramount  control  of  Congress 
over  commerce,  see  supra,  Section  9.  Commenting  upon  the  cir- 
cumstances attending  the  adoption  of  the  Constitution,  the  court 
said,  1.  c,  p.  438 : 

"From  the  vast  inequality  between  the  different  States  of  the 
confederacy,  as  to  commercial  advantages,  few  subjects  were 
viewed  with  deeper  interest,  or  excited  more  irritation,  than  the 
manner  in  which  the  several  States  exercised,  or  seemed  dis- 
posed to  exercise,  the  power  of  laying  duties  on  imports."     .     , 

In  reply  to  the  argument  that  the  abuse  of  power  was  not  to 
be  apprehended,  it  was  said,  1.  c,  p.  439 : 

"Questions  of  power  do  not  depend  on  the  degree  to  which  it 
may  be  exercised.  If  it  may  be  exercised  at  all,  it  must  be  exer- 
cised at  the  will  of  those  in  whose  hands  it  is  placed.  If  the  tax 
may  be  levied  in  this  form  by  a  State,  it  may  be  levied  to  an  ex- 
tent which  will  defeat  the  revenue  by  impost,  so  far  as  it  is 
drawn  from  importE^tions  into  the  particular   State."     .     .     . 

It  was  urged  that  the  tax  was  not  upon  the  import,  but  upon 
the  importer.  But  the  Court  said  it  was  simply  varying  the 
form  without  varying  the  substance.  A  tax  on  the  occupation 
of  an  importer  was  a  tax  on  the  importation,  and  must  be  paid 
in  the  end  by  the  consumer,  or  by  the  importer  himself.  This  the 
State  had  no  right  to  do  because  i)rohibited  by  the  Constitution. 


112  Wheat.  419,  supra  §98.  The  case  was  argued  for  Maryland  by 
Mr.  Taney,  afterwards  the  successor  of  Chief  Justice  Marshall,  and  by 
Reverdy   Johnson. 


106  REGULATION    OF    COMMERCE  §    113 

It  was  also  iii'f?ed  that  as  the  word  "export"  means  to  take 
goods  out  of  the  country,  so  does  "import"  mean  only  to  bring 
goods  in.  As  to  this  the  court  said  that  the  United  States  had 
the  same  right  to  tax  occupations  as  was  possessed  by  the  States. 
The  right  to  import  includes  the  right  to  sell,  and  a  license  upon 
the  business  of  importer  is  a  tax  upon  the  right  to  sell  and 
therefore  prohibited. 

§  113.  Original  Package  Rule. — The  court  admitted  the 
difficulty  of  setting  a  definite  time  when  the  taxing  power  of  the 
State  should  begin,  but  fixed  it  as  beginning  when  the  original 
package  in  which  the  goods  have  been  imported  is  broken  up  or 
sold,  and  thus  was  laid  down  the  ' '  original  package  rule, ' '  which 
has  been  the  subject  of  so  much  judicial  discussion.  On  this 
point  the  court  said,  at  p.  441 : 

"The  constitutional  prohibition  on  the  States  to  lay  a  duty  on 
imports,  a  prohibition  which  a  vast  majority  of  them  must  feel 
an  interest  in  preserving,  may  certainly  come  in  conflict  with 
their  acknowledged  power  to  tax  persons  and  property  within 
their  territory.  The  power,  and  the  restriction  on  it,  though 
quite  distinguishable  when  they  do  not  approach  each  other,  may 
yet,  like  the  intervening  colors  between  white  and  black,  ap- 
proach so  nearly  as  to  perplex  the  understanding,  as  colors  per- 
plex the  vision  in  marking  the  distinction  between  them.  Yet 
the  distinction  exists,  and  must  be  marked  as  the  cases  arise. 
Till  they  do  arise,  it  might  be  premature  to  state  any  rule  as  being 
universal  in  its  application.  It  is  sufficient  for  the  present  to 
say,  generally,  that  when  l^he  importer  has  so  acted  upon  the 
thing  imported,  that  it  has  become  incorporated  and  mixed  up 
with  the  mass  of  property  in  the  country,  it  has,  perhaps,  lost 
its  distinctive  character  as  an  import,  and  has  become  subject 
to  the  taxing  power  of  the  State ;  but  while  remaining  the  prop- 
erty of  the  importer,  in  his  warehouse,  in  the  original  form  or 
package  in  which  it  was  imported,  a  tax  upon  it  is  too  plainly 
a  duty  on  imports  to  escape  the  prohibition  in  the  Constitution."'! 


cChief  Justice  Taney,  the  successor  of  Chief  Justice  Marshall,  who 
appeared  in  this  case  as  counsel  for  the  State  of  Maryland,  in  his 
opinion  in  the  License  Cases,  5  Howard,  504,  said  at  page  575,  12  L.  Ed. 
288   (1847);   concerning  this  "original  package"  rule: 

"I  argued  the  case  in  behalf  of  the  State,  and  endeavored  to  main- 
tain that  the  law  of  Maryland,  which  required  the  importer  as  well  as 


§    114  REGULATION    OP    COMMERCE  107 

§  114.  License  Tax  on  Importer  also  Void  as  Regulation 
of  Commerce. — The  court  held  further  that  the  act  imposing 
a  license  was  also  void  as  au  attempted  regulation  of  commerce. 
Any  charge  on  the  introduction  of  the  article  into  the  country, 
and  its  incorporation  with  the  mass  of  the  property  therein, 
must  he  hostile  to  the  power  of  Congi^ss,  since  an  essential  part 
of  its  regulation  and  the  principal  object  of  it  is  to  prescribe 
the  regular  means  for  accomplishing  that  introduction  and  in- 
corporation. This  could  not  abridge  the  acknowledged  power  of 
a  State  to  tax  its  own  citizens,  because  that  power  is  subject  to 
the  paramount  authority  of  Congress.  On  the  historical  setting 
of  the  commerce  clause  and  the  occasion  of  its  adoption,  it  was 
said,  1.  c,  p.  445 : 

"The  oppressed  and  degraded  state  of  commerce  previous  to 
the  adoption  of  the  Constitution  can  scarcely  be  forgotten.  It 
was  regulated  by  foreign  nations  with  a  single  view  to  their  own 
interests;  and  our  disunited  efforts  to  counteract  their  restric- 
tions were  rendered  impotent  by  want  of  combination.  'Congress 
indeed  possessed  the  power  of  making  treaties ;  but  the  inability 
of  the  federal  government  to  enforce  them  had  become  so  appar- 
ent as  to  render  that  power  in  a  great  degree  useless.  Those  who 
felt  the  injury  arising  from  this  state  of  things,  and  those  who 
were  capable  of  estimating  the  influences  of  commerce  on  the 
prosperity  of  nations,  perceived  the  necessity  of  giving  the  con- 
trol over  this  important  subject  to  a  single  government.  It  may 
be  doubted  whether  any  of  the  evils  proceeding  from  the  feeble- 


other  dealers  to  take  out  a  license  before  he  could  sell,  and  for  which 
he  ^Yas  to  pay  a  certain  sum  to  the  State,  was  valid  and  constitutional; 
and  certainly  I  at  that  time  persuaded  myself  that  I  was  right,  and 
thought  the  decision  of  the  Court  restricted  the  powers  of  the  State 
more  than  a  sound  construction  of  the  Constitution  of  the  United 
States  would  warrant.  But  further  and  more  mature  reflection  has 
convinced  me  that  the  rule  laid  down  by  the  Supreme  Court  is  a  just 
and  safe  one,  and  perhaps  the  best  that  could  have  been  adopted  for 
preserving  the  right  of  the  United  States  on  the  one  hand,  and  of  the 
States  on  the  other,  and  preventing  collision  between  them.  The  ques- 
tion, I  have  already  said,  was  a  very  difficult  one  for  the  judicial 
mind.  In  the  nature  of  things,  the  line  of  division  is  in  some  degree 
vague  and  indefinite,  and  I  do  not  see  how  it  could  be  drawn  more 
accurately  and  correctly,  or  more  in  harmony  with  the  obvious  inten- 
tion and  object  of  the  provisions  in  the  Constitution." 


108  REGULATION    OF    COMMERCE  §    115 

ness  of  the  federal  government  contributed  more  to  that  great 
revolution  which  introduced  the  present  system,  than  the  deep 
and  general  conviction  that  commerce  ought  to  be  regulated  by 
Congress.  It  is  not  therefore  matter  of  surprise,  that  the  gi^ant 
should  be  as  extensive  as  the  mischief,  and  should  comprehend 
all  foreign  commerce  and  all  commerce  among  the  States.  To 
construe  the  power  ,so  as  to  impair  its  efficacy,  would  tend  to  de- 
feat an  object,  in  the  attainment  of  which  the  American  public 
took,  and  justly  took,  that  strong  interest  which  arose  from  a 
full  conviction  of  its  necessity." 

§  115.  Regulation  of  Commerce  During"  Non-action  of  Con- 
gress.— In  Gibbons  v.  Ogden,  Congress  had  exercised  its  con- 
trol over  interstate  commerce  by  granting  a  coasting  license,  and 
the  decision  of  the  court  therefore  was  really  based  upon  the  in- 
validity of  the  exclusive  grant  by  the  State  of  New  York  as 
against  the  right  granted  by  Congress.  It  was  unnecessary 
therefore  to  decide  'the  extent  of  the  State's  right,  during  the 
non-action  of  Congress,  to  exercise  its  police  or  taxing  power, 
when  such  exercise  might  incidentally  affect  interstate  commerce. 
This  remained  a  vexata  quaesUoA 

Thus,  in  the  License  Cases,  decided  in  1847,  where  the  question 
before  the  court  was  as  to  the  validity  of  certain  prohibitive  or 
liquor  license  tax  laws  for  some  of  the  New  England  States, 
Chief  Justice  Taney  said,  at  p.  578  : 

"The  question,  therefore,  brought  up  for  decision  is,  whether 
a  State  is  prohibited  by  the  Constitution  of  the  United  States 
from  making  any  regulations  of  foreign  commerce  with  another 
State,  although  such  regulation  is  confined  to  its  own  territory, 
and  made  for  its  own  convenience  or  interest,  and  does  not  come 
in  conflict  with  any  law  of  Congress.  In  other  words,  whether 
the  grant  of  power  to  Congress  is  of  itself  a  prohibition  to  the 
States,  and  renders  all  State  laws  upon  the  subject  null  and 
void. ' ' 

All  of  the  judges  concurred  in  holding  the  State  laws  valid ; 
some  however  concurring  on  the  ground  that  the  license  laws 


iNew  York  v.  Miln,   11   Peters,   102,   9  L.   Ed.   648    (1837);    License 
Cases,  supra;  Passenger  Cases,  7  How.  283,  12  L.  Ed.  702  (1849). 


§    116  REGULATION    OP    COMMERCE  109 

were  merely  police  regulations,  although  they  might  incidentally 
affect  commerce. 

Later  the  rule  was  laid  down,  that  the  power  to  regulate  com- 
merce is  one,  which  includes  many  subjects,  various  and  quite 
unlike  in  their  nature ;  and  that  whenever  these  subjects  are  in 
their  nature  national  or  require  one  uniform  system  or  plan  of 
regulation,  they  may  be  justly  held  to  belong  to  that  class  over 
which  Congress  has  exclusive  power  of  regulation ;  but  that  local 
and  limited  matters,  not  national  in  their  nature,  as  pilotage  and 
the  like,  may  be  regulated  by  the  States  during  the  non-action  of 
Congress.  The  action  of  Congress,  however,  renders  void  such 
regulations  of  ithe  States  as  conflict  with  it.i 

§  116.  Freedom  of  Interstate  Commerce.— Finally,  nearly 
fifty  years  after  the  decision  in  Brown  v.  Maryland,  the  doctrine 
of  the  License  Cases  was  definitely  overruled  by  the  Supreme 
Court  and  the  rule  established,  that  where  the  subject  is  national 
in  its  character,  and  therefore  in  its  nature  requires  uniformity 
of  regulation  affecting  all  the  States,  e.  g.,  interstate  transporta- 
tion, including  the  importation  of  goods  from  one  State  into  an- 
other, Congress  alone  can  act,  and  its  non-action  means  that 
commerce  must  be  free.  This  ruling  was  made  with  reference 
to  the  importation  of  liquors  into  a  State,  where  the  sale  of  such 
liquors  was  prohibited.2  The  freedom  of  transportation  there 
declared  extends  to  the  goods  in  their  original  packages.  Thus 
the  ''original  package,"  as  first  introduced  in  Brown  v.  Mary- 
land in  reference  to  foreign  importations,  becomes  material  in 
interstate  commerce  in  limiting  the  police  power  of  the  State. 
In  Leisy  v.  Hardin  the  rule  is  thus  formulated  by  the  court : 

The  absence  of  any  law  of  Congress  on  the  subject  of  ecjuival- 
ent  to  its  declaration  that  commerce  in  that  matter  shall  be  free. 
Thus  the  absence  of  regulations  as  to  interstate  commerce  with 
reference  to  any  particular  subject  is  taken  as  a  declaration  that 
the  importation  of  that  article  into  the  States  shall  be  unre- 

iCooley  V.  Board  of  Wardens  of  Philadelphia,  12  Howard,  299,  3  L.  Edf 
996   (1851). 

2  Bowman  v.  Railway  Co.,  125  U.  S.  508,  31  L.  Ed.  700  (1887);  Leisy 
V.  Hardin,  135  U.  S.  100,  p.  119  and  cases  cited,  34  L.  Ed.  128  (1889). 


110  REGULATION    OF    COMMERCE  §    118 

stricted.  It  is  only  after  the  importation  is  completed,  and  the 
property  imported  has  mingled  with  and  become  a  part  of  the 
general  property  of  the  State,  that  its  regulations  can  act  upon 
it,  except  so  far  as  may  be  necessary  to  insure  safety  in  the  dispo- 
sition of  the  import  until  thus  mingled." 

§  117.    Consent  of  Congress  to  State  Regulation.  —  After 

the  decision  in  Leisy  v.  Hardin,  Congress  enacted  a  statute 
.known  as  the  Wilson  bill,  providing  that  liquors  transported  into 
any  State  or  Territory,  or  remaining  therein  for  use,  consump- 
tion, sale  or  storage,  shall,  upon  arrival  in  such  State  or  Territory, 
be  subject  to  the  operation  and  effect  of  its  laws,  enacted  in  the 
exercise  of  its  police  powers,  to  the  same  extent  and  in  the  same 
manner  as  though  such  liquors  had  been  there  produced,  "and 
shall  not  be  exempt  therefrom  by  reason  of  being  introduced 
therein  the  orginal  packages  or  otherwise."^  It  was  claimed 
that  the  act  was  invalid,  because  the  Constitution  guarantees 
freedom  of  commerce  among  the  States  in  all  things,  and  there- 
fore Congress  could  not  delegate  its  control  over  interstate  com- 
merce to  the  States.  But  the  court  said  at  page  561,  that  "in 
surrendering  their  own  power  over  external  commerce,  the  States 
did  not  secure  absolute  freedom  in  such  commerce,  but  only  the 
protection  from  encroachment  afforded  by  confiding  its  regula- 
tion exclusively  to  Congress." 

§  118.  Judicial  Construction  of  "Arrival"  in  State. — In 
a  later  ease, 2  the  court  construed  this  statute  as  not  applying 
to  goods  while  in  transit  in  the  State  before  delivery  to  the  con- 
signee. It  was  claimed  that,  if  the  act  was  construed  to  apply  to 
the  goods  the  -moment  they  reached  the  Iowa  line  and  before  the 
consummation  of  the  contract  of  shipment,  it  would  give  the 
statutes  of  Iowa  extra-territorial  operation  and  would  render  the 
Act  of  Congress  repugnant  to  the  Constitution.  But  the  court 
said  that  its  construction  of  the  statute,  according  to  which  "ar- 

126  Stats.  313,  e.  728.  This  act  was  approved  August  8,  1890,  and 
was  held  constitutional  by  the  Supreme  Court  in  In  re  Rahrer,  140 
U.  S.  545,  35  L.  Ed.  572    (1890). 

2  Rhodes  v.  Iowa,  170  U.  S.  412,  42  L.  Ed.  1088  (1897).  See  infra, 
section  125,  for  more  complete  statement. 


§    120  REGULATION    OP    COMMERCE  111 

rival"  meant  the  completion  of  the  shipment  by  delivery  to  the 
consignee,  rendered  it  unnecessary  to  consider  whether  if  the 
Act  of  Congress  had  submitted  the  right  to  make  interstate  com- 
merce shipments  to  State  control,  it  would  be  repugnant  to  the 
Constitution. 

§  119.    Duties  on  Imports  Relate  Only  to  Foreign  Imports. 

— Chief  Justice  ^Marshall  said  at  the  conclusion  of  the  opinion  in 
Brown  v.  Maryland : 

"It  may  be  proper  to  add,  that  we  suppose  the  principles  laid 
down  in  this  case,  to  apply  equally  to  importations  from  a  sister 
State.  We  do  not  mean  to  give  any  opinion  on  a  tax  discrimin- 
ating between  foreign  and  domestic  articles. ' ' 

The  tax  in  this  case,  it  will  be  remembered,  was  upon  the  busi- 
ness of  a  foreign  importer.  In  1860  a  stamp  tax  imposed  by  the 
State  of  California  upon  a  bill  of  lading  for  merchandise  shipped 
from  San  Francisco  to  New  York  was  held  to  be  in  effect  a  tax 
upon  exports,  and  therefore  invalid,  the  words  "imports  and  ex- 
ports" in  the  Constitution  being  assumed  to  include  importations 
from  one  State  into  another.  The  opinion  was  by  Chief  Justice 
Taney.^ 

But  in  1868  a  tax  levied  in  Mobile  upon  all  sales  of  merchandise 
was  claimed  to  be  invalid,  because  it  was  laid  on  the  sale  of  mer- 
chandise brought  from  other  States  while  it  remained  in  the 
original  packages.  It  was  urged  that  the  case  was  controlled  by 
the  Almy  case,  supra,  where  the  court  had  adopted  the  remark 
in  the  opinion  in  Brown  v,  j\Iaryland,  supra.  But  the  court  held, 
opinion  by  Justice  Miller,2  that  the  words  "imports  and  ex- 
ports" as  used  in  the  Constitution,  had  exclusive  reference  to 
foreign  trade,  and  the  State  tax  therefore  was  lawfully  levied. 

§  120.  Woodruff  v.  Parham. — With  reference  to  the  de- 
cision in  Brown  v,  Maryland,  the  court  said,  at  p.  130 : 

"That  decision  has  been  recognized  for  over  forty  years  as 
governing  the  action  of  this  court  in  the  same  class  of  cases ;  and 


lAlmy  V.  California,  24  Howard,  169,  16  L.  Ed.  644  (1860). 
8  Woodruff  v.  Parham.  8  Wallace,  123,  19  L.  Ed.  382  (1868). 


112  REGULATION   OF    COMMERCE  §    120 

its  reasoning  lias  been  often  stated  and  received  with  approba- 
tion in  others  to  which  it  is  applicable.  "We  do  not  now  propose 
to  question  its  authority  or  to  depart  from  its  principles.  The 
tax  of  the  State  of  Maryland,  whch  was  the  subject  of  the  con- 
troversy in  that  case,  was  limited  by  its  terms  to  importers  of 
foreign  articles  or  commodities,  and  the  proposition  that  we  are 
now  to  consider  is  whether  the  provision  of  the  Constitution  to 
which  we  have  referred  extends,  in  its  true  meaning  and  intent, 
to  articles  brought  from  one  State  of  the  Union  into  another. ' ' 

The  court  said  further  that  the  actual  remark  of  Chief  Justice 
Marshall  in  the  opinion  at  the  conclusion  of  Brown  v.  Maryland 
could  only  be  received  as  an  intimation  of  what  the  court  might 
have  decided,  if  such  a  case  had  ever  come  before  it,  and  the  re- 
mark might  have  referred  only  to  the  matter  of  discriminating 
taxes  in  domestic  commerce. 

The  case  of  Almy  v.  California,  supra,  was  also  declared  to 
have  involved  an  interference  with  interstate,  not  foreign,  com- 
merce, although  it  was  not  so  stated  in  the  opinion.  The  court 
added:  "We  take  it  to  be  a  sound  principle,  that  no  proposition 
of  law  can  be  said  to  be  overruled  by  a  court,  which  was  not  in 
the  mind  of  the  court  when  the  decision  was  made."  As  to  the 
License  Cases,^  the  court  said  it  was  very  doubtful  if  any  mate- 
rial proposition  was  decided,  though  the  precise  question  involved 
in  the  case  at  bar  was  before  the  court  and  seemed  to  require  solu- 
tion. The  words  ' '  imports  and  exports ' '  are  frequently  used  in  the 
Constitution  and  have  a  necessary  correlation,  and  the  same 
words  are  used  with  reference  to  the  taxing  power  of  'Congress. 
It  was  obvious  that  if  articles  brought  from  one  State  into  an- 
other were  exempt  from  taxation,  even  under  the  limited  circum- 
stances laid  down  in  Brown  v.  Maryland,  the  grossest  injustice 
must  prevail  and  equality  of  the  public  burden  ia  our  large 
cities  would  be  impossible.  The  application  of  this  original  pack- 
age rule  would  practically  exempt  from  all  taxatioTi  the  whole- 
sale merchants  who  bought  their  goods  in  original  packages.  2 


1  5  Howard,  504,  supra. 

2  Justice  Nelson  dissented,  claiming  that  the  absence  of  discrimina- 
tion would  be  entirely  worthless  as  a  protection  against  the  taxation 
of  interstate  commerce;   that  the  coal  of  Pennsylvania  could  be  taxed 


§    121  REGULATION    OF    COMMERCE  113 

§  121.  Impoii;ations  from  Other  States  Taxable  in  Original 
Packages. — The  original  package  rule,  therefore,  as  laid  down 
in  Brown  v.  JMaryland,  does  not  prevent  the  taxation  of  mer- 
chandise brought  into  one  State  from  another,  even  though  it 
reonains  in  the  original  packages.  In  this  respect  such  mer- 
chandise is  sharply  distinguished  from  foreign  goods  which  are 
exempt  from  taxation  while  in  the  original  packages  and  in  the 
hands  of  the  importer. 

In  later  cases  the  ruling  in  Woodruff  v.  Parham  has  been  re- 
affirmed. The  principle  was  applied  to  shipments  of  coal  from 
Pennsylvania  by  water  to  New  Orleans,  to  be  sold  in  open  market 
there.  It  was  held^  that,  though  still  on  the  river  at  New  Or- 
leans, it  was  intermingled  with  the  general  property  in  the  State 
and  subject  to  taxation,  although  it  might  be  sold  from  the  ves- 
sel, without  being  landed,  and  for  the  purpose  of  being  taken  out 
of  the  country  on  a  vessel  bound  for  a  foreign  jprt.  It  was  sub- 
ject to  the  taxing  power  of  the  State,  because  when  the  tax  was 
levied,  the  coal  was  held  in  New  Orleans  for  sale,  and  it  was  im- 
material that  thereafter  some  of  it  might  have  been  sold  for  ex- 
port. "A  duty  on  exports  must  either  be  a  duty  levied  on  goods 
as  a  condition,  or  by  reason  of  their  exportation,  or,  at  least,  a 
direct  tax  or  duty  on  goods  intended  for  exportation,  "2 

In  Brown  v.  Houston,  the  court  also  said,  at  pp.  633,  63-4 : 

"When  the  assessor  of  taxes  goes  his  round,  must  he  omit  from 
his  list  of  taxables  all  goods  which  have  come  into  the  city  from 
the  factories  of  New  England  and  New  Jersey,  or  from  the  pas- 
tures and  grain  fields  of  the  West  ?  If  he  must,  what  will  be  left 
for  taxation  ?  And  how  is  he  to  distinguish  between  those  goods 
which  are  taxable  and  those  which  are  not?  With  the  exception 
of  goods  imported  from  foreign  countries,  still  in  the  original 
packages,  and  goods  in  transit  to  some  other  place,  why  may  he 
not  assess  all  property  alike  that  may  be  found  in  the  city,  being 


ia  New  York,  the  salt  and  plaster  of  New  York  in  Pennsylvania,  the 
grain  and  flour  of  the  West  in  Massachusetts,  and  the  lumber  of  Wis- 
consin in  Illinois,  and  so  on. 

1  114  U.  S.  622,  29  L.  Ed.  257  (1884);  Pittsburgh,  etc..  Coal  Co.  v. 
Bates,  156  U.  S.  577,  39  L.  Ed.  538   (1894). 

2'The  court  added,  p.  629:  "WTiether  the  last  would  be  a  duty  on 
exports   it   is   not  necessary   to   determine." 


114  REGULATION   OF   COMMERCE  §    123 

there  for  the  purpose  of  remaining  there  till  used  or  sold,  and 
constituting  part  of  the  great  mass  of  its  commercial  capital — 
provided  always,  that  the  assessment  be  a  general  one,  and  made 
Avithout  discrimination  between  goods  the  product  of  New  York, 
and  goods  the  product  of  other  States  ? "     .     .     . 

§  122.    Tax  Must  be  Without  Discrimination.— But  the  tax 

must  be  without  discrimination  as  between  the  domestic  and  non- 
domestic  goods.  "While  property  brought  in  from  other  States, 
although  remaining  in  the  original  packages,  can  be  taxed,  it 
must  be  taxed  as  property  in  common  with  other  property  in  the 
State,  and  there  must  be  no  discrimination  against  it.  On  this 
point  the  court  said,  at  p.  634,  in  the  case  last  cited : 

''We  do  not  mean  to  say  that  if  a  tax  collector  should  be  sta- 
tioned at  every  ferry  and  railroad  depot  in  the  city  of  New 
York,  charged  with  the  duty  of  collecting  a  tax  on  every  wagon 
load,  or  car  load  of  produce  and  merchandise  brought  into  the 
city,  that  it  would  not  be  a  regulation  of,  and  restraint  upon  in- 
terstate commerce,  so  far  as  the  tax  should  be  imposed  on  ar- 
ticles brought  from  other  States.  We  think  it  would  be,  and  that 
it  would  be  an  encroachment  upon  the  exclusive  powers  of  Con- 
gress, It  would  be  very  different  from  the  tax  laid  on  auction 
sales  of  all  property  indiscriminately,  as  in  the  case  of  Wood- 
ruff v.  Parham,  which  had  no  relation  to  the  movement  of  goods 
from  one  State  to  another.  It  would  be  very  different  from  a 
tax  laid,  as  in  the  present  case,  on  property  which  had  reached 
its  destination,  and  had  become  part  of  the  general  mass  of  prop- 
erty of  the  city,  and  which  was  only  taxed  as  a  part  of  that  gen- 
eral mass  in  common  with  all  other  property  in  the  city,  and  in 
precisely  the  same  manner. 

"When  Confess  shall  see  fit  to  make  a  regulation  on  the  sub- 
ject of  property  transported  from  one  State  to  another,  which 
may  have  the  effect  to  give  it  a  temporary  exemption  from  taxa- 
tion in  the  State  to  which  it  is  transported,  it  will  be  time 
enough  to  consider  any  conflict  that  may  arise  between  such 
regulation  and  the  general  taxing  laws  of  the  State." 

§  123.  Taxability  of  Goods  from  Other  States  Not  Affected 
by  Decision  in  Leisy  v.  Hardin.— After  the  decision  of  the  Su- 
preme Court  in  Leisy  v.  Hardin,  supra,  wherein  the  whole  sub- 
ject of  the  power  and  jurisdiction  of  the  State  over  property 
brought  in  from  other  States  in  the  course  of  interstate  com- 


§    123  REGULATION    OP    COMMERCE  115 

merce  was  examined,  and  the  freedom  of  interstate  commerce  in 
the  absence  of  congressional  legislation  asserted,  the  court  was 
urged  to  overrule  Brown  v.  Houston,  on  the  ground  that  it  had 
been  in  effect  overruled  by  Leisy  v.  Hardin  and  other  later  deci- 
sions of  the  Supreme  Court.  In  this  case  the  coal,  which  had 
been  brought  down  the  river  from  Pittsburgh,  was  afloat  at  Baton 
Rouge  in  the  original  barges  in  which  it  had  been  exported  from 
Pennsylvania.  The  court,  however,  reaffirmed  its  decision.^  It 
said  that  as  the  coal  was  subjected  to  no  discrimination  in  favor 
of  the  products  of  Louisiana,  but  treated  in  exactly  the  same 
way,  the  tax  was  valid.  It  was  not  a  tax  imposed  upon  the  coal 
as  a  foreign  product,  nor  by  reason  of  its  being  brought  to 
Louisiana,  nor  while  it  was  in  a  state  of  transit  through  Louis- 
iana. 

This  subject  was  again  reviewed  in  American  Steel  &  Wire 
Co.  V.  Speed,2  when  the  court  reaffirmed  the  rule  declared  in 
Woodruff  V.  Parham  and  in  Brown  v.  Houston,  and  sustained  a 
merchant's  tax  in  Tennessee,  which  was  levied  upon  goods  which 
had  been  stored  in  the  original  packages  in  a  warehouse  and  de- 
livered therefrom  to  pui'chasers.  The  court  said  that  the  law 
on  this  subject  had  been  foreclosed  by  prior  decisions,  and  had 
in  no  wise  been  overruled  by  the  decision  in  Leisy  v.  Hardin  or 
Lyng  V.  Michigan.  The  court  said  that  in  these  cases  the  ques- 
tion involved  was  the  authority  of  the  State  to  prohibit  the  in- 
troduction of  goods  from  other  States.  These  cases,  therefore, 
related  only  to  the  assertion  of  State  authority  considered  there- 
in, that  is,  the  right  of  exclusion  in  the  exercise  of  the  police 
power  of  the  State. 

In  this  case  it  was  also  held  that  a  merchant's  licence  tax  of  the 
State  which  included  persons  doing  a  like  business  with  the  steel 
company,  involved  no  discrimination,  although  the  Tennessee 
Constitution  provided  that  no  article  manufactured  of  the  pro- 
duce of  the  State  should  be  taxed  otherwise  than  to  pay  inspec- 
*tion  fee,  where  the  highest  court  of  the  State  held  that  tliis 
provision  referred  only  to  a  direct  levy  of  taxation  upon  articles 

1  Pittsburgh  Coal  Co.  v.  Bates,  156  U.  S.  .577,  supra.  Sec.  121. 

2  192  U.  S.  500,  48  L.  Ed.  538    (1904),  affirming  67  S.  W.  806. 


116  REGULATION    OF    COMMERCE  §    124 

manufactured  of  the  produce  of  the  State,  and  that  the  mer- 
chant's tax  applied  e(iually  to  all  merchants.i 

§  124.  Original  Package  in  Interstate  Commerce  as  to 
State  Police  Authority. — It  will  be  observed  that  there  is  a 
distinction  between  the  taxing  power  of  the  State  and  its  police 
power  with  reference  to  the  original  packages  in  interstate 
shipments.  Under  the  rulings  referred  to,  Leisy  v.  Hardin  and 
Bowman  v.  Railway  Co.,  supra,  in  the  absence  of  legislation  by 
Congress,  commerce  between  the  States  must  be  free.  The  Stjite 
therefore  in  the  exercise  of  its  police  power  cannot  exclude  the 
products  of  other  States,  even  though  it  may  conclude  that  they 
are  injurious  to  its  people ;  but  when  these  products  are  admitted 
into  the  State  they  become  subject  to  its  taxing  poM^er  equally 
with  its  own  products.  Thus,  in  a  recent  case,^  the  act  of  the 
State  of  Pennsylvania  prohibiting  the  introduction  of  oleomar- 
garine from  another  State  and  its  sale  in  the  original  package 
was  held  void  as  an  interference  with  interstate  commerce.  It  was 
held  that  oleomargarine  is  a  lawful  article  of  commerce,  and  that, 
while  a  State  can  regulate  its  introduction  so  as  to  insure  purity, 
it  cannot  wholly  exclude  it.  The  right  of  the  importer  to  sell  in 
the  original  package  does  not  depend  upon  whether  such  package 
is  suitable  for  retail  trade  or  not.  The  court  said,  however,  at 
p.  24 : 

"We  do  not  say  or  intimate  that  this  right  of  sale  extended  be- 
yond the  first  sale  by  the  importer  after  the  arrival  of  the  oleo- 
margarine in  the  State. ' ' 

But  in  a  later  ease^  the  court  sustained  a  conviction  under 
the  laws  of  Tennessee,  for  the  sale  of  cigarettes  in  what  were 
claimed  to  be  original  packages,  on  the  ground  that  the  size  of 


iBut  see  Darnell  &  Son  Co.  v.  Memphis,  208  U.  S.  113,  52  L.  Ed. 
413  (1907);  holding  invalid  the  discrimination  in  Tennessee  exempt- 
ing property  produced  from  the  soil  of  Tennessee.    Sec.  136,  infra. 

2  Schollenberger  v.  Pennsylvania,  171  U.  S.  1,  43  L.  Ed.  49  (1897); 
Justices   Harlan   and   Gray   dissenting. 

3  Austin  V.  Tennessee,  179   U.  S.   343,   45  L.  Ed.  224    (1900). 


§    125  REGULATION    OF    COMMERCE  117 

the  package  was  such  as  to  indicate,  under  the  circumstances, 
that  it  was  prepared  for  the  purpose  of  evading  the  law. 

§  125.  What  is  an  Original  Package? — It  is  therefore  nec- 
essary to  determine  what  is  an  "original  package,"  in  regard 
both  to  importations  from  abroad  and  shipments  from  one  State 
to  another.  In  the  case  of  foreign  importations,  the  State  can- 
not exclude  nor  can  it  tax  either  the  business  or  the  import,  so 
long  as  the  latter  is  in  the  hands  of  the  importer  in  its  original 
package.  The  State  cannot  exclude  nor  prevent  the  sale  of  ship- 
ments from  another  State  in  the  original  packages,  but  it  can 
tax  them  when  they  come  under  the  jurisdiction  of  the  State, 
provided  it  does  so  without  discrimination  between  that 
and  the  other  property  of  the  State.  The  determination  of 
what  is  an  original  package  therefore  becomes  important,  both 
with  reference  to  the  police  and  taxing  authority  of  th,e 
State. 

In  a  case  from  Louisiana  the  Supreme  Court  held  that  the 
"original  package"  means  the  box  or  case  in  which  the  goods 
are  shipped,  and  not  the  package  in  which  they  were  placed  by 
the  manufacturer  and  manufactured,  and  before  they  were 
encased  in  the  larger  boxes  for  shipment,  i  Thus  packages  of 
lace,  household  linens,  etc.,  were  held  to  lose  their  exemption 
when  taken  out  of  the  boxes  or  cases  in  which  they  were  shipped. 
The  court  said  that  to  extend  the  exemption  to  the  manufactur- 
er's packages  would  mean  that  the  power  of  the  State  to  tax  im- 
ported goods  would  depend  upon  the  form  in  which  the  Euro- 
pean manufacturer  or  packer  shipped  them  to  this  country.  Thus 
if  he  shipped  fifty  Geneva  watches,  all  he  need  do  would  be  to 
put  each  watch  in  a  separate  case. 

In  the  Pennsylvania  oleomargarine  ease,  supra,  a  ten-pound 
package  of  oleomargarine  was  held  to  be  an  ''original  package." 
But  in  Austin  v.  Tennessee  the  paper  packages  containing  ten 
cigarettes  unboxed  or  thrown  loosely  into  baskets  were  held  not 


1  May  V.  New  Orleans,  178  U.  S.  496,  45  L.  Ed.  1165  (1899);  affirming 
51  La.  Ann.  1064,  four  judges  dissenting,  Chief  Justice  Fuller  and 
Justices  Brewer,  Shiras  and  Peckham. 


118  REGULATION    OP    COMMERCE  §    126 

to  be  ''original  packages"  within   the  meaning  of  the  court's 
decisions.^    Justice  Brown  in  the  opinion  says,  at  p'.  359  : 

' '  The  real  question  in  this  case  is  whether  the  size  of  the  pack- 
age in  which  the  importation  is  actually  made  is  to  govern  or 
the  size  of  the  package  in  which  bona  fide  transactions  are  car- 
ried on  between  the  manufacturer  and  the  wholesale  dealer  re- 
siding in  different  States.     We  hold  to  the  latter  view." 

And  after  describing  the  packages  he  says,  1.  c,  p.  361 : 

"And  yet  we  are  told  that  each  one  of  these  packages  is  an 
original  package,  and  entitled  to  the  protection  of  the  Constitu- 
tion of  the  United  States  as  a  separate  and  distinct  importation. 
We  can  only  look  upon  it  as  a  discreditable  subterfuge  to  which 
this  court  ought  not  to  lend  its  countenance.  If  there  be  any 
original  package  at  all  in  this  case,  we  think  it  is  the  basket  and 
not  the  paper  box.  "2 

§  126.  Theory  of  Exemption  of  Orig-inal  Packages  from 
State  Laws. — In  Austin  v.  Tennessee,  the  court  explained  the 
theory  of  the  exemption  in  the  original  package  as  based  upon 
the  idea  that  the  property  is  imported  in  the  ordinary  form  in 
which  from  time  immemorial  foreign  goods  have  been  brought 
into  the  country.  These  had  gone  into  the  hands  of  wholesale 
dealers  who  had  been  in  the  habit  of  breaking  up  the  packages 
and  distributing  their  contents  among  retail  dealers.  The  prac- 
tice had  grown  up  of  sending  goods  in  minute  packages  so  as  to 
bid  defiance  to  the  laws  of  the  States  "against  importation  and 
sale.  The  court  said  that  in  such  cases  the  original  package  rule 
had  no  application.     The  court  concluded  as  follows: 

''The  consequences  of  our  adoption  of  the  plaintiff's  conten- 
tion would  be  far-reaching  and  disastrous.     If  the  court  adopts 


1  In  this  case  Justice  White  concurred  in  a  separate  opinion,  and 
Justices  Brewer,  Shiras  and  Peckham  and  Chief  Justice  Puller  dissented. 

2  For  discussion  in  the  State  courts  of  what  is  an  "original  package" 
see  Commonwealth  v.  Schollenberger,  156  Pa.  201,  reversed  by  the  Su- 
preme Court,  supra;  State  v.  Parsons,  124  Mo.  436,  where  separate  medi- 
cine bottles  boxed  for  shipment  were  held  not  to  be  original  packages; 
Keith  V.  Alabama,  97  Ala.  32,  10  L.  R.  A.  430,  where  a  similar  ruling  was 
made  as  to  half-pint,  pint  and  quart  whisky  bottles. 


§    127  REGULATION    OF    COMMERCE  119 

the  contention  of  the  manufacturer  in  evading  the  laws  of  a 
sister  State,  we  should  be  compelled  to  recognize  anything  as  an 
original  package  of  beer  from  a  hogshead  to  a  vial,  anything  is  a 
package  of  cigarettes  from  an  importer's  case  to  a  single  paper 
box  of  ten,  or  even  a  single  cigarette,  if  imported  separately  and 
loose;  anything  from  a  bale  of  merchandise  to  a  single  ribbon, 
providing  only  the  dealer  sees  fit  to  purchase  his  stock  outside  of 
the  State  and  import  it  in  minute  quantities. ' '' 

§  127.    The  Definition  of  "Original  Package"  Reaffirmed. 

— In  Cook  V.  Marshall  County,-  the  Supreme  Court  reaffirmed 
this  definition  of  the  original  package  in  sustaining  a  tax  im- 
posed on  cigarette  selling  by  the  Iowa  Code  as  applied  to  sales 


1  Justice  White  in  his  concurring  opinion  said  that  if  he  thought 
either  the  opinion  or  the  conclusion  had  the  effect  of  weakening  the 
doctrine  upheld  by  Leisy  v.  Hardin,  135  U.  S.  100,  supra,  and  Rhodes 
V.  Iowa,  170  U.  S.  412,  supra,  he  would  be  unable  to  concur.  But 
under  all  the  circumstances  he  was  constrained  to  conclude  that  each 
particular  parcel  of  cigarettes  was  not  an  "original  package"  as  de- 
fined by  the  previous  adjudications  of  the  court.  Justice  Brewer  in 
his  dissenting  opinion,  concurred  in  by  Chief  Justice  Fuller  and  Jus- 
tices Shiras  and  Peckham,  said  that  the  case  was  reversed  on  the 
single  proposition  of  the  size  of  the  package  of  cigarettes,  and  that 
he  searched  the  Constitution  of  the  United  States  in  vain  for  any  inti- 
mation that  the  power  of  Congress  over  interstate  commerce  ceases 
when  the  packages  in  which  that  commerce  is  carried  are  of  any  par- 
ticular size.  And  on  page  381  he  said:  "Apparently  the  dividing  line 
as  to  the  size  of  packages  must  be  somewhere  between  that  of  a  ten 
pound  package  of  oleomargarine  and  that  of  a  package  of  ten  cigar- 
ettes; but  where?  Must  diamonds,  in  order  to  be  w'ithin  the  pro- 
tecting power  of  the  nation,  be  carried  from  State  to  State  in  ten-pound 
packages?"  And  on  the  suggestion  that  diamonds  are  not  a  subject 
of  police  regulation,  while  cigarettes  are,  he  says:  "Concretely  it 
amounts  to  this:  the  police  power  of  the  State,  the  power  exercised 
to  preserve  the  health  and  morals  of  its  citizens,  may  prevent  the  im- 
portation and  sale  of  a  pint  of  whisky,  but  cannot  prevent  the  importa- 
tion and  sale  of  a  barrel ;  or  in  other  words,  the  greater  the  wrong  which 
is  supposed  to  be  done  to  the  morals  and  health  of  the  community,  the 
less  the  power  of  the  State  to  prevent  it.  That  may  be  constitutional 
law,  but  to  my  mind  it  lacks  the  saving  element  of  common  sense." 
He  said  further  that  Chief  Justice  Marshall  had  said,  in  Brown  v. 
Maryland:  "'In  the  original  form  or  package  in  which  it  was  im- 
ported,' not  in  which  'it  might  have  been'  or  'ought  to  have  been  im- 
ported'    Obviously  it  did  not  occur  to  him  that  the  form  or  package 


120  REGULATION   OP    COMMERCE  §    128 

at  retail  of  packages  of  ten  cigarettes  in  small  pasteboard  boxes 
sealed  and  stamped  with  the  revenue  stamp  which  had  been 
shipped  loose  to  the  retailer  from  another  State  by  an  express 
company,  which  merely  issued  a  receipt  in  duplicate  showing 
the  number  of  the  packages  and  the  name  of  the  consignee,  the 
packages  not  having  separately  the  dealers'  address,  since  such 
a  box  could  in  no  sense  be  considered  an  original  package. 

The  court  reaffirmed  the  rule  declared  in  the  Austin  case.  The 
court  said  that  this  case  differed  from  the  Austin  ease  only  in 
the  fact  that  there  the  packages  were  thrown  loosely  into  baskets, 
and  it  was  argued  that  the  baskets  might  have  been  considered  as 
the  original  package;  that  this  method  as  well  as  that  dn  the 
Austin  case,  was  really  devised  for  evading  the  police  laws  of 
the  State. 

§  128.  Exemption  Only  Extends  to  Importer. — The  exemp- 
tion from  taxation  of  imported  goods  in  the  original  packages 
applies  only  in  favor  of  the  importer,  and  therefore  does  not  ex- 
tend to  the  goods,  even  while  they  are  in  the  original  packages 

which  the  importer  might  adopt  in  any  way  affected  the  power  of 
Congress  over  the  importation."  The  court,  he  continued,  should  not 
overlook  the  changes  in  the  modes  of  transportation.  At  the  time 
that  Chief  Justice  Marshall  wrote  the  opinion  in  Brown  v.  Maryland, 
transportation  was  carried  on  by  water  in  sailing  vessels,  and  on 
land  largely  in  lumber  wagons.  It  is  not  strange  that  at  that  time  all 
transportation  was  of  goods  packed  in  large  boxes,  securely  fastened  to 
prevent  accidents  from  the  rough  and  tumble  way  of  transportation. 
There  were  then  no  express  companies  for  the  carrying  of  small  pack- 
ages. All  that  mode  of  transportation  has  grown  up  in  this  country 
within  the  last  sixty  years.  But  the  express  companies  carrying  their 
small  packages  from  State  to  State  are  just  as  certainly  engaged  in 
interstate  commerce  as  the  old-fashioned  lumber  wagons  carrying 
commodities  between  the  same  places.  The  facilities  of  transportation 
are  increasing  rapidly,  and  with  them  the  cost  of  such  transportation 
is  diminishing,  so  that  more  and  more  will  it  be  true  that  the  small 
packages  will  be  the  frequent  subject  of  transportation  as  between 
State  and  State.  He  therefore  insisted  that  it  was  for  Congress,  and 
not  for  the  State,  to  make  modifications  in  the  rule,  if  circumstances 
required. 

2  196  U.  S.  261,  49  L.  Ed.  471   (1905);   affirming  119  Iowa  384.     The 
Chief   Justice,   and   Justices   Brewer   and   Peckham   dissenting. 


§    129  REGULATION   OF   COMMERCE  121 

after  they  have  been  sold  by  him.  Thus,  in  Waring  v.  the  Mayor  i 
goods  imported  in  the  original  packages  were  sold  while  still  on 
the  vessel,  which  was  anchored  in  the  harbor  waiting  for  the 
lighters  to  load  her  cargoes  and  carry  them  to  the  town.  They 
were  held  subject  to  taxation  as  the  property  of  the  purchaser, 
and  such  purchaser  could  be  taxed  upon  his  occupation  or  the 
amount  of  his  sales.  In  this  case  the  purchaser  was  in  the  habit 
of  buying  the  entire  cargo  and  selling  it  in  the  original  packages 
to  traders.  Merchandise  in  the  original  packages  when  once  sold 
by  the  importer  is  therefore  taxable  like  other  property,  provided 
of  course  it  is  taxed  without  discrimination,  as  it  has  lost  its  dis- 
tinctive character  as  an  import. 

Neither  does  an  exemption  apply  to  the  cash  on  hand  and 
notes  held  by  a  federal  corporation  doing  business  in  New  York 
as  importers,  though  these  were  the  proceeds  of  sales  of  imported 
goods  in  the  original  package.^  The  court  said  that  such  pro- 
ceeds were  not  exempted  from  ^tate  taxation.  They  had  lost 
their  distinctive  character  which  would  give  the  right  to  the 
protection  of  the  Federal  Constitution,  and  as  the  business  was 
carried  on  under  the  protection  of  the  laws  of  New  York,  the 
capital  was  subject  to  taxation  by  the  laws  of  that  State. 

§  129.  Form  of  Tax  is  Immaterial. — It  is  immaterial 
whether  the  tax  be  imposed  upon  the  goods  as  imports,  or  upon 
the  goods  as  part  of  the  general  property  of  the  importer  which 
is  subject  to  an  ad  valor-em  tax.^  So  the  exemption  extends  to 
the  goods  in  the  original  packages  in  the  warehouse  so  long  as 
they  remain  the  property  of  the  importer.  4  A  tax  is  likewise  in- 
valid which  is  laid  by  a  State  on  the  amount  of  sales  made  by 
an  auctioneer,  when  applied  to  the  imported  goods  in  the  original 
packages.  &  An  importer  has  the  right  not  only  to  sell  in  person, 
but  also  to  employ  an  agent  to  sell  for  him,  and  this  right  to  sell 

^8  Wallace,  110,  L.  Ed.  342   (1868). 

2  New  York  ex  rcl  v.  Wells,  208  U.  S.  12,  52  I..  Ed.  370  (1907),  affirm- 
ing 184  N.  Y.  275. 

3  Low  V.  Austin,  13  Wallace,  29,  20  L.   Ed.   517    (1871). 

4  Siegfried  v.  Raymond,  190  111.  424. 

5  Cook  V.  Pennsylvania,  97  U.  S.  566,  24  L.  Ed.  1015   (1879). 


122  REGULATION    OF    COMMERCE  §    131 

cannot  be  made  to  depend  upon  whether  the  original  package  is 
suitable  for  the  retail  trade  or  not,  provided  it  is  a  bona  fide 
package,  not  made  for  the  purpose  of  evading  the  law.  i 

In  Cook  V.  Pennsylvania,  the  court  held  that  a  tax  on  sales 
made  by  an  auctioneer  is  a  tax  on  the  goods  sold,  within  the 
terms  of  Waring  v.  The  Mayor,  and  indeed  of  all  the  decisions 
cited;  and  when  applied  to  foreign  goods  sold  in  the  original 
packages  by  the  importer,  before  they  become  incorporated  into 
the  general  property  of  the  country,  the  law  imposing  such  tax 
is  void  as  laying  a  duty  on  imports. 

§  130.  Intent  to  Export  is  Insufficient  to  Exempt  from  Tax- 
ation.— The  fact  that  capital  is  uniformly  and  continuously 
employed  in  the  business  of  purchasing  goods  for  exportation 
from  the  United  States  to  foreign  countries  is  not  sufficient  to 
avoid  an  assessment  on  the  ground  that  it  is  money  employed  in 
exportation,  if  such  capital  is  in  fact  on  hand  as  money  on  the 
day  the  assessment  is  made.  The  court  saids  that  as  it  did  not 
appear  that  the  capital  in  question  was  actually  invested  in 
goods  for  export  on  that  day,  it  was  not  necessary  to  decide  what 
would  have  been  the  effect  if  it  had  been  so  invested. 

§  131.  Property  in  Commercial  Transit. — The  same  prin- 
ciple applies  to  the  claim  of  exemption  from  taxation  on  the 
ground  that  property  is  actually  in  commercial  transit.  Prop- 
erty which  is  in  commercial  transit  through  a  State  has  no  situs 
for  taxation  therein,  whether  destined  for  another  State  or  for 
foreign  shipment.  Any  attempt  therefore  by  a  State  to  tax  such 
property  is  a  direct  interference  with  interstate  commerce.  But 
the  property  must  be  actually  in  transit.  Intent  to  export  prop- 
erty or  to  send  it  to  another  State  is  not  sufficient  to  exempt  it 
from  taxes. 

It  is  not  necessary  that  property  should  be  actually  on  the 
cars  or  steamers,  as  it  has  been  held  to  be  in  commercial  transit 
when  it  is  at  the  point  of  shipment  awaiting  loading.    Thus  also 

1  See  Schollenberger  v.  Pennsylvania,  and  Austin  v.  Tennessee, 
supra. 

2  People  V.  Commissioners,  104  U.  S.  466,  26  L.  Ed.  632   (1881). 


§    132  REGULATION   OF   COMMERCE  123 

delay  within  the  State  no  longer  than  is  necessary  for  convenient 
trans-shipment  to  its  destination  will  not  give  the  property  a 
situs  in  the  State,  so  as  to  su'bject  it  to  the  State's  taxing  laws,  i 
Where  corn  had  been  removed  from  its  place  of  production  and 
placed  temporarily  in  cribs  to  await  loading  on  cars  for  ship- 
ment, it  was  held  to  have  no  taxable  situs  as  property  of  the 
non-resident  owner.  2 

This  rule  was  applied  to  droves  of  sheep  where  they  were  driven 
from  State  to  State  by  way  of  transportation  to  a  market.  The 
court  said  that  the  incidental  grazing  did  not  appear  to  have 
been  material,  and  they  might  with  equal  propriety  be  taxed  in 
each  State  traversed.^ 

The  intent  to  export  is  not  sufficient.  4  The  goods  must  be 
actually  in  commercial  transit. 

§  132.  Coe  V.  Errol. — A  leading  and  illustrative  case  on 
this  poiilt  is  Coe  v.  Errol.  s  The  plaintiff,  a  resident  of  New 
Hampshire,  owned  spruce  logs,  drawn  down  during  the  winter 
before  from  the  mountains  of  New  Hampshire  to  the  banks  of  a 
stream  in  the  town  of  Errol,  New  Hampshire,  thence  floated 
down  the  river  in  the  spring  to  the  State  of  Maine.  It  was  held 
that  they  were  properly  appraised  for  taxation  in  Errol. 

The  court  decided,  opinion  by  Justice  Bradley,  that  the  pro- 
ducts of  a  State,  though  intended  for  exportation  and  partially 
prepared  for  that  purpose,  are  liable  to  be  taxed  like  other  prop- 
erty at  the  point  where  they  are  deposited,  and  that  they  are  not 
exempted  from  taxation  by  the  owner's  preparation  to  ship 
them ;  that  this  is  not  the  case  of  goods  in  course  of  transporta- 
tion through  a  State,  though  detained  for  a  time  therein  by  low 
water  or  other  causes.    When  the  products  of  the  farm  or  forest 


1  State  V.  Engle,  34  N.  J.  L.  425. 

2  Ogilvie  V.  Crawford  County,  U.  S.  Cir.  Ct.  of  Iowa,  7  Fed.  745. 
The  court  distinguished  the  case  of  Carrier  v.  Gordon,  21  Ohio  605,  as 
there  the  property  was  not  in  transit,  but  plaintiffs  intended  to  remove 
it  on  the  opening  of  navigation. 

8  Kelly  V.  Rhodes,  188  U.  S.  1,  47  L.  Ed.  359  (1903);  reversing  9 
Wyom.   352. 

*  Myers  v.  Baltimore  County  Commissioners,  83   Md.   385. 
5  116  U.  S.  517,  29  L.  Ed.  715   (1886). 


124  REGULATION    OF    COMMERCE  §    133 

are  collected  and  brought  in  from  the  surrounding  country  to  a 
town  or  station  serving  as  an  entrepot  for  that  particular  region, 
whether  on  a  river  or  railroad,  such  products  are  not  yet  in  pro- 
cess of  transportation,  but  they  are  a  part  of  the  general  mass 
of  property  in  the  State,  subject  to  its  jurisdiction,  in  the  same 
way  as  other  property  therein.  They  cannot  be  taxed  as  ex- 
ports; they  are  not  yet  exported  and  may  never  be  exported. 
The  mere  intention  to  export  is  not  sufficient.  The  court  de- 
clared that,  if  the  intention  to  export  were  sufficient,  in  many 
States  there  would  be  nothing  left  to  tax  but  real  estate,  and 
added,  1.  c,  p.  528 : 

''Carrying  it  from  the  farm,  or  the  forest,  to  the  depot  is  only 
an  interior  movement  of  the  property,  entirely  within  the  State, 
for  the  purpose,  it  is  true,  but  only  for  the  purpose,  of  putting  it 
into  a  course  of  exportation ;  it  is  no  part  of  the  exportation  it- 
self. Until  shipped  or  started  on  its  final  journey  out  of  the 
State,  its  exportation  is  a  matter  altogether  in  fieri,  and  not  at  all 
a  fixed  and  certain  thing." 

§  133.  Products  Moved  in  Interstate  Commerce  May  be 
Given  a  State  Taxable  Situs. — The  rule  declared  by  the  Su- 
preme Court  is  that  while  the  property  is  at  rest  for  an  inde- 
finite time  awaiting  transportation,  or  aw^aiting  at  sale  at  its 
place  of  destination,  or  at  an  intermediate  point,  it  is  subject  to 
taxation.  But  if  it  be  actually  in  transit  to  another  State,  it  be- 
comes a  subject  of  interstate  commerce  and  is  exempt  from  local 
assessment.! 

Thus  coal  shipped  from  Pennsylvania  and  dumped  on  the  dock 
in  New  Jersey  preliminary  to  trans-shipment  to  other  States, 
was  held  not  in  transit  under  interstate  commerce  and  therefore 
not  exempt  from  State  taxation. 2 

Grain  shipped  from  southern  and  western  States  under  con- 
tracts for  its  shipment  to  eastern  States  but  afterwards  pur- 
chased while  in  transit  by  a  resident  of  Illinois  with  the  intention 


1  Diamond   Match   Co.  v.   Ontonagon,   188   U,   S.   82,   47   L.   Ed..    394 
(1903). 

2  Susquehanna    Coal    Co.    v.    City    of    South   Amboy,    184    Fed.    941 
(1911). 


§    134  REGULATION   OP   COMMERCE  125 

to  foi'ward  it  promptly  according  to  shipping  directions,  after 
exercising  the  privilege  reserved  therein  of  removing  it  from  the 
cars  at  Chicago  for  inspection,  weighing  and  so  forth,  may  be 
assessed  for  local  taxation  while  actually  in  a  private  grain  ele- 
vator in  Chicago  to  which  it  had  been  removed  for  such  pur- 
poses, i  The  court  said  that  in  that  case  the  property  so  held 
within  this  State  should  be  held  for  the  owner  for  purposes  as- 
sumed to  be  beneficial,  and  as  it  was  not  in  actual  transportation, 
there  was  nothing  inconsistent  with  the  Federal  authority  in 
compelling  the  owner  to  bear  in  common  with  other  property  in. 
the  State  his  share  of  the  expenses  of  the  local  government. 

Oil  shipped  from  Pennsylvania  and  Ohio  and  destined  ulti- 
mately for  points  in  Arkansas,  Louisiana  and  Mississippi,  is  not 
property  in  interstate  commerce  so  as  to  be  exempt  from  state 
tax  or  inspection  laws,  while  it  is  held  at  a  distributing  point 
maintained  by  the  shipper  in  Tennessee,  at  which  point  such  oil 
is  unloaded  from  the  tank  cars  into  various  tanks,  barrels  and 
other  receptacles,  and  from  which  it  is  forwarded  to  its  final 
destination.  2 

It  was  declared,  however,  in  this  as  in  other  eases,  that  per- 
sonal property  which  is  in  transit  in  interstate  commerce  might 
not  be  subject  to  local  taxation  merely  because  the  owner  is  a 
resident  of  the  State  and  the  property  is  within  the  limits  of  the 
county  where  the  assessment  was  made. 

§  134.    Same  Rule  in  Interstate  as  in  Foreign  Shipments. — 

In  its  opinion  in  this  case  the  court  used  the  words  "export" 
and  "exportation"  in  reference  to  a  shipment  to  another  State, 
although  it  had  already  held  in  Woodruff  v.  Parham,  supra, 
that  the  terms  "imports"  and  "exports"  as  used  in  the  Consti- 
tution in  the  clause  under  consideration  referred  only  to  foreio-n 
shipments.  The  principle  is  obviously  the  same  whether  the 
shipments  are  intended  for  another  State  or  for  a  foreign  coun- 


1  Bacon  v.  Illinois,  227  U.  S.  504,  57  L,  Ed.  615  (1913);  affirming 
243  111.  313.  As  to  the  application  of  this  principle  to  traveling  cir- 
cuses see  Robinson  V.  Longley,  18  Nev.  71,  1  Pac.  377. 

2 General  Oil  Co.  v.  Grain,  52  L.  Ed.  754,  209  U.  S.  211  (1908); 
affirming  117  Tenn.  82. 


126  REGULATION   OF   COMMERCE  §    135 

try.  In  either  case  the  goods  must  be  actually  in  transportation 
or  awaiting  the  means  of  transportation  to  be  exempt  from  the 
taxing  power  of  a  State. 

In  a  ease  decided  at  the  following  term,i  the  principle  laid 
down  in  Coe  v.  Errol  was  considered  with  reference  to  the  pro- 
hibition upon  Congress  in  the  Constitution  against  taxing  ex- 
ports. The  court  held  that  an  excise  laid  on  tobacco  requiring  it 
to  be  stamped  before  it  is  removed  from  the  factory  is  not  a  duty 
on  exports,  even  though  the  tobacco  be  intended  for  exportation. 
It  stated  that  a  general  tax,  laid  on  all  property  alike,  and  not 
levied  on  goods  in  course  of  exportation,  nor  because  of  their 
intended  exportation,  is  not  within  the  constitutional  prohibi- 
tion. "How  can  the  officers  of  the  United  States,  or  of  the 
State,  know  that  goods  apparently  part  of  the  general  mass  and 
not  in  course  of  exportation,  will  ever  be  exported?  Will  the 
mere  word  of  the  owner  that  they  are  intended  for  exportation 
make  them  exports?  This  cannot  for  a  moment  be  contended. 
It  would  not  be  true  and  would  lead  to  the  greatest  frauds." 
And  the  court  added  at  p.  507 : 

''It  is  true,  as  was  conceded  in  Coe  v.  Errol,  that  the  prohibi- 
tion to  the  States  against  laying  duties  on  imports  or  exports  re- 
lated to  imports  from  and  exports  to  foreign  countries;  yet  the 
decision  in  that  case  was  based  on  the  postulate  that  when  such 
imposts  or  duties  are  laid  on  imports  or  exports  from  one  State 
to  another  it  amounts  to  a  regulation  of  commerce  among  the 
States,  and,  therefore,  is  an  invasion  of  the  exclusive  power  of 
Congress.  iSo  that  the  analogy  between  the  two  cases  holds  good, 
and  what  would  be  constitutional  or  unconstitutional  in  the  one 
case  would  be  constitutional  or  unconstitutional  in  the  other." 

§  135.  Termination  of  Commercial  Transit. — The  subject  of 
commercial  transit  was  considered  by  the  Supreme  Court  with 
reference  to  the  police  power  of  the  State,  the  particular  point 
in  issue  being  the  time  when  goods  shipped  into  a  State  become 
subject  to  its  police  laws.  It  was  helda  that  the  statute  of  Iowa 
making  it  a  misdemeanor  for  any  express  or  railway  company 


iTurpin  v.   Burgess,   117   U.    S.    504,   29   L.    Ed.    988    (1886). 
2  Rhodes  V.  Iowa,  170  U.  S.  412,  42  L.  Ed.  1088   (1898). 


§    136  REGULATION    OP    COMMERCE  127 

to  transport  any  intoxicating  liquors  from  one  place  to  another 
within  the  State,  without  being  furnished  a  certificate  from  the 
county  auditor  that  the  consignee  was  authorized  to  sell  such 
intoxicating  liquors,  could  not  be  applied  to  a  box  of  liquors 
shipped  by  rail  from  a  point  in  Illinois  to  a  citizen  of  Iowa  at  his 
residence  in  that  State,  while  in  transit  from  its  point  of  ship- 
ment to  its  delivery  to  the  consignee,  without  causing  the  Iowa 
law  to  be  repugnant  to  the  Constitution  of  the  United  States. 
Moreover,  moving  such  goods  in  the  station  from  the  platform  on 
which  they  were  put  on  arrival  to  the  freight  warehouse  was  a 
part  of  the  interstate  commerce  transportation.  The  court  in 
this  case  construed  the  Act  of  Congress  of  August  8,  1890,  supra, 
Section  117,  providing  that  liquors  transported  into  a  State 
should  upon  arrival  become  subject  to  its  laws.  The  court  said 
that  the  word  ''arrival"  did  not  mean  ari;ival  at  the  State  lines, 
but  arrival  at  their  destination  in  the  State  and  delivery  there 
to  the  consignee.  This  construction  of  the  statute  rendered  it  un- 
necessary to  consider  whether,  if  the  Act  of  Congress  had  sub- 
mitted the  right  to  make  interstate  commerce  shipments  to  State 
control,  it  would  be  repugnant  to  the  Constitution.!  Although 
this  decision  was  with  reference  to  the  police  power  of  the  State, 
the  reasoning  would  seem  equally  applicable  to  the  exercise  of  the 
taxing  power.  The  decision  turned,  not  upon  the  question  of 
what  constituted  an  original  package,  but  upon  whether  the 
commercial  transit  was  concluded.  As  it  was  not  ended  when 
it  was  in  the  freight  warehouse  of  the  railroad  company  await- 
ing delivery,  it  was  still  in  commercial  transit,  and  therefore 
not  subject  to  either  the  taxing  or  the  police  laws  of  the  State. 

§  136.    Inheritance  Tax  on  Aliens  Not  Tax  on  Exports. — 

A  law  of  Louisiana  imposed  a  tax  of  ten  per  cent  upon  the  in- 
heritance going  to  any  person  not  domiciliated  in  that  State  and 
not  a  citizen  of  any  State  or  Territory  in  the  Union.  It  was 
claimed  that  this  was  essentially  a  tax  upon  exports,  and  repug- 


1  Justices  Gray,  Harlan  and  Brown,  dissenting,  said  that  there  had 
been  an  arrival  in  the  State  so  as  to  subject  the  liquor  to  the  exer- 
cise of  the  police  power  of  Iowa  within  the  letter  and  spirit  of  the 
Act  of  Congress. 


128  REGULATION   OF    COMMERCE  §    137 

nant  to  the  power  of  Congress  to  regulate  commerce  'with  foreign 
nations.  But  the  court  held,  opinion  by  Chief  Justice  Taney,  ^ 
that  the  tax  was  nothing  more  than  the  exercise  of  the  power 
which  every  State  and  sovereignty  possesses  of  regulating  the 
manner  and  terms  on  which  property,  real  or  personal,  within 
its  dominion,  may  be  inherited.  Every  State  or  nation  may  un- 
questionably refuse  to  allow  an  alien  to  take  either  real  or  per- 
sonal property  situated  within  its  limits,  either  as  heir  or  legatee, 
and  may,  if  it  thinks  proper,  direct  that  property  so  descending 
or  bequeathed  shall  belong  to  the  State.  It  was  held  also  that  the 
constitutionality  of  inheritance  laws  imposing  taxation  upon  the 
State's  own  citizens  is  unquestioned,  and  it  cannot  be  contended 
that  aliens  are  entitled  to  any  exemption.  Indeed  the  court 
could  see  no  objection  to  such  a  tax,  even  if  imposed  upon  aliens 
exclusively.  It  had  no  concern  with  commerce  or  with  exports. 
In  answer  to  the  argument  that  it  was  a  tax  on  exports  because  it 
would  be  necessary  to  send  abroad  the  inheritance,  the  court 
said  that,  if  that  argument  was  sound,  no  property  would  be 
liable  to  be  taxed  in  a  State  when  the  owner  intended  to  convert 
it  into  money  and  send  it  abroad. 

§  137.  License  Tax  on  Foreign-Exchange  Broker  Not  Tax 
on  Exports. — A  license  tax  of  four  hundred  and  fifty  dollars, 
levied  by  the  State  of  Louisiana  on  money  and  exchange  brokers, 
was  sustained  in  the  case  of  a  broker  who  claimed  that  it  was  in- 
valid as  to  him,  because  he  dealt  in  foreign  exchange  exclusively, 
and  that  the  taxing  of  bills  of  exchange  was  taxing  the  necessary 
instruments  of  commerce.  But  the  court  held 2  that  this  was  not 
a  tax  on  the  bills  of  exchange,  which  under  the  law  every  person 
was  free  to  buy  or  sell,  but  the  tax  was  imposed  for  engaging 
in  the  business  of  a  monej^  or  exchange  broker.  If  a  tax  on  the 
business  of  an  exchange  broker  were  invalid,  all  taxes  on  banks 
which  deal  in'bills  of  exchange  would  be  invalid.  No  one  can  claim 


1  Mager  v.  Grima,  8  How.  490,  12  L.  Ed.  1168  (1850);  affirming  12 
Rob.    (La.)    584. 

2  Nathan  v.  Louisiana,  8  How.  73,  12  L.  Ed.  992  (1850).  See  Fair- 
bank  V.  United  States,  181  U.  S.  283,  45  L.  Ed.  862  (1901);  holding  a 
Federal  tax  on  foreign  bills  of  lading  a  tax  on  exports. 


§    138  REGULATION    OP    COMMERCE  129 

an  exemption  from  a  general  tax  on  the  ground  that  the  product 
•  sold  may  be  used  in  commerce.    The  court  concluded,  page  82  : 

"The  taxing  power  of  a  State  is  one  of  its  attributes  of 
sovereignty.  And  where  there  has  been  no  compact  with  the 
Federal  government,  or  cession  of  jurisdiction  for  the  purposes 
specified  in  the  Constitution,  this  power  reaches  all  property  and 
objects  in  the  State  which  are  not  properly  denominated  the 
means  of  the  general  government,  and  as  laid  doA^Ti  by  this  court, 
it  may  be  exercised  at  the  discretion  of  the  State.  .  .  . 
Whatever  exists  within  its  territorial  limits  in  the  form  of  prop- 
erty, real  or  personal,  with  the  exception  stated,  is  subject  to  its 
laws ;  and  also  the  numberless  enterprises  in  which  its  citizens 
may  be  engaged.  These  are  subjects  of  State  regulation  and  State 
taxation  and  there  is  no  Federal  power  under  the  Constitution 
which  can  impair  this  exercise  of  State  sovereignty." 

§  138.  State  Taxing"  Power  in  Relation  to  Imports  and  Ex- 
ports.— In  the  case  last  cited  the  court  further  defined  the 
taxing  power  of  the  State  in  relation  to  the  prohibition  of  du- 
ties on  imports  and  exports  as  follows,  1.  c,  p.  81 : 

"No  State  can  tax  an  export  or  an  import  as  such,  except 
under  the  limitations  of  the  Constitution.  But  before  the  ar- 
ticle becomes  an  export,  or  after  it  ceases  to  be  an  import,  by 
being  mingled  with  other  property  in  the  State,  it  is  a  subject 
of  taxation  by  the  State.  A  cotton  broker  may  be  required  to 
pay  a  tax  upon  his  business,  or  by  way  of  license,  although  he 
may  buy  and  sell  cotton  for  foreign  exportation." 

This  was  quoted  and  applied  by  the  Court  of  Appeals  of 
Maryland,!  where  it  held  valid  a  license  tax  on  all  those  en- 
gaged in  packing  or  canning  oysters  for  sale  or  transportation, 
and  whose  place  of  business  was  in  the  State.  It  was  claimed 
that  the  words  "for  transportation"  made  the  law  objection- 
able as  an  interference  with  commerce.  Tlie  court  said  tliat 
the  words  "for  sale"  and  "for  transportation"  were  used  to 
exempt  those  who  packed  or  canned  OA-sters  for  their  own  pur- 
poses; and  further  that  the  fact  that  oyster  packers  miglit 
transport  their  oysters  outside   of  the   State   did   not  prevent 


1  state    V.    Applegarth,   28    L.   R.    A.    812. 


130  REGULATION    OF    COMMERCE  §    139 

it  from  taxing  them  for  the  prosecution  of  their  business  with- 
in its  jurisdiction.! 

§  139.  State  Tax  Upon  Alien  Passengers  Is  Void.  —  It  was 
held  in  the  Passenger  Cases,  2  that  the  statutes  of  New  York 
and  Pennsylvania  imposing  taxes  upon  alien  passengers  ar- 
riving in  the  ports  of  those  States  were  void.  There  is  no 
opinion  of  the  court,  as  such,  as  to  the  grounds  of  the  deci- 
sion. 3  Prior  to  this,  in  State  of  New  York  v.  Miln,4  a  stat- 
ute of  New  York  requiring  the  master  of  a  vessel  to  render 
the  mayor  a  verified  description  of  the  names,  ages,  etc.,  of 
passengers  was  declared  a  proper  police  regulation. 

The  invalidity  of  the  State  tax  upon  passengers  was  again 
affirmed  in  1875,^  the  court  saying  that  the  rule,  which  pre- 
scribed the  terms  or  conditions  upon  which  a  vessel  could  dis- 
charge its  passengers  coming  from  foreign  ports,  was  a  regu- 
lation of  commerce  with  foreign  nations,  and  that  it  was  im- 
material that  the  statute  did  not  come  into  operation  until 
after  the  passenger  had  landed. 

Still  later,  in  1881,  another  statute  of  New  York  was  de- 
clared void,  6  which  imposed  a  tax  on  every  alien  passenger 
and  held  the  vessel  liable  for  the  tax,  and  it  was  immaterial 
that  the  act  declared  its  purpose  to  raise  money  for  the  exe- 
cution of  the  inspection  laws  of  the  State.     The  court  said  it 


1  It  was  held  in  the  U.  S.  Circuit  Court  of  California,  hi  re  Wong 
Yung  Quy,  2  Fed.  624,  that  a  corpse  is  not  property;  that  the 
remains  of  human  beings  carried  out  of  the  State  for  burial  in  a  for- 
eign country  are  not  exports  within  meaning  of  the  Constitution,  and 
that  the  permit  fee  of  $10.00,  under  the  statute  of  California,  for 
removal  of  remains  of  deceased  persons,  was  valid  as  a  sanitary 
measure. 

2  7  Howard,  283,  supra. 

»  See  statement  of  the  case  in  Henderson  v.  Mayor,  92  U.  S.,  p. 
269,  23  L.  Ed.  543   (1876). 

*11  Peters  103,  supra.  For  an  interesting  view  of  the  difference  of 
opinion  in  the  court  at  this  time,  see  remarks  of  Justice  Wayne,  7 
How.  429  to  436,  and  Chief  Justice  Taney,  pp.  487  to  490. 

5  Henderson  v.  Mayor  of  New  York,  92  U.  S.  259,  supra. 

6  People  V.  Compagnie  Gen.  Trans-Atlantique,  107  U.  S.  59,  27  L.  Ed. 
383   (1883). 


§    140  REGULATION   OF   COMMERCE  131 

was  not  valid  as  an  inspection  law,  as  that  could  only  relate 
to  property.! 

§  140.    State  Inspection  Laws  and  Interstate  Commerce. — 

The  Constitution  2  excepts  from  the  prohibition  laid  upon  the 
States  to  levy  duties  on  imports  or  exports  what  may  he  abso- 
lutely necessary  for  executing  their  inspection  laws.  The  Su- 
preme Court  held  that  the  tobacco  inspection  laws  of  Mary- 
land were  valid  under  this  clause,  and  that  the  charges  upon 
the  tobacco  for  outage  and  storage  were  authorized  by  the 
Constitution.  3  Such  charges  were  for  services  rendered  and 
were  therefore  lawful.  It  was  claimed  that  the  act  discrimin- 
ated between  different  classes  of  exporters,  in  that  it  exempted 
from  certain  regulations  those  who  packed  tobacco  for  exporta- 
tion in  the  county  or  neighborhood  where  it  was  grown.  But  the 
court  held  that  such  discriminations  the  State  had  the  right  to 
make.  It  did  not,  however,  express  any  opinion  as  to  the  provi- 
sions of  the  Maryland  law  for  the  inspection  of  tobacco  grown 
out  of  Maryland. 

The  inspection  law  of  North  Carolina  was  also  sustained  by 
the  Supreme  Court. 4  A  charge  of  twenty-five  cents  per  ton 
upon  fertilizers,  to  pay  the  cost  of  inspection,  was  held  to  be  rea- 
sonable and  proper.  The  court  said  that,  as  it  was  competent  for 
the  State  to  pass  laws  of  this  character,  the  requirement  of  in- 
spection and  payment  of  the  costs  did  not  bring  the  act  into  col- 
lision With  the  power  vested  in  Congress.  The  right  to  make  in- 
spection laws  was  not  granted  to  Congress,  but  was  reserved  to 
the  States,  subject,  however,  to  the  paramount  right  of  Congress 
to  regulate  foreign  commerce  and  among  the  several  States.  If 
the  cliarge  should  exceed  what  was  necessary  for  executing  the 
inspection  laws,  it  would  be  an  unauthorized  interference  with 


1  In  Head  Money  Cases,  112  U.  S.  580,  28  L.  Ed.  798  (1884);  the 
court  sustained  an  act  of  Congress  imposing  a  duty  of  fifty  cents 
on  every  alien  passenger  coming  into  the  United  States  in  steam  or 
sailing  vessels.     See  also  Crandall  r.  Nevada,  supra,  Sec.  20. 

2  Art.  1,  Sec.  10,  Par.  2. 

3  Turner  v.  Maryland,  107  U.  S.  .38,  27  L.  Ed.  370    (1883). 

*  Petapsco  Guano  Co.  v.  North  Car.  Board  of  Agriculture,  171  U.  S. 
345,  43  L.  Ed.  191  (1898). 


132  REGULATION    OF    COMMERCE  §    140 

the  free  importation  of  goods  and  therefore  void.  But  if  the  law 
is  really  an  inspection  law  the  charge  fixed  by  the  State  must 
stand  until  Congress  shall  see  fit  to  alter  it  in  its  paramount 
power  over  commerce.  This  right  to  make  inspection  laws  ap- 
plies to  commerce  between  the  States  as  well  as  to  foreign  com- 
merce, although  the  words  imports  and  exports  in  the  same  sec- 
tion relate  only  to  foreign  commerce.  The  scope  of  inspection 
laws  is  not  confined  to  articles  intended  for  exportation,  but  ap- 
plies to  importations  and  articles  intended  for  domestic  use.i 

While  it  is  conceded  that  the  inspection  necessarily  involves 
expense,  and  the  power  to  fix  the  fee  to  cover  the  expense  is 
left  primarily  to  the  legislature,  and  the  receipts  and  disburse- 
ments may  so  vary  from  time  to  time  that  the  surplus  of  one 
year  may  be  needed  to  supply  the  deficiency  of  another,  yet  if  it 
is  shown  that  the  fees  are  disproportionate  to  the  services  ren- 
dered, or  that  they  included  the  costs  of  something  beyond  legi- 
timate inspection  to  determine  quality  and  condition,  the  tax 
must  be  declared  void,  because  such  cost,  by  necessary  operation, 
obstructs  the  freedom  of  commerce  among  the  States.  This  was 
illustrated  in  the  decision  of  the  Supreme  Court  holding  void  the 
statute  of  Maryland  imposing  a  tax  upon  oysters  coming  into  the 
State.2 

Each  case  must,  therefore,  depend  upon  its  own  facts,  and 
ordinarily,  though  it  appears  that  the  sum  collected  is  beyond 
what  is  needed  for  inspection  expenses,  the  courts  will  presume 
that  the  legislature  will  reduce  the  fees  to  a  proper  sum.3 


1  Neilson  v.  Garza,  2  Woods,  287.  As  to  when  the  court  will  take 
judicial  notice  that  the  amount  char,ged  is  unreasonably  large  for  an 
inspection  charge,  see  American  Fertilizing  Co.  v.  Board  of  Agriculture 
of  North  Carolina,  43  Fed.  609. 

2  Foote  V.  Stanley,  232  U.  S.  494,  58  L.  Ed.  698,  reversing  117  Md. 
335  (1914). 

3  Red  "C"  Oil  Manufacturing  Co.  v.  Board  of  Agriculture,  222  U.  S. 
393,  56  L.  Ed.  244  (1912),  affirming  172  Fed.  695. 


CHAPTER    IV. 

REGULATION  OF  COMMERCE— Continued. 

§  141.    Era  of  discriminating  state  taxation. 

142.  Privileges  and  immunities  of  citizens. 

143.  Discrimination  against  non-residents  an  interference  with 

commerce. 

144.  DisA"iminating  taxation  condemned  in  state  courts. 

145.  Discrimination  in  taxation  in  favor  of  products  of  state  unlawful. 

146.  What  constitutes  discrimination? 

147.  Discrimination  must  relate  to  interstate  commerce. 

148.  Taxation  of  commercial  travellers  from  other  states  unlawful. 

149.  The  Supreme  Court  in  Robbins  v.  Shelby  Copnty  Taxing  District. 

150.  Robbins  v.  Shelby  County  Taxing  District,  reaffirmed. 

151.  The  Supreme  Court  in  Brennan  v.  Titusville. 

152.  Taxation  of  Commercial  Brokers. 

153.  The  Supreme  Court  cjn  Taxation  of  Commercial  Brokers. 

154.  The  form  of  Commercial  Agency  immaterial. 

155.  Only  interstate  commerce  agencies  exempt. 

156.  Sale  of  goods  in  the  state  subject  to  taxing  power  of  state. 

157.  Discrimination  must  be  more  than  incidental  disadvantage. 

158.  Tax  upon   peddler   without   discrimination   against   resi- 

dents or  products  of  other  states,  is  valid. 

159.  Definition  of  peddler. 

160.  Peddlers  and  drummers. 

161.  Licensing  under  police  power. 

162.  Police  power  cannot  interfere  with  interstate  commerce. 

163.  Supreme  Court  not  concluded  by  title  of  act  as  to  the  pur- 

pose of  act. 

164.  When  a  license  tax  act  void  in  part  is  void  in  toto. 

165.  The  separate  delivery  of  portrait  frames  not  taxable. 

166.  Orders  for  purchases  or  sales  on  future  delivery,  not  ex- 

empt from  state  taxation. 

"The  citizens  of  each  State  shall  be  entitled  to  all  privileges  and  Im- 
naunities  of  citizens  in  the  several.States."    Const.  U.  S.,  Art.  IV.,  Sec.  2. 

§  141.  Era  of  Disc^riminating'  State  Taxation.  —  The  en- 
forcement of  the  national  control  over  interstate  eominerce 
has  been  prolific  of  litigation,  both  in  the  State  and  Fed- 
eral court.s,  arising  out  of  the  Conflict  between  the  national  su- 
premacy on  the  one  hand,  and  the  authority  of  the  States  to 

(133) 


t 


134  REGULATION    OF    COMMERCE CONTINUED.  §    141 

impose  business,  occupation  and  so-called  privilege  taxes  on  the 
other.  The  clamor  of  local  merchants  for  protection  against 
competition  from  other  States  was  potent  with  State  legisla- 
tures, as  it  was  in  the  days  of  the  Confederation  before  the 
adoption  of  the  Constitution,  and  the  result  was  the  enactment 
of  discriminations  in  taxation  favoring  the  citizens  and  the 
goods  and  products  of  the  State  as  against  the  citizens  and 
products  of  other  States.  During  the  long  period  when  the 
Supreme  Court  gave  no  decided  opinion  as  to  the  supremacy 
of  the  national  power  in  interstate  commerce,  such  discriminat- 
ing statutes  multiplied,  until,  in  one  form  or  another,  they 
were  on  the  statute  books  of  nearly  every  State  in  the  Union. 
Thus  Justice  Miller  said  in  1889  •} 

"Notwithstanding  for  nearly  one  hundred  years  we  have 
had  in  the  Federal  Constitution  the  declaration  that  Congress 
shall  have  power  to  regulate  commerce .  among  the  several 
States,  there  are  at  this  hour  upon  the  statute  books  of  almost 
every  State  laws  violating  that  provision;  and  there  is  no 
doubt  that  if  that  clause  were  removed  tomorrow,  this  Union 
would  fall  to  pieces,  simply  by  reason  of  the  struggles  of  each 
State  to  make  the  property  owned  in  other  States  pay  its  ex- 
penses. Tt  was  this  tendency  of  each  State  to  support  its  gov- 
ernment out  of  taxes  levied  upon  the  property  of  other  States, 
or  on  the  produce  or  merchandise  which  must  go  through  one 
State  to  another,  that  more  than  any  other  one  thing  com- 
pelled the  formation  of  the  present  Constitution.  "^ 

The  declaration  of  the  Supreme  Court  in  the  cases  already 
referred  to,  that  commerce  between  the  States  must  be  free  from 
State  control  or  interference,  was  announced  at  a  time  when 
changed  economic  conditions  made  intolerable  the  discriminating 
legislation  of  the  States.    The  extension  of  railroad  systems  over 


1  Lectures  on  the  Constitution,  p.  81. 

2  Justice  Miller  quotes  from  Mr.  Van  Buren  in  a  speech  in  the  Senate 
in  1826:  "There  are  few  States  in  the  Union  upon  whose  acts  the  seal 
of  condemnation  has  not  from  time  to  time  been  placed  by  the  Supreme 
Court.  The  sovereign  authorities  of  Vermont,  New  Hampshire,  New 
York,  New  Jersey,  Pennsylvania,  Maryland,  Virginia,  North  Carolina, 
Missouri,  Kentucky  and  Ohio  have  in  turn  been  rebuked  and  silenced 
by  the  overruling  authority  of  this  court." 


§    142  REGULATION    OF    COMMERCE — CONTINUED.  135 

the  country,  the  promotion  of  facilities  of  intercourse  and  trans- 
portation, unknown  at  an  earlier  period,  extended  the  market 
available  to  producers.  Instead  of  the  buyer  seeking  in  his  own 
locality  the  manufacturer  or  jobber,  an  army  of  commercial  trav- 
elers covered  the  country,  bringing  the  goods  of  the  manufac- 
turer and  jobber  to  the  door  of  the  retailer  or  consumer.  The 
methods  of  business  were  revolutionized. 

§  142.  Privileges  and  Immunities  of  Citizens.— Where  citi- 
zens of  other  States  are  concerned,  not  only  is  this  discrimination 
in  taxation  in  favor  of  citizens  or  residents  of  the  State  an  inter- 
ference with  commerce,  but  at  this  point  the  comprehensive  pro- 
vision of  the  Constitution  for  the  regulation  of  commerce  is  re- 
inforced by  th^  specific  direction  in  the  Constitution  that  **  citi- 
zens of  each  State  shall  be  entitled  to  all  the  privileges  and  im- 
munities of  citizens  in  the  several  States."  This  specific  protec- 
tion accorded  to  citizens  of  other  States,  however,  while  it  is  in- 
eluded  in  the  comprehensive  guaranty  of  national  control  over 
commerce,  falls  far  short  of  affording  the  necessary  remedy.  The 
right  to  carry  on  interstate  commerce,  and  to  be  free  from  dis- 
criminating restrictions  therein,  is  not  limited  to  citizens.  All 
non-residents  of  the  State,  and  foreign  corporations,  which  are 
not  citizens  within  the  meaning  of  Article  IV,  Section  2,  are  en- 
titled to  the  protection  of  the  Constitution  in  so  far  as  they  are 
engaged  in  interstate  commerce. 

In  the  earlier  cases,  however,  before  the  position  of  the  Su- 
preme Court  in  regard  to  the  national  control  over  commerce  was 
distinctly  declared,  both  provisions  of  the  Constitution  were  in- 
voked, and  in  some  cases  the  judges  of  the  Supreme  Court  them- 
selves differed  in  the  grounds  of  their  opinion  as  to  the  invalidity 
of  such  legislation,  some  assigning  as  a  reason  the  violation  of  the 
privileges  and  immunities  of  citizens  of  other  States  and  others 
the  interference  with  commerco.i 


1  Crandall  v.  Nevada,  6  Wall.  35,  supra,  §20;  Ward  v.  Maryland,  12 
Wall.  419.  Thus  Justice  Miller,  who  delivered  the  opinion  of  the 
court  in  Crandall  v.  Nevada,  decided  in  1867,  in  holding  a  State  tax  on 
passengers  passing  through  the  State  invalid,  placed  his  decision  on 
the  ground   that  the  tax   was   inconsistent   with  the  relations  of  the 


136  REGULATION   OF   COMMERCE — CONTINUED.  §    143 

Later  decisions  of  the  court,  however,  have  declared  all  such 
discriminations  void  on  the  ground  of  interfering  with  commerce. 

§  143.  Discrimination  Against  Non-Residents  An  Interfer- 
ence With  Commerce. — This  was  decided  in  the  case  of  Ward 
V.  Maryland.!  The  statute  required  all  traders  resident  in  the 
State  to  take  out  licenses,  varying  from  $12  to  $150,  according 
to  the  value  of  their  stock,  and  required  of  non-residents  an  an- 
nual license  of  $300.  The  Supreme  Court  held  that  this  was  void 
as  a  violation  of  the  privileges  and  immunities  of  citizens  of 
other  States.  It  declared  that,  if  the  States  could  impose  dis- 
criminating taxes  against  citizens  of  other  States,  it  would  soon 
be  found  that  the  power  conferred  upon  Congress  to  regulate  in- 
terstate commerce  was  of  no  value,  and  that  inequality  of  burden 
as  well  as  the  want  of  uniformity  in  commercial  regulations  was 
one  of  the  grievances  of  citizens  under  the  Confederation,  which 
the  new  Constitution  was  adopted  to  remedy.2  The  rule,  that 
any  form  of  discrimination  in  taxation  against  non-residents  is 
invalid  has  been  enforced  in  many  State  eases. 

In  "Walling  v.  Michigan,^  this  principle  was  applied  to  a  stat- 
ute of  Michigan  imposing  a  tax  upon  persons,  who,  not  residing 
or  having  their  principal  place  of  business  in  the  State,  engaged 
there  in  the  business  of  selling  or  soliciting  the  sale  of  liquors  to 
be  shipped  into  the  State.  The  court  held  that  such  an  act  was 
necessarily  a  discrimination  in  favor  of  the  products  of  the 
State,  and  was  thus  a  regulation  and  restraint  of  commerce ;  and 


State  to  the  Federal  Government,  see  supra,  and  doubted  whether  it 
could  be  avoided  under  the  commerce  clause;  Justice  Clifford  and 
Chief  Justice  Chase  based  their  opinion  distinctly  upon  its  being  void 
under  the  commerce  clause.  In  his  lectures,  however,  delivered  in 
1889,  Justice  Miller  speaks  of  the  case  as  illustrative  of  the  national 
regulation  of  commerce.     See  Miller  on  Const,  p.  453. 

112  Wallace,  419,  20  L.  Ed.  449  (1871),  reversing  Ward  v.  State, 
31  Md.  279. 

2  Justice  Bradley  concurred  in  this  case,  on  the  ground  that  the  act 
was  violative  of  the  national  control  over  commerce,  and  that  it  would 
be  violative,  even  if  the  same  burden  was  put  upon  non-residents  for 
selling  goods   as  upon   residents. 

3  116   U.   S.   446,   29  L.   Ed.   691    (1886). 


§    144  REGULATION  OF   COMMERCE — CONTINUED.  137 

it  was  none  the  less  a  discrimination  though  the  subsequent  act 
imposed  a  greater  tax  upon  all  persons  in  the  State  engaged  in 
manufacturing  or  selling  liquors  to  be  shipped  outside  of  its  con- 
fines. The  subsequent  act  imposed  a  tax  on  domestic  dealers  but 
not  on  their  drummers,  while  the  tax  on  drummers  and  agents 
of  non-residents  remained,  and  this  operated  as  a  discrimination. 

§  144.    Discriminating  Taxation  Condemned  in  State  Courts. 

— The  same  principle,  that  there  must  be  no  discrimination  in 
taxation  in  favor  of  residents,  since  the  decision  in  Ward  v. 
Maryland  has  been  recognized  and  applied  in  numerous  decisions 
of  the  State  courts.  Thus  statutes  demanding  licenses  from  non- 
resident peddlers,  while  exempting  from  the  same  requirement 
manufacturers,  farmers  and  mechanics  residing  in  the  State, 
have  been  held  void.i 

In  Pennsylvania,  a  borough  ordinance  was  void,  which  dis- 
criminated against  non-residents,  by  prohibiting  them  from  ped- 
dling or  selling  goods  from  house  to  house  without  license,  and 
fixed  the  fee  at  so  high  a  figure  as  to  amount  to  a  prohibition, 
while  it  excepted  residents  of  the  borough  from  its  operation.  2 

A  New  Hampshire  statute  provided  that  the  court  could  grant 
peddlers'  licenses,  on  proper  application,  to  residents.  The 
court  held  that  the  restriction  was  invalid  under  the  Federal 
guaranty  of  equal  privileges,  and  granted  a  license  to  a  non- 
resident notwithstanding  the  restriction  in  the  statute.3 

An  act  authorizing  the  city  of  Philadelphia  to  require  a 
license,  except  from  Pennsylvania  farmers  peddling  the  pro- 
ducts of  their  farms  in  the  city  -J  and  a  similar  ordinance  of  the 
city  of  Buffalo  relating  to  the  sale  of  farm  products,  and  ex- 
cepting retail  sales  by  residents  of  the  State  and  owners  or  lessees 


1  Commonwealth  v.  Myer,  92  Va.  809;  Rogers  v.  Kent  Circuit  Judge 
115  Mich.  441;  see  also  Albertson  v.  Wallace,  81  N.  C.  479;  Sinclair 
V.  State,  69  N.  C.  47. 

2  Sayre  Borough  v.  Phillips,  148  Pa.  482.  See  Radebaugh  v.  Village 
of  Plain  City,  28  Weeltly  Law  Bui.  107;  Ex  parte  Thornton,  12  Fed. 
538. 

3  In  re  Bliss.  63  N.  If.  135. 

*  Coe  V.   Simmons,  3  Pa.  Dist.  Ct.   792. 


138  REGULATION    OP    COMMERCE — CONTINUED.  §    145 

of  lands  within  the  State,  and  sales  of  products  grown,  by  the 
sellers  on  their  own  lands,  were  held  discriminating  and  void.^ 

A  license  fee  exacted  from  peddlers,  except  those  dealing 
exclusively  with  merchants  of  the  county,  merchants  residing  and 
having  a  regular  place  of  business  therein  and  citizens  of  the 
county  selling  wares  of  their  own  growth  and  manufacture,  was 
held  void.  -  . 

§  145.  Discrimination  in  Taxation  in  Favor  of  Products  of 
State  Unlawful. — The  leading  authority  on  this  subject  is  the 
decision  of  the  Supreme  Court  in  Welton  v.  Missouri,3  decided  in 
1875,  reversing  the  Supreme  Court  of  Missouri  and  holding  void 
a  statute  of  that  State  which,  from  the  requirements  of  a  license 
from  peddlers,  excepted  goods  which  were  the  growth,  produce 
or  manufacture  of  the  State.  The  State  court  had  held  that  this 
was  valid  as  a  police  regulation.  But  the  Supreme  Court  said 
that  the  statute  infringed  the  power  of  Congress  to  regulate 
commerce,  which  includes  the  power  to  determine  how  far 
commerce  shall  be  free  and  untrammeled.  In  this  case  the 
court  announced  distinctly  the  doctrine,  that  that  portion  of 
commerce  with  foreign  nations  and  between  the  States,  which  con- 
sists in  the  transportation  and  exchange  of  commodities,  is  of 
national  importance  and  admits  and  requires  uniformity  of 
regulation. 

The  Supreme  Court  said  in  its  opinion  that  the  very  object  of 
investing  this  power  of  regulating  commerce  in  the  general  gov- 
ernment was  to  insure  uniformity  against  discriminating  state 
legislation,  and  that  it  would  be  premature  to  state  any  rule 
which  would  be  universal  in  its  application  to  determine  when  the 
commercial  power  of  the  Federal  government  over  the  commodity 
has  ceased  and  the  power  of  the  state  has  commenced,  concluding : 

"It  is  sufficient  to  hold  now  that  the  commercial  power  con- 
tinues until  the  commodity  has  ceased  to  be  the  subject  of  dis- 


1  City  of  Buffalo  v.  Reavey,  55  N.  Y.  S.  792;   see  also  Fecheimer  v. 
City  of  Louisville,  84  Ky.  306. 

2  Commonwealth   v.    Snyder,   182    Pa.    St.    630. 

3  91    U.    S.    275,   23    L.    Ed.    347,   reversing   Missouri   v.    Welton,    55 
Mo.  288. 


§    145  REGULATION   OF    COMMERCE CONTINUED.  139 

criminating  legislation  by  reason  of  its  foreign  character.  That 
power  protects  it,  even  after  it  has  entered  the  state,  from  any 
burdens  imposed  by  reason  of  its  foreign  origin.  The  act  of 
Missouri  encroaches  upon  this  power  in  this  respect,  and  is  there- 
fore in  our  judgment  unconstitutional  and  void."^ 

This  principle  has  been  frequently  enforced.  Thus  a  statute 
of  Virginia  discriminating  against  manufacturers  of  other 
States,  by  requiring  a  license  from  their  agents  and  not  from  the 
agents  of  its  own  manufacturers,  was  held  invalid.  2  The  Court 
said: 

"Sales  by  manufacturers  are  chiefly  effected  through  agents. 
A  tax  upon  their  agents  when  thus  engaged  is,  therefore,  a  tax 
wpon  them,  and  if  this  is  made  to  depend  upon  the  foreign  char- 
acter of  the  articles,  that  is,  of  their  having  been  manufactured 
without  the  State,  it  is  to  that  extent  a  regulation  of  commerce  in 
the  articles  between  the  States.  It  matters  not  whether  the  tax 
be  laid  directly  upon  the  article  sold  or  in  the  form  of  licenses 
for  the  sale.     If  by  reason  of  their  foreign  character  a  State 


1  The  Supreme  Court  of  Missouri,  in  a  decision  of  an  earlier  date 
however,  was  among  the  first,  if  it  was  not  the  first,  of  the  State  courts 
to  condemn  discriminations  of  this  character  in  taxation.  Thus  in 
State  V.  North,  27  Mo.  464,  in  an  opinion  by  Judge  Scott,  notable  from 
the  fact  that  it  was  pronounced  shortly  before  the  outbreak  of  the  Civil 
War,  when  sectional  feeling  ran  high  in  Missouri,  it  was  said,  1.  c.  p. 
482:  "Nothing  is  to  be  gained  by  the  exercise  of  the  power  of  laying 
a  discriminating  tax.  If  it  is  lawful  for  one  State  to  do  it,  it  is  equally 
so  to  the  others.  Laws  will  be  passed  in  retaliation  of  those  we  may 
enact,  and  so  we  may  be  losers  in  the  end.  Situated  as  the  State  of 
Missouri  is,  she  should  be  one  of  the  last  to  enter  on  such  a  course  of 
legislation.  Without  a  seaboard,  far  in  the  interior,  cut  off  from  all 
outlet  to  foreign  commerce,  she  would  be  one  of  the  greatest  sufferers 
in  a  contest  of  such  a  nature.  If  we  have  erred  in  applying  to  the  law 
under  consideration  the  principle  that  a  tax  discriminating  between  for- 
eign and  domestic  articles  cannot  be  imposed,  we  feel  confident,  never- 
theless, that  the  principle  is  a  correct  one.  No  one  can  rise  from 
reading  the  history  of  events-  out  of  which  our  present  constitution  had 
its  existence,  without  a  conviction  that  the  power  of  laying  a  discrimi- 
nating tax  on  the  importations  from  other  States  and  nations  was 
never  designed  to  be  left  with  the  several  States.  That  is  a  power 
only  to  be  exercised  by  a  single  body,  and  that  body  has  been  created 
with  ample  power  for  the  protection  of  the  interests  of  all  the  States." 
This  case  was  cited  by  the  Supremo  Court  in  Ward  v.  Md.,  supra, 
§  143. 

2  Webber  v.  Virginia,  103  U.  S.  344.  26  L.  Ed.  565  (1881). 


140  REGULATION   OF   COMMERCE — CONTINUED,  §    146 

can  impose  a  tax  upon  them,  or  upon  the  person  through  whom 
the  sales  are  effected,  the  amount  of  the  tax  will  be  a  matter  rest- 
ing in  her  discretion.  She  may  place  the  tax  at  so  high  a  figure 
as  to  exclude  the  introduction  of  the  foreign  article  and  prevent 
competition  with  the  home  product."^ 

§  146.  What  Constitutes  Discrimination.  —  Discrimination 
may  consist  not  only  in  a  different  rate  of  taxation  or  license  as 
between  domestic  goods  and  goods  from  other  States,  but  also  in 
the  requirement  of  a  license  for  selling  those  which  are  foreign 
made  when  none  is  required  for  selling  domestic  goods,  as  in  the 
eases  cited,  or  also  a  license  may  be  granted  only  in  the  ease  of 
domestic  goods  or  residents.2  Freedom  of  commerce  under  the 
guaranty  of  the  Constitution  requires  equality  of  right  and  the 
absence  of  all  discrimination.  Thus,  in  a  Pennsylvania  cases  an 
ordinance  requiring  peddlers  and  canvassers  to  take  out  licenses 
was  held  invalid,  notwithstanding  a  proviso  that  it  should  not 
apply  to  persons  soliciting  orders  for  goods  manufactured  out- 
side the  State.  The  court  said  there  were  many  articles  of  inter- 
state commerce,  such  as  the  products  of  the  soil,  besides  manu- 
factured goods.  But  a  requirement  of  all  persons,  without  dis- 
crimination, who  desire  to  peddle  a  certain  commodity,  that  they 
must  make  proof  of  good  moral  character  before  they  can  obtain 
a  license,  is  a  proper  regulation,  and  not  in  violation  of  the  inter- 
state commerce  clause.4 


1  For  decisions  in  State  courts  holding  discriminations  in  peddlers' 
licenses  against  goods  manufactured  in  other  States  to  be  void,  follow- 
ing Welton  v.  Missouri,  see  Vines  v.  State,  67  Ala.  73;  Ex  parte  Thomas, 
71  Cal.  204;  State  v.  Furbush,  72  Me.  493;  State  v.  McGinnis,  37  Ark. 
362;  Sayre  Borough  v.  Phillips,  148  Pa.  482;  Georgia  Pkg.  Co.  v.  Macon, 
60  Fed.  774;  Ames  v.  People,  25  Colo.  508.  But  held  in  State  v. 
Stevenson,  109  N.  C.  730,  that  the  exception  of  "farm  products  pur- 
chased from  the  producer"  from  the  return  required  to  be  made  by 
merchants  and  other  dealers  as  the  basis  for  a  license  tax  is  not  a  dis- 
crimination against  the  products  of  citizens  of  other  States. 

2  See  In  re  Bliss,  63  N.  H.  135,  supra,  Sec.  144. 

3  Port  Clinton  Borough  v.  Shafer,  5  Pa.  Dist.  Ct.  583. 

4  Commonwealth  v.  Harmel,  166  Pa.  89.  An  illustrative  discrimina- 
tion was  held  invalid  in  Iowa,  where  a  city  ordinance  required  a  license 
from  peddlers,  except  where  they  resided,  and  the  goods  were  manu- 
factured, in  Marshall  County.     Marshalltown  v.  Blum,  58  Iowa,  184. 


§    148  REGULATION    OP    COMMERCE CONTINUED.  141 

A  tax  upon  property  within  the  State  of  Tennessee  which  is 
the  product  of  the  soil  of  other  states,  when  the  laws  of  Tennessee 
exempted  like  property,  when  produced  from  the  soil  of  Tennes- 
see, was  held  to  be  a  discrimination  directly  interfering  with 
interstate  commerce. i  In  this  ease  the  collection  of  a  tax  upon 
logs  cut  from  the  soil  of  other  states  was  enjoined,  because  logs 
from  Tennessee  were  exempted  from  taxation,  and  the  tax  was 
therefore  held  to  be  directly  discriminative  against  the  property 
from  other  States,  although  the  property  was  subject  to  taxation 
in  Tennessee  were  it  not  for  such  discrimination, 

§  147.    Discrimination  Must  Relate  to  Interstate  Commerce. 

— Thus  a  city  ordinance  imposing  a  license  tax  upon  beer  not 
made  in  the  city  but  brought  there  for  sale  was  held  by  the  Su- 
preme Court  not  open  to  objection,  so  far  as  it  operated  upon  the 
business  of  the  plaintiff  in  error,  either  under  the  commerce 
clause  or  as  a  violation  of  the  privileges  and  immunities  of  citi- 
zens, because  it  did  not  appear  that  plaintiff's  beer  was  not  manu- 
factured in  the  State  of  Virginia  and  for  aught  that  appeared  in 
the  case  it  might  have  been  manufactured  in  other  parts  of  that 
State.  In  order  to  raise  a  Federal  question  on  either  ground,  it 
must  be  shown  that  the  manufacturer  is  in  another  State  or  in 
a  foreign  country.     The  writ  of  error  therefore  was  dismissed.^ 

§  148.  Taxation  of  Commercial  Travelers  from  Other  States 
Unlawful. — The  decisions  of  the  Supreme  Court  denying  the 
right  to  discriminate  against  either  persons  or  products  of  other 
States  were  in  accord  with  the  prevailing  judicial  opinion  in  the 
State  courts.  But  very  many  of  the  States  had  enacted  statutes 
requiring  licenses  from  commercial  travelers,  sometimes  on  behalf 
of  both  the  State  and  those  of  its  municipalities,  which  such  com- 
mercial travelers  visited.  It  was  held  by  the  State  courts  that 
such  statutes,  when  free  from  discrimination  either  against  the 
person  employing  the  drummers  or  the  States  wherein  the  goods 


1  Darnell  &  Son  Co.  v.  Memphis,  208  U.  S.  113,  52  L.  Ed.  413   (1908), 
reversing  116  Tenn.  424. 

2  Downham  v.  Alexandria  (Va.),  10  Wall.  173,  19  L.  Ed.  929  (1870). 


142  REGULATION    OF    COMMERCE CONTINUED.  §    149 

sold  by  tliem  were  produced,  not  open  to  constitutional  objec- 
tion of  interfering  with  interstate  commerce.  These  statutes  how- 
ever were  nullified  and  these  decisions  overruled  by  the  decision 
of  the  Supreme  Court  in,  Robbins  v.  Shelby  County  Taxing  Dis- 
trict, decided  in  1887,i  which  laid  down  the  definite  rule  ever 
since  consistently  adhered  to  in  the  Court,  that  while  the  State 
can  tax  property  from  other  States  as  part  of  the  general  prop- 
erty within  its  jurisdiction,  whether  in  the  original  packages  or 
not,  it  cannot  tax  the  business  of  importing  from  other  States ; 
and,  as  the  right  to  bring  goods  from  other  States  includes  the 
right  to  sell  them  and  to  solicit  sales,  therefore  the  State  cannot 
tax  either  the  right  to  sell  or  the  right  to  solicit  sales,  whether 
in  the  form  of  a  license  charge  or  otherwise. 

§  149.  Supreme  Court  in  Robbins  v.  Shelby  County  Taxing 
District. — Robbins,  a  commercial  traveler  for  a  Cincinnati  firm, 
for  refusing  to  pay  the  license  required  from  all  drummers  and 
all  persons  not  having  a  licensed  house  of  business  in  the  taxing 
district,  who  should  sell  or  offer  to  sell  goods,  wares  or  merchan- 
dise by  sample,  was  found  guilty  of  a  misdemeanor,  and  the 
conviction  was  sustained  by  the  State  court. 

The  Supreme  Court  held  that  the  State  statute  was  invalid  as 
an  attempted  regulation  of  commerce;  that  in  the  matter  of 
interstate  conunerce  the  United  States  was  but  one  country,  and 
therefore,  this  commerce  could  be  subject  to  but  one  system  of 
regulation.  A  merchant  could  not  sell  his  goods  in  other  States 
without  procuring  orders,  and  in  most  cases  the  only  practical 
way  was  .by  soliciting  orders  and  in  many  cases  by  exhibiting 
samples.  The  court  said  that  it  was  urged  that  there  was  no 
discrimination  between  domestic  and  foreign  drummers,  that  is, 
those  of  Tennessee  and  those  of  other  States,  that  all  were  taxed 
alike.  The  court  said  that  did  not  meet  the  difficulty  as  inter- 
state commerce  could  not  be  taxed  at  all.  If  it  was  necessary 
to  regulate  this  business  of  selling  goods  by  sample  and  em- 
ploying drummers,  Congress  could  undoubtedly  make  reasonable 


1  120  U.  S.  489,  30  L.  Ed.  694,  reversing  13  Lea  (Tenn.)  303. 


§    150  REGULATION   OF    COMMERCE — CONTINUED.  143 

regulations  as  the   ease   demanded,   but   Congress  alone   could 
do  so.    It  is  obvious,  said  the  Court : 

"That  such  regulation  should  be  based  on  a  uniform  system 
applicable  to  the  whole  country,  and  not  left  to  the  varied,  dis- 
cordant or  retaliatory  enactments  of  forty  different  States,  The 
confusion  into  which  the  commerce  of  the  country  would  be 
thrown  by  being  subject  to  State  legislation  on  this  subject, 
would  be  but  a  repetition  of  the  disorder  which  prevailed  under 
the  Articles  of  Confederation. '  'i 

§  150.  Robbins  v.  Shelby  Taxing  District  Reaffirmed. — Sub- 
sequently, in  a  case  from  Texas  also  imposing  a  tax  upon  com- 
mercial travelers,  the  court  was  asked  to  reconsider  the  Kobbina 
case.  It  had  been  contended  by  the  Texas  court,  in  its  opinion, 
that  the  decision  was  contrary  to  sound  principles  of  constitu- 
tional construction  and  in  conflict  with  the  cases  formerly  de- 
cided by  the  Supreme  Court.  But  the  latter  tribunal  adhered  to 
its  ruling,  saying  r 

"Even  if  it  were  true  that  the  decision  referred  to  was  not 
in  harmony  with  some  of  the  previous  decisions,  we  had  sup- 
posed that  a  later  decision  in  conflict  with  prior  decisions  had  the 
effect  to  overrule  them,  whether  mentioned  and  commented  on  or 


1  Chief  Justice  Waite  and  Justices  Field  and  Gray  dissented,  saying 
that  they  could  see  no  constitutional  objection  to  such  a  tax;  that 
there  was  no  discrimination  and  citizens  of  other  States  were  taxed 
the  same  as  if  they  were  citizens  of  Tennessee.  The  State  court  had 
decided  that  any  person  who  should  sell  by  sample  should  pay  the 
tax,  and  to  that  they  agreed,  and  that  it  would  be  time  enough  to 
consider  whether  a  non-resident  can  be  taxed  for  merely  soliciting 
orders  without  having  samples,  when  such  a  case  arose.  In  a  later 
case,  Corson  v.  Maryland,  120  U.  S.  502,  30  L.  Ed.  699  (1887),  reversing 
57  Md.  251,  these  dissenting  judges  concurred  in  the  decision  on  the 
ground  that  the  statute  required  the  non-resident  merchant  desiring  to 
sell  by  sample  to  pay  for  his  license  a  sum  to  be  ascertained  by  the 
amount  of  his  stock  in  trade  in  the  State  where  he  resided  and  where 
he  had  his  principal  place  of  business;  that  is,  the  charge  was  measured 
by  his  capacity  to  do  business  all  over  the  United  States  and  without 
reference  to  the  amount  of  the  business  done  in  Maryland. 

2  Asher  v.  Texas,  128  U.  S.  129,  32  L.  Ed.  368  (1888);  reversing  23 
Texas  Ap.  662. 


144  REGULATION    OF    COMMERCE CONTINUED.  §    151 

not.  And  as  to  the  constitutional  principles  involved,  t)ur  views 
were  quite  fully  and  carefully,  if  not  clearly  and  satisfactorily, 
expressed  in  the  Robbins  case." 

§  151.  Supreme  Court  in  Brennan  v.  Titusville. — The  prin- 
ciple of  the  Robbins  case  was  again  applied  in  the  case  of  the 
agent  of  a  Chicago  manufacturer,  who  traveled  and  solicited 
orders  for  picture  frames,  exhibiting  samples.  He  was  con- 
victed under  an  ordinance  of  the  city  of  Titusville,  Pennsyl- 
vania, for  violating  the  city  ordinance  requiring  a  license  from 
all  persons  canvassing  and  soliciting  orders  for  goods,  wares  and 
merchandise.  The  Supreme  Court  of  Pennsylvania  sustained  the 
tax,  but  was  reversed  by  the  Supreme  Court  of  the  United  States. 
The  latter  court  said  it  was  immaterial  that  the  tax  was  only 
required  for  selling  to  persons  other  than  manufacturers  and 
licensed  merchants,  because,  if  the  State  could  tax  for  the  privi- 
lege of  selling  to  one  class,  it  could  for  selling  to  another  or  to 
aU.  In  either  case  it  was  a  restriction  on  the  right  to  sell  and  on 
lawful  commerce  between  the  citizens  of  two  States.  The  Court 
was  not  precluded  by  the  opinion  of  the  Supreme  Court  of  Penn- 
sylvania, that  the  ordinance  was  enacted  in  the  exercise  of  the 
police  power.  1 

In  this  case  the  court  distinguished  Ficklen  v.  Shelby  County, 
infra,  Sec.  152,  saying,  1.  c.  p.  308 : 

"We  only  refer  thus  ^t  length  to  that  ease  to  show  the 
distinction  between  it  and  this  case,  and  to  notice  that  in 
the  opinion  was  reaffirmed  the  proposition  that  no  State  can  levy 
a  tax  on  interstate  commerce  in  any  form,  whether  by  way  of 
duties  laid  on  the  transportation  of  the  subjects  of  that  com- 
merce, or  on  the  receipts  derived  from  that  transportation,  or  on 
the  occupation  or  business  of  carrying  it  on."^ 


1  Brennan  v.  Titusville,  153  U.  S.  289,  38  L.  Ed.  719  (1894). 

2  The  effect  of  the  decision  in  Robbins  v.  Shelby  Taxing  District, 
was  to  nullify  the  laws  requiring  licenses  from  drummers  in  a  number 
of  States.  The  decision  was  followed  in  the  following  States  and 
United  States  Circuit  Courts:  Alabama:  State  v.  Agee,  83  Ala.  110;  Ex 
parte  Murray,  93  Ala.  78;  Arkansas:  In  re  Rozelle,  57  Fed.  155; 
District  of  Columbia:  In  re  Hennick,  5  Mackey,  489;  Georgia:  Wrought 
Iron  Range  Co.  v.  Johnson,  84  Ga.  754,  the  Georgia  Supreme  Court 


§    152  REGULATION   OF    COMMERCE CONTINUED.  145 

§  152.     Taxation  of  Commercial  Brokers. — The  taxing  power 

of  the  State  over  persoiis  and  subjects  within  its  jurisdiction  is 
not  limited,  except  where  it  involves  necessarily  and  directly  the 
taxation  of  interstate  commerce,  that  is,  taxation  of  sales  or 
soliciting  sales,  on  behalf  of  a  non-resident  principal. 

Thus  in  another  Tennessee  case,i  the  tax  was  levied  upon  com> 
mission  merchants,  who  were  known  as  commercial  agents  and 
merchandise  brokers.  They  had  no  capital  in  their  business  and 
so,  in  accordance  with  the  State  statutes,  took  out  a  license  for 
one  year  authorizing  them  to  do  any  and  all  kinds  of  commission 
business.  The  tax  was  imposed  on  the  gross  yearly  commissions 
during  the  year  for  which  they  were  thus  licensed.  It  happened 
that  during  the  year  1887  all  the  sales  negotiated  by  one  of  the 
parties,  and  most  of  those  made  by  the  other,  were  for  non- 
resident principals.  But  it  seems  that  their  business  was  not  con- 
fined to  transactions  for  non-residents.  A  renewal  of  their 
licenses  having  been  applied  for,  the  application  was  denied  be- 
cause they  made  no  return  of  sales  and  no  payment  of  percentage 
on  their  commissions  received.  Thereupon  a  bill  was  filed  to  re- 
strain any  interference  with  their  current  business.  The  court 
affirmed  the  judgment  of  the  Supreme  Court  of  Tennessee  deny- 


say  ing:  "After  the  State  has  yielded  to  the  Federal  army,  it  can 
very  well  afford  to  yield  to  the  Federal  judiciary;"  Illinois:  City  of 
Bloomington  v.  Bourland,  137  111.  534;  Indiana:  Martin  v.  Rosedale, 
130  Ind.  108;  Kansas:  Ft.  Scott  v.  Pelton,  39  Kans.  764;  Louisiana: 
Simmons  Hardware  Co.  v.  Maguire,  Sheriff,  39  La.  Ann.  848;  MicTii- 
gan:  People  v.  Bunker,  87  N.  W.  Rep.  90;  Minnesota:  In  re  Kimmel, 
41  Fed.  775;  Mississippi:  Overton  v.  Vicksburg,  70  Miss.  558; 
"Nevada:  Ex.  parte  Rosenblatt,  19  Nev.  439;  North  Carolina:  Ex  parte 
Hough,  69  Fed.  330;  also  State  v.  Bracco,  103  N.  C.  349;  Oklahoma: 
Baxter  v.  Thomas,  4  Okla.  605;  Pennsylvania:  In  re  White,  43  Fed. 
913;  In  re  Nichols,  48  Fed.  164;  In  re  Tyerman,  48  Fed.  167; 
Texas:  Ex  parte  Stockton,  33  Fed.  95;  Talbutt  v.  State,  39  Texas 
Crim.  Rep.  64;  Virginia:  Adkins  v.  Richmond,  98  Va.  91,  and  47  L.  R.  A. 
583.  In  Texas  the  State  court  at  first  declined  to  follow  the  Robbins 
case,  see  In  re  Asher,  23  Tex.  App.  662,  reversed  in  128  U.  S.  129, 
supra,  Sec.  150. 

1  Ficklen  v.  Shelby  County  Taxing  District,  145  U.  S.  1,  36  L.  Ed. 
601    (1892). 


146  REGULATION   OF    COMMERCE — CONTINUED.  §    152 

ing  the  injunction,  saying  that  the  tax  was  not  on  the  goods,  nor 
on  the  proceeds  of  the  goods,  nor  was  it  a  tax  on  non-resident 
merchants,  anil  that  if  it  affected  interstate  commerce  in  any- 
way, it  was  incidentally  and  so  remotely  as  not  to  be  a  regulation 
of  such  commeree.i 

It  seems  that  in  this  ease  the  complainants  held  themselves 
out  as  prepared  to  transact  business  upon  commission  for  who- 
ever employed  them,  whether  resident  or  non-resident,  and  their 
claim  of  exemption  rested  upon  the  single  fact  that  during  that 
year  their  principals  were  non-residents.  The  case  was  distin- 
guished from  the  Robbins  case  on  the  ground  that  there  the  tax 
was  not  upon  Robbins,  but  upon  the  non-residents  who  em- 
ployed him,  while  here  the  tax  was  upon  the  merchandise  brok- 
ers themselves  in  respect  to  the  general  commission  business 
which  they  conducted. 

A  tax  upon  the  resident  managing  agent  of  a  non-resident 
meat  packing  house,  although  a  greater  part  of  the  business 
may  be  interstate  in  its  character,  does  not  conflict  with  the  com- 
merce clause  of  the  Constitution  where  the  tax  is  construed  by 
the  highest  state  court  to  apply  only  to  the  business  of  selling 
to  local  customers  from  the  stock  of  original  packages  shipped 
into  the  state  without  a  previous  sale  or  contract  and  kept  and 
held  for  sale  in  the  ordinary  course  of  trade  and  this  domestic 
business  is  not  shown  to  be  a  mere  incident  to  the  interstate 
business.^ 

So  also  a  tax  imposed  by  North  Carolina  which,  as  con- 
strued by  the  state  courts,  applied  to  such  local  business  of  a 
foreign  packing  house  on  sales  within  the  state  of  products 
already  stored  there  on  orders  received  after  the  products  were 


1  See  also  State  v.  Wagener,  77  Minn.  483,  where  a  statute  requiring 
commission  merchants  selling  agricutural  produce  on  commission  to 
take  out  a  license  and  give  bond  for  benefit  of  consignors  was  sus- 
tained, the  court  saying  that  the  statute  was  obviously  not  intended  to 
raise  revenue,  but  to  protect  consignors  of  wheat  and  perishable  farm 
produce  from  frauds  so  frequently  practiced  upon  them.  It  was 
therefore  an  ordinary  police  regulation.    See  infra,  Sec.  161, 

2  Kehrer  v.  Stewart,  197  U.  S.  60,  49  L.  Ed.  663  (1904),  affirming  117 
Ga.  969. 


§    153  REGULATION    OF    COMMERCE CONTINUED.  147 

thus  stored  was  not  invalid  as  an  interference  with  interstate 
commerce.! 

On  the  other  hand  a  North  Carolina  tax  upon  all  those  en- 
gaged in  the  business  of  selling  sewing  machines  in  the  State 
was  an  unconstitutional  interference  with  interstate  commerce 
so  far  as  applied  to  the  sale  of  a  single  machine  shipped  into 
the  State  by  a  non-resident  manufacturing  corporation  upon 
the  written  order  of  a  customer  under  an  ordinary  C.  O.  D. 
consignment.  2 

It  will  be  noted  that  in  Brennan  v.  Titusville,^  above  re- 
ferred to,  the  court  referred  to  this  case  and  said  that  it  was  no 
departure  from  the  rule  so  firmly  established  by  the  prior  de- 
cisions, saying: 

''At  least,  no  departure  was  intended,  though,  as  shown  by 
the  division  in  the  court,  and  by  the  dissenting  opinion  of  Mr. 
Justice  Harlan,  the  case  was  near  the  boundary  line  of  the 
State's  power.  In  that  case  the  plaintiffs  were  in  a  general 
commission  business,  not  acting  for  any  particular  firm  within  or 
without  the  State." 

§  153.  The  Supreme  Court  on  Taxation  of  Commercial 
Brokers. — In  another  case,  also  from  Tennessee,  the  Supreme 
Court  reversed  the  judgment  of  the  Supreme  Court  of  that 
State,  and  held  that  parties  who  do  business  only  for  non-resi- 
dents, that  is,  whose  business  is  exclusively  confined  to  soliciting 
orders  from  jobbers  and  wholesale  dealers  in  the  State  as  agents 
for  non-residents,  that  is,  whose  business  is  exclusively  confined 
for  non-resident  parties,  firms  or  corporations,  are  not 
subject  to  a  privilege  tax  for  conducting  such  business.  4 
The  fact  that  a  broker,  as  such,  can  transact  a  local  business 
as  well  as  a  business  for  non-residents,  does  not-  determine  the 


1  Armour  Packing  Co.  v.  Lacey,  200  U.  S.  226,  50  L.  Ed.  451  (1905), 
affirming  134  N.  C.  467.    ' 

See  also  American  Steel  &  W.  Co  v.  Speed,  supra. 

2  Norfolk   &   Wes.   R.   Co.   v.   Simms,   191    U.   S.    441,   48   L.   Ed.    254 
^(1903).  reversing  130  N.  C.   556. 

8  Ficklin  v.  Shelby  County,  supra. 

4Stockard  v.  Morgan,  185  U.  S.  27,  46  L.  Ed.  785   (1902). 


148  REGULATION   OP    COMMERCE CONTINUED.  |    154 

matter,  and,  if  he  confines  himself  to  interstate  business,  he 
can  do  so  without  becoming  liable  to  the  tax.i  The  court  said  at 
page  580: 

"Although  it  is  said  in  the  opinion  of  the  State  court  herein 
that  the  thing  taxed  is  the  occupation  of  merchandise  brokerage, 
and  not  the  business  of  those  employing  the  brokers,  yet  we  have 
seen  from  the  cases  already  cited  that  when  the  tax  is  applied 
to  an  individual  within  the  State  selling  the  goods  of  his  princi- 
pal who  is  a  non-resident  of  the  State,  it  is  in  effect  a  tax 
upon  interstate  commerce,  and  that  fact  is  not  in  any  wise  al- 
tered by  calling  the  tax  one  upon  the  occupation  of  the  individ- 
ual residing  within  the  State  while  acting  as  the  agent  of  a  non- 
resident principal.  The  tax  remains  one  upon  interstate  com- 
merce, under  whatever  name  it  may  be  designated." 

It  therefore  is  established  by  this  judgment  of  the  court  that 
commercial  agents  or  brokers  who  transact  business  exclusively 
for  non-residents,  in  soliciting  purchases  or  sales,  are  not  subject 
to  a  privilege  or  occupation  tax  for  so  doing. 

§  154.    The  Form  of  Commercial  Agency  Immaterial. — ^It  is 

immaterial  therefore  whether  the  agency  in  conducting  inter- 
state commerce  is  that  of  a  drummer  soliciting  sales,  or  of  a 
commercial  broker  negotiating  purchases.  The  essential  fact 
is  that  it  is  interstate  commerce,  that  is,  the  sale  of  property  out 
of  the  State  to  a  resident  of  the  State,  or  of  property  in  the 
State,  or  of  property  in  the  State  to  a  non-resident.  It  is  imma- 
terial whether  the  agent  is  a  commercial  traveler,  or  has  an  office 
as  a  commercial  broker.  He  may  neither  travel  nor  have  an 
office,  but  have  a  room  at  his  hotel,  or  at  his  lodgings,  in  which 
he  exhibits  his  samples  or  negotiates  purchases.  In  the  case 
of  brokerage,  however,  it  seems  that  exemption  from  taxation 
may  be  claimed  only  when  the  business  is  exclusively  for  non- 
residents. 2 


1  Following  and  qu«ting  from  Stratford  v.  Montgomery,  110  Ala. 
619. 

2  See  cases  supra.  Sec.  152  et  seq.,  and  Walton  v.  Augusta,  104  Ga. 
757,  30  S.  E.  Rep.  964,  where  parties  engaged  in  the  commercial  street- 
brokerage  business  were  held  not  exempt  from  municipal  tax. 


§    155  REGULATION   OF   COMMERCE — CONTINUED.  149 

Delivery  is  essential  to  a  sale.  The  agent  delivering  goods 
sold  by  a  drummer  or  commercial  traveler  is  therefore  also 
exempt  from  State  taxation.  Thus  the  salaried  distributing 
agent  for  a  publishing  firm  of  another  State  is  entitled  to  dis- 
tribute the  books  sold  through  another  salaried  agent,  and  a 
license  cannot  be  exacted  without  an  unlawful  interference  with 
interstate  commerce.i  It  is  immaterial  that  the  goods  are  to  be 
sold  on  the  installment  plan.  The  right  to  sell  implies  the  obli- 
gation and  right  to  deliver.  2 

"Commerce  among  the  several  States"  is  a  practical  con- 
ception not  drawn  from  the  "witty  diversities"  of  the  law  of 
sales,  said  the  Supreme  Court,  in  holding  that  interstate  com- 
merce was  unlawfully  burdened  by  the  municipal  ordinance 
exacting  a  license  fee  from  a  person  employed  by  a  foreign  cor- 
poration to  solicit,  within  the  municipality,  orders  for  groceries 
which  the  company  filled  by  shipping  goods  to  him  for  the  de- 
livery to  and  collection  of  the  purchase  price  from  the  customer, 
who  had  the  right  to  refuse  the  goods  if  not  equal  to  the  sample, 
such  goods  always  being  shipped  in  distinct  packages,  corres- 
ponding to  the  several  orders,  except  in  the  case  of  brooms,  which 
after  being  tagged  and  marked  like  the  other  articles,  according 
to  the  number  ordered,  are  thus  tied  together  in  bundles  of 
about  a  dozen  wrapped  up  conveniently  for  shipment.^ 

§  155.  Only  Interstate  Commerce  Agencies  Exempt. — To  se- 
cure exemption  from  the  taxing  power  of  the  State  over  persons 
and  subjects  within  its  jurisdiction,  it  must  appear  that  the  bus- 
iness for  non-residents  is  interstate  commerce. 

"While  interstate  commerce  is  more  than  travel,  and  in  its 
broad  sense  includes  intercourse  and  the  means  of  intercourse, 
it  has  been  held  not  to  include  personal  interstate  contracts,  like 
insurance,  but  to  l)e  limited  to  subjects  of  trade  and  barter 


1  Huntington  v.  Mahan,  142  Ind.  695. 

2  In  re  Spain,  47  Fed.  208.    See  also  Laurens  v.  Elmore,  55  S.  C.  477, 
33  S.  E.  Rep.  560;   Pegues  r.  Ray  (La.),  23  So.  Rep.  904. 

3  Rearick  v.  Pennsylvania,  203  U.  S.  507,  51  L.  Ed.  295    (1906),  re- 
versing 26   Pa.   Sup.   Ct.  384. 


150  REGULATION   OF    COMMERCE — CONTINUED.  §    156 

offered  in  the  market  and  having  an  existence  and  value  inde- 
pendent of  the  parties  to  the  contract,  i 

Thus  neither  the  contract  of  fire  insurance,2  nor  of  marine 
insurance,  3  nor  of  mutual  life  insurance*  constitute  commerce. 
The  making  of  such  contracts,  it  was  said,  is  a  mere  incident 
of  commercial  intercourse,  and  not  commerce  itself. 

This  distinction  was  illustrated  in  two  cases  from  Tennessee. 
The  soliciting  of  pictures  to  be  enlarged  outside  of  the  State 
was  held  to  constitute  interstate  commerce, s  because  the  process 
of  enlarging  involved  the  making  of  a  larger  picture  from  the 
image  of  a  smaller  one,  and  hence  there  was  traffic  or  commerce. 
But  the  business  of  collecting  soiled  linen  in  Tennessee  for  ship- 
ment to  a  Kentucky  laundry  to  be  washed  and  then  returned  was 
not  interstate  commerce. 6  The  court  said,  in  the  latter  case, 
that  there  was  no  commodity  created  of  which  the  ownership 
was  changed.  It  was  simply  a  personal  contract  having  no  ele- 
ment of  a  commercial  transaction. 

On  the  other  hand,  the  selling  of  cloth  by  sample  to  be  made 
up  in  another  State  from  measurements  taken  by  the  salesman, 
and  the  clothing  returned  to  the  purchaser,  is  a  transaction  of 
interstate  commerce.  7 

§  156.  The  Sale  of  Goods  in  the  State  Subject  to  the  Taxing 
Power  of  the  State. — The  principle  of  exemption  has  no  ap- 
plication when  the  goods  sold  by  the  commercial  traveler  or  other 
solicitor  are  actually  in  the  State  when  sold,  as  such  a  sale 
is  not  a  transaction  in  interstate  commerce.  Accordingly  when 
a  salesman  takes  the  goods  about  with  him  and  delivers  them 
when  sold,  a  license  may  be  required  from  him.     See  taxation 


1  Paul  V.  Virginia,  8  Wall.  183,  19  L.  Ed.  357    (1869). 

2  Paul  V.  Virginia,  supra. 

3  Hooper  v.  California,  155  U.  S.  648,  39  L.  Ed.  297   (1895). 

4  N.   Y.    Life   Ins.    Co.   v.    Cravens,    178    U.    S.    389,    44    L.    Ed.    1116 
(1900),  affirming  148  Mo.  583. 

5  Tennessee  v.   Scott,  98  Tenn.  254,  and  36  L.  R.  A.  461. 

6  Smith  V.  Jackson,  54  S.  W.  Rep.  981,  and  47  L.  R.  A.  416. 

7  State  V.  Rakin,  76  N.  W.  Rep.   299,  11   So.  Dak.  144. 


§    156  REGULATION    OP    COMMERCE CONTINUED.  151 

of  peddlers,  infra,  Sec.  158. »  Thus  where  a  corporation  of 
one  State  sends  its  manufactured  goods  into  another 
in  car  load  lots,  and  causes  the  goods  to  be  stored  in  a  storehouse, 
from  which  its  agents  take  them  in  small  quantities,  carry  tliem 
about  the  country,  and  sell  and  deliver  them  to  purchasers, 
such  agents  are  not  engaged  in  interstate  commerce.  In  other 
words,  when  the  goods  are  sent  into  the  State  unsold  and  are 
there  stored  for  sale,  they  became  part  of  the  general  property  of 
the  State  and  amenable  to  its  laws.s  Thus,  in  the  ease  last 
cited  it  was  said  by  the  court,  Caldwell,  J.,  that  while  the  State 
could  not  license  the  selling  by  sample  of  goods  which  were  not 
in  the  State,  it  could  tax  the  privilege  of  selling  them  after  they 
had  been  shipped  into  its  jurisdiction  and  stored  in  a  storehouse, 
in  this  case  a  railroad  depot  rented  for  the  purpose.  The  prop- 
erty then  can  be  taxed  as  other  property  in  the  State.  It  is 
inunaterial  that  the  goods  in  the  State  are  in  the  original  pack- 
ages, provided  of  course  they  are  not  imported  foreign  goods.* 

It  is  immaterial  that  the  goods  sent  into  the  State  on  orders 
forwarded  by  the  drummer  are  packed  in  a  box  and  consigned 
to  him  for  distribution  therefrom.  The  opening  of  the  box  in 
such  ease  does  not  cause  the  property  to  become  mingled  with 
the  property  of  the  State  for  taxation.^ 

Whether  such  goods  thus  sent  into  the  State  and  there  stored 
for  the  purposes  of  sale  are  taxable  or  not,  of  course  depends 
upon  the  laws  of  the  State.  It  has  power  to  tax  them,  because 
they  are  within  its  jurisdiction,  and  it  also  has  power  to  tax 


1  South  Bend  v.  Martin,  142  Ind.  31;  State  v.  French,  109  N.  C. 
722. 

2  American  Harrow  Co.  r.  Shaffer,  68  Fed.  750. 

3  Hynes  v.  Briggs,  41  Fed  468;  Singer  Mfg.  Co.  v.  Wright,  97  Ga. 
114,  35  L.  R.  A.  497. 

4  In  re  May,  82  Fed.  422,  432,  and  see  cases  cited  supra,  Sec.  119 
ct  seq.  See  also  In  re  Nichols,  48  Fed.  164,  where  the  ordinance  im- 
posing a  license  was  held  void  in  the  case  of  a  book  agent,  although 
the  books  sold  by  him  were  delivered  from  a  stock  in  a  branch  office  of 
storeroom  in  Pittsburgh,  replenished  from  time  to  time  by  the  pub- 
lisher. The  point  here  involved,  as  to  the  effect  of  this  renting  of  a 
.storeroom,  was  not  discussed  in  the  opinion. 

6/n  re  Spain,  47  Fed.  208. 


152  REGULATION    OF    COMMERCE — CONTINUED.  §    157 

tlie  business  of  selling  them.  It  has  been  held,  however,  that 
such  sending  of  goods  into  a  State  by  a  foreign  corporation  does 
not  constitute  ''doing  business"  within  the  State.  See  infra, 
Sec.  188.1 

A  party  sells  goods  as  owner,  not  as  agent,  and  is  accord- 
ingly subject  to  a  license  tax,  where,  after  obtaining  orders 
therefor  from  resident  customers  for  a  non-resident  concern, 
he  submits  these  orders,  and;  having  obtained  the  goods,  which 
are  charged  to  him  individually  and  shipped  directly  to  him  in 
bulk,  he  delivers  the  goods  to  the  several  customers  and  collects 
the  price.2  The  distinction  is  between  the  sales  made  by  a  party 
as  agent  for  a  non-resident  principal  and  sales  made  by  a  party 
for  himself  on  his  own  account. 

§  157.  Discrimination  Must  be  More  than  an  Incidental 
Disadvantage.  —  To  constitute  discrimination  in  taxation 
against  a  non-resident  manufacturer  or  dealer,  there  must  be 
more  than  a  mere  incidental  disadvantage,  not  growing  out  of 
any  intention  on  the  part  of  the  legislature  to  make  a  hostile  dis- 
tinction. The  act  must  show^  an  intention  to  discriminate.  Thus, 
in  a  recent  case,3  a  tax  levied  by  the  State  of  Ohio  upon  every 
person,  corporation  or  partnership  carrying  on  the  business  of 
trafficking  in  spirituous,  vinous  or  intoxicating  liquors  was  ad- 
judged valid,  and  the  bill  filed  by  a  brewing  company  of  West 
Virginia  to  enjoin  a  county  treasurer  from  enforcing  a  collec- 
tion of  this  tax  levied  on  beer  shipped  to  the  company's  Ohio 
agent  and  stored  for  delivery  in  its  cold  storage  house,  was  held 
properly  dismissed.     There  was  no  illegal  discrimination  in  the 


1  The  distinction  between  the  taxing  power  of  the  State  over 
property  within  its  jurisdiction  and  the  actual  exercise  of  that  power 
is  illustrated  in  People  ex  rel.  Mills  v.  Commissioners  of  Taxes  of  New 
York,  23  N.  Y.  242,  where  it  was  held  that  manufactured  goods,  owned 
by  non-residents  and  sent  into  New  York  for  mere  purposes  of  sale 
without  reinvestment  of  the  proceeds,  were  not  taxable  under  the  pro- 
visions of  the  New  York  statute. 

2Kimmell  v.  State,  104  Tenn.  184;  see  also  Croy  v.  Obion  County, 
104  Tenn.  525. 

3Reymann  Brewing  Co.  v.  Brister,  179  U.  S.  445,  45  L.  Ed.  269 
(1900),  affirming  92  Fed.  28. 


§    158  EEGULATION   OF    COMMERCE — CONTINUED.  163 

exemption  of  liquors  sold  upon  prescriptions  issued  in  good  faith, 
by  physicians,  or  exclusively  for  chemical,  pharmaceutical  or 
sacramental  purposes;  nor  in  the  fact  that  the  sale  of  liquor  at 
the  manufactory  by  the  manufacturer  in  quantities  of  one  gallon 
or  more  at  one  time,  was  not  subject  to  the  tax.  The  plaintiff 
claimed  that  the  latter  provision  operated  as  an  illegal  discrimi- 
nation against  him,  because  he  must  necessarily  sell  at  places 
other  than  his  manufactory.  The  court,  however,  replied,  that 
manufacturers  both  within  and  without  the  State  could  sell  at 
the  manufactory  and  ship  to  any  part  of  Ohio,  and  the  inci- 
dental disadvantage  that  the  foreign  manufacturer  was  under, 
if  he  wished  to  establish  in  Ohio  a  place  for  making  sales,  did 
not  appear  to  arise  out  of  any  intention  on  the  part  of  the  legis- 
lature to  make  a  hostile  discrimination  against  foreign  manufac- 
turers. The  tax  in  this  case  was  not  an  interference  with  inter- 
state commerce,  but  a  legitimate  exercise  of  the  police  power  of 
the  State  under  the  Wilson  Act.i 

A  revenue  act  requiring  all  merchants  to  pay  as  a  license 
fee  a  certain  per  cent  on  the  total  amount  purchased  in  or  out 
of  the  State,  except  purchases  of  farm  products  from  the  pro- 
ducer, for  cash  or  on  credit,  was  not  a  tax  on  the  privilege 
of  purchasing  the  goods,  but  on  the  goods  themselves  as  part  of 
the  general  mass  of  property  in  the  State,  and  such  a  tax  did  not 
therefore  in  its  application  to  purchases  outside  of  the  State. 
operate  as  an  interference  with,  interstate  commerce.  2  Nor  did 
the  fact  that  merchants  would  probably  buy  more  products  from 
resident  than  non-resident  farmers  constitute  such  interference. 

§  158.  A  Tax  Upon  Peddlers  Without  Discrimination 
Against  Residents  or  Products  of  Other  States  is  Valid. — The 

taxation  of  peddlers  without  discrimination  in  favor  of 
either  the  residents  or  the  products  of  the  State,  is  valid.  Tliis 
was  the  ruling  of  the  State  courts  before  the  Supreme  Court  de- 
cided the  question.3      Thus,  in  the  case  cited,  decided  in  1853,  it 


1  See  supra.  Sec.  135. 

2  Ex  parte  Brown,  48  Fed.  (N.  C.)  435. 

8  See  Commonwealth  v.  Ober  (Mass.),  12  Cush.  493. 


154  REGULATION   OP   COMMERCE — CONTINUED.  §    158 

was  said  by  Chief  Justice  Shaw  in  answer  to  the  objection  that 
the  statute  licensing  peddlers  was  an  interference  with  com- 
merce :  ' '  We  consider  this  as  wholly  an  internal  commerce  which 
the  States  have  a  right  to  regulate,  and  in  this  respect  this  law 
stands  on  the  same  footing  with  the  laws  regulating  sales  of  wine 
and  spirits,  sales  at  auction,  and  very  many  others,  which  are  in 
force  and  constantly  acted  upon." 

The  question  first  came  before  the  Supreme  Court  in  the  case 
of  a  sewing  machine  agent  in  Tennessee,  who  was  held  properly 
convicted  for  the  failure  to  have  a  peddler's  license,  the  court 
saying  that  the  requiring  of  a  license  from  each  peddler  without 
reference  to  the  place  of  growth  or  manufacture  of  his  wares,  was 
neither  a  violation  of  the  constitution  nor  an  attempted  regula- 
tion of  commerce.  1  This  ruling  was  reaffirmed  in  a  later  case, 
whei^  the  Missouri  statute  condemned  by  the  court  in  the  Welton 
ease,  which  had  been  re-enacted  without  the  discriminating 
clause,  was  construed  and  approved.2  The  opinion  says,  at 
page  311 : 

"The  defendant's  occupation  was  offering  for  sale  and  selling 
sewing  machines,  by  going  from  place  to  place  in  the  State  of 
Missouri,  in  a  wagon,  without  a  license.  There  is  nothing  in 
the  case  to  show  that  he  ever  offered  for  sale  any  machine  that 
he  did  not  have  with  him  at  the  time.  His  dealings  were  neither 
accompanied  nor  followed  by  any  transfer  of  goods,  or  of  any 
order  for  their  transfer,  from  one  State  to  another;  and  were 
neither  interstate  commerce  in  themselves,  nor  were  they  in  any 
way  directly  connected  with  such  commerce.  The  only  business 
or  commerce  in  which  he  was  engaged  w^as  internal  and  domestic ; 
and,  so  far  as  appears,  the  only  goods  in  which  he  was  dealing 
had  become  part  of  the  mass  of  property  within  the  State. 
Both  the  occupation  and  the  goods,  therefore,  were  subject  to  the 
taxing  power,  and  to  the  police  power,  of  the  State. 

"The  statute  in  question  is  not  part  of  a  revenue  law.  It 
makes  no  discrimination  between  residents  or  products  of  Mis- 


1  Machine  Co.  v.  Gage,  100  U.   S.  676,  25  L.  Ed.  754    (1880). 

2  Emert  v.  Missouri,  156  U.  S.  296,  39  L.  Ed.  430  (1895),  affirming  103 
Mo.  241.  Among  State  decisions  to  tlie  same  effect  are:  Wrought  Iron 
Range  Co.  v.  Carver,  118  N.  C.  328;  City  of  CarroUton  v.  Bazzette,  159 
111.  284;  Cole  v.  Randolph,  31  La.  Ann.  535;  State  v.  Harrington,  68 
Vt.  622;    State  v.  Richards,  32  W.  Va.  348. 


§    159  REGULATION    OF    COMMERCE — CONTINUED.  155 

soiiri  and  those  of  other  States;  aud  manifests  no  intention  to 
interfere,  in  any  way,  with  interstate  commerce.  Its  object,  in 
requiring  peddlers  to  take  out  and  pay  for  licenses  and  to  ex- 
hibit their  licenses,  on  demand,  to  any  peace  officer,  or  to  any 
citizen  householder  of  the  county,  appears  to  have  been  to  pro- 
tect their  citizens  of  the  State  against  the  cheats  and  frauds,  or 
even  thefts,  which,  as  the  experience  of  ages  has  shown,  are 
likely  to  attend  itinerant  and  irresponsible  peddling  from  place 
to  place  and  from  door  to  door." 

It  was  argued  in  this  case  on  behalf  of  the  company  owning 
the  sewing  machines  which  the  peddler  was  selling,  that  it  had 
forwarded  its  machines  from  its  works  in  another  State  as  "a 
matter  of  interstate  commerce"  to  its  agent,  to  be  sold  by  him 
on  its  account,  and  that  the  exaction  of  a  license  from  Emert 
was  in  effect  a  regulation  of  commerce ;  but  the  court  held  that 
peddling  was  not  interstate  commerce 

§  159.  Definition  of  a  Peddler. — The  court  in  this  case 
adopts  the  definition  of  a  peddler  given  by  Justice  Shaw  in 
Commonwealth  v.  Ober,  supra,  Sec.  158,  as  follows: 

"The  leading  primary  idea  of  a  hawker  and  peddler  is  that 
of  an  itinerant  traveling  trader,  who  carries  goods  about,  in 
order  to  sell  them,  and  who  actually  sells  them  to  purchasers,  in 
contradistinction  to  a  trader  who  has  goods  for  sale  and  sells 
them  in  a  fixed  place  of  business.  Superadded  to  this  (though 
perhaps  not  essential),  by  a  hawker  is  generally  understood  one 
who  not  only  carries  goods  for  sale,  but  seeks  for  purchasers, 
either  by  outcry,  which  some  lexicographers  conceive  as  inti- 
mated by  the  derivation  of  the  word,  or  by  attracting  notice  and 
attention  to  them  as  goods  for  sale,  by  an  actual  exhibition 
or  exposure  of  them,  by  placards  or  labels,  or  by  a  conventional 
signal,  like  the  sound  of  a  horn  for  the  sale  of  fish." 

The  peddler  is  therefore  an  itinerant  trader,  one  who  sells 
and  delivers  wares,  usually  small,  from  house  to  house.  It  is 
not  necessary  that  he  should  be  personally  interested  in  the  sales. 
He  may  be  paid  for  his  services  by  salary  or  otherwise. 

It  is  hold  in  the  District  of  Columbia  that  an  agent  rrtay 
be  compelled  to  take  out  a  peddler's  license  who  sells  goods 
at  retail  from  house  to  house  and  delivers  them  at  the  time 


156  REGULATION    OF    COMMERCE — CONTINUED.  §    160 

of  the  sale,  as  an  advertisement  for  a  wholesaler  who  employs 
him.  1 

In  a  Virginia  case  it  was  said  that  a  peddler  is  a  person 
who  does  not  keep  a  regular  place  of  Lusiness,  either  in  a 
house,  vacant  lot  or  elsewhere,  open  at  all  times  in  regular 
business  hours,  and  who  offers  wares  for  sale. 

§  160.  Peddlers  and  Drummers.— As  a  State  or  municipal 
license  may  be  re(iuired  of  a  peddler,  but  not  of  a  drummer,  the 
question  has  been  raised  in  several  eases  as  to  when  a  party  is 
the  one  or  the  other.2     Thus  it  was  held  in  the  United  States 


iln  re  Wilson  (D.  C),  12  L.  R.  A.  625. 

2  Thus,  in  North  Carolina,  State  v.  Gorham,  115  N.  C.  721,  an  itiner- 
ant who  sold  and  put  up  lightning  rods  was  held  properly  required  to 
take  out  a  license.  There  was  no  violation  of  interstate  commerce,  as 
there  was  a  distinction  between  the  business  of  selling  lightning  rods 
and  putting  them  up,  and  the  State  had  the  right  to  license  the  latter, 
though  no  extra  charge  was  made  therefor. 

In  State  v.  Caldwell,  127  N.  C.  521,  the  agent  of  a  non-resident  por- 
trait company,  having  made  contracts  of  sale  by  samples,  placed  the 
pictures  in  the  frames  in  his  room  at  the  hotel,  and  then  delivered 
them  to  the  purchasers.  The  court  decided  that  this  was  not  interstate 
commerce,  distinguishing  the  case  from  Brennan  v.  Titusville  on  the 
ground  that  no  title  to  the  pictures  passed  until  they  were  put  into 
the  frames  and  delivered.  Judge  Clark  dissented,  holding  that  there 
was  no  breaking  of  bulk  in  the  legal  sense  and  that  the  transaction 
was  in  effect  a  delivery  of  the  article  sold  by  sample. 

In  Georgia,  Racine  Iron  Co.  v.  McCommons,  111  Ga.  536,  the  court 
held  that  an  Itinerant  selling  smoothing  irons  was  none  the  less  a  ped- 
dler because  he  took  his  orders  first  by  sample  and  then,  after  the 
lapse  of  some  period  of  time,  whether  a  day,  week  or  month,  freighted 
himself  with  the  goods  and  filled  the  orders,  which  he  had  previously 
procured  by  a  house-to-house  canvass. 

Contra:  In  Wyoming,  State  v.  Willingham,  9  Wyo.  290,  an  itinerant 
picture  agent  who  not  only  sold  by  sample  but  received  and  distributed 
the  pictures  and  frames,  was  held  to  be  engaged  in  interstate  com- 
merce. 

In  Indiana,  a  book  agent  distributing  books  previously  sold  by 
sample,  was  held  to  be  engaged  in  interstate  commerce.  Huntington  v. 
Mahan,  142  Ind.  695. 

In  Texas,  where  orders  for  groceries  and  medicine  were  taken  by 
sample  and  brand,  forwarded  to  a  non-resident  firm  and  filled  on  ap- 
proval, and  the  goods  were  shipped  back  in  boxes  consigned  to  the  firm 


§    160  REGULATION   OF    COMMERCE — CONTINUED.  157 

Circuit  Court  in  Missouri,i  that  a  single  sale  by  a  drummer  who 
was  selling  by  samples,  effected  by  his  delivery  of  the  article 
that  he  carried  with  him  as  a  sample,  did  not  make  him  a  ped- 
dler within  the  meaning  of  the  Statute  of  Missouri  requiring  a 
license  of  peddlers.    The  court  said : 

"To  hold  that  such  sporadic,  casual  sale  fixes  upon  the  party 

the  office  of  a  dealer  does  not  obtain  outside  of  the  practice 
under  the  revenue  laws,  which  are  designedly  rigid  and  con- 
trolled by  the  letter  of  the  act." 

But  a  party  is  none  the  less  a  peddler  within  the  meaning 
of  the  statute  exacting  a  license  from  itinerant  traveling  trad- 
ers, when  he  goes  from  house  to  house  and  sells  and  delivers 
goods  which  he  carries  with  him,  although  he  may  occasionally 
sell  by  sample  and  forward  the  order  to  his  non-resident  prin- 
cipal. In  other  words,  it  is  immaterial  that  he  occasionally 
transact  business  in  interstate  commerce,  if  he  is  at  the  same 
time  a  peddler  within  the  meaning  of  the  State  statute.  Thus, 
in  a  case  under  the  same  Missouri  law,  the  party  went  from 
house  to  house  carrying  a  single  harrow  with  him,  which  h'e 
sometimes  sold  and  delivered,  and  then  replaced  by  another  from 
the  warehouse  where  the  harrows  were  stored,  but  which  in  other 
cases  he  used  as  a  sample  and  thereafter  filled  the  order.  The 
Supreme  Court  of  the  State  held  that  this  agent  was  a  peddler. 
In  this  case,  however,  the  harrows  were  stored  in  the  State,  so 
that  the  transaction  in  any  event  was  not  one  of  interstate  com- 
merce. - 


in  Texas,  where  they  were  unpacked  and  delivered  to  the  purchasers 
from  the  car,  it  was  held  that  this  was  interstate  commerce.  Turner 
V.  State,  41  Tex.  Crim.  Rep.  545.  See  also  Miller  v.  Goodman,  40  S.  AV. 
Rep.  718. 

1  In  re  Houston,  47  Fed.  539. 

2  State  V.  Snoddy,  128  Mo.  523;  State  v.  Wessell,  109  N.  C.  735; 
American  Harrow  Co.  v.  Shaffer,  68  Fed.  750.  See  also  French  v. 
The  State,  52  L.  R.  A.  160,  where  the  court  held  that  the  agent  of  a 
non-resident  organ  company  carrying  an  organ  in  a  wagon  which  he 
sometimes  delivered  and  sometimes  used  as  a  sample,  sending  an 
order  for  one  to  be  shipped  to  the  purchaser,  was  engaged  in  inter- 
state commerce. 


158  REGULATION    OF    COMMERCE — CONTINUED.  §    161 

Some  of  the  State  courts  and  United  States  Circuit  Courts, 
particularly  befoj-e  the  decision  of  the  Supreme  Court  in  Emert 
V.  Missouri,  in  sustaining  the  right  to  tax  peddlers,  held  that  the 
original  packages  shipped  from  other  States  were  still  the  sub- 
jects of  interstate  commerce  until  sold,  although  stored  in  a 
warehouse  in  the  State.i  But,  as  already  shown,  see  Sec.  125, 
supra,  the  original  package  in  interstate  commerce,  when  stored 
in  the  State  unsold,  is  protected  against  its  police  power,  but  not 
against  its  taxing  power.  One  State  cannot  exclude  the  original 
package  coming  from  another  without  the  consent  of  Congress; 
but  when  stored  within  its  jurisdiction  for  the  account  of  the 
non-resident  owner,  it  is  subject  to  taxation  like  other  property 
of  the  State ;  see  authorities  supra,  Sec.  121.  The  State  therefore 
has  the  power  to  tax,  not  only  the  property,  but  also  the  occu- 
pation of  selling  it.  The  test  of  its  taxing  power  is  the  presence 
of  the  property  sold  within  its  jurisdiction  at  the  time  of  the 
sale. 

§  161.  Licensing  Under  the  Police  Power. — The  State  can 
license  occupations  as  well  for  police  regulation,  in  the  interest 
of  public  health  and  morals,  as  for  purposes  of  revenue.  The 
licensing  of  itinerant  traders  has  been  sustained  on  both  grounds. 
Thus  the  Supreme  Court  said  in  Emert  v.  Missouri,  supra,  Sec. 
158,  that  the  object  of  the  statute  in  that  case  under  considera- 
tion was  to  protect  the  citizens  against  the  cheats  and  frauds,  or 
even  thefts,  which  the  experience  of  ages  had  shown  were  likely 
to  attend  itinerant  and  irresponsible  peddling  from  place  to 
place  and  from  door  to  door, 

A  statute  then,  obviously  intended,  not  to  raise  revenue,  but 
to  protect  the  public,  will  be  sustained,  although  incidentally 
it  may  affect  interstate  commerce.     See  note.  Sec.  152,  supra. 

Thus,  in  an  Iowa  case, 2  a  license  on  itinerant  vendors  of 
drugs  was  held  valid,  although  defendant  sold  in  the  original 


1  See  French  v.  The  State,  supra;  Commonwealth  v.  Harmel,  166  Pa. 
89. 

2  Iowa  V.  Wheelock,  95  Iowa,  577;   State  v.  Smithson,  106  Mo.  149. 
See  also  Commonwealth  v.  Newhall,  164  Mass.  338. 


§    162  REGULATION   OF    COMMERCE — CONTINUED.  159 

packages,  the  court  saying  that  the  primary  object  of  the  act 
was  not  to  derive  revenue  for  the  State,  but  in  large  part  at 
least  to  protect  its  citizens,  against  solicitations  and  harmful 
practices  of  irresponsible  and  unknown  vendors  of  drugs,  and 
that  the  prohibited  act  could  be  committed  without  any  sale. 

Licenses  required  of  liquor  dealers  are  therefore  within  the 
legitimate  police  power  of  the  State.  But  even  such  licenses 
must  not  discriminate  against  the  citizens  or  products  of  other 
Stat€S,i  nor  can  there  be  any  interference,  without  the  consent 
of  Congress,  with  the  shipment  of  original  packages  into  the 
State.  But  the  requirement  of  license,  though  the  issue  of  it  de- 
pends upon  the  permission  of  a  majority  of  a  board  and  the 
approval  of  adjacent  property  owners,  provided  there  be  no  dis- 
crimination, is  not  in  violation  of  the  Federal  Constitution. 2 

§  162.  Police  Power'Cannot  Interfere  With  Interstate  Com- 
merce.— The  police  power  of  the  State,  therefore,  whatever 
may  be  the  subject,  must  be  exercised  subject  to  the  national  con- 
trol over  commerce.  It  cannot  interfere  with  this,  under  the 
guise  of  restraining  peddling  from  door  to  door  by  irresponsible 
parties.  Thus  it  was  strongly  urged  in  the  case  of  Brennan  v, 
Titusville,  supra,  Sec.  151,  in  the  words  of  the  Supreme  Court 
of  the  State,  that  if  canvassers,  hawkers  and  peddlers  coming 
from  other  States  and  infesting  the  homes  of  the  citizens  at  all 
seasons  and  imposing  their  worthless  goods  upon  gullible  or  in- 
experienced housemaids  or  housewives,  should,  under  the  guise 
of  interstate  commerce,  be  permitted  without  any  restraint  what- 
ever to  go  on  deceiving  and  injuring  the  public,  it  would  be 
a  startling  and  unlooked  for  result  of  the  investment  of  the  gen- 
eral government  with  the  power  to  regulate  commerce.    But  the 


'  Tiernan  v.  Rinker,  102  U.  S.  123,  26  L.  Ed.  103  (1880);  Walling  v. 
Michigan,  116  U.  S.  446,  29  L.  Ed.  691  (1884);  reversing  People  v. 
Walling,  53  Mich.  264;  Minneapolis  Brewing  Co.  v.  McGillivray,  104 
Fed.  258;  see  also  Pabst  Brewing  Co.  v.  Terre  Haute,  98  Fed. 
330;  State  v.  Zophy,  84  N.  W.  R.  391,  14  S.  Dak.  119;  Cullman  v. 
Arndt,   125   Ala.    581,   State  v.   Lichtenstein,   44   W.   Va.   99. 

■^  In  re  Christensen,  85  Cal.  208;  Ilinson  v.  Lott,  8  Wall.  148,  19  L. 
Ed.  387   (1869). 


160  REGULATION   OF    COMMERCE — CONTINUED.  §    163 

Federal  Supreme  Court  answered,  page  298,  that  the  license  did 
not  purport  to  be  exacted  in  the  exercise  of  the  police,  but 
rather  in  the  taxing  power,  and  that  it  was  not  designed  to  pro- 
tect from  imposition  or  wrong  either  minors,  habitual  drunk- 
ards, or  persons  under  any  other  affliction  or  disability.  There 
was  no  charge  that  the  goods  which  defendant  was  engaged  in 
selling,  i.  e.,  pictures  and  picture  frames,  were  open  to  any  con- 
demnation, and  they  were  in  fact  unchallenged  subjects  of  com- 
merce. *' There  is  no  charge  of  dealing  in  obscene  or  indecent 
pictures,  or  that  the  pictures,  or  the  frames,  were  in  any  manner 
dangerous  to  the  health,  morals,  or  general  welfare  of  the  com- 
munity." The  court  therefore  held  that  the  act  was  not  a  legiti- 
mate exercise  of  the  police  power,  but  was  a  direct  interference 
with  interstate  commerce. i 

§  163.  Supreme  Court  Not  Concluded  by  Title  of  Act  to 
Purpose  of  Act. — In  determining  whether  a  license  is  exacted 
in  the  legitimate  exercise  of  the  police  power  of  the  State,  the 
Supreme  Court  is  not  concluded,  as  to  the  purpose  of  the  act, 
by  either  the  recital  of  the  purpose  or  the  title.    Thus,  in  Bren- 


1  In  Arnold  v.  Yanders,  56  Ohio  417,  47  N.  E.  Rep.  50,  the  act  of 
Ohio,  making  it  unlawful  to  sell  or  expose  for  sale  within  the  State 
convict  made  goods  without  first  obtaining  a  license  of  $500  per 
annum,  was  held  void  as  interfering  with  commerce. 

The  Texas  statute  imposing  an  occupation  tax  of  $500  upon  every 
person,  firm  or  association  engaged  In  selling  the  "Sunday  Sun,"  the 
"Kansas  City  Sunday  Sun,"  or  other  publications  of  like  character,  be- 
ing applicable  to  all  persons,  whether  residents  of  the  State  or  not,  en- 
gaged in  selling  "publications  of  like  character"  with  those  specifically 
mentioned,  was  held  not  a  discrimination  against  either  the  person  or 
the  property  of  the  owners  of  the  publications  named,  but  a  legitimate 
exercise  of  the  police  power,  and  therefore  not  invalid  as  a  regulation 
of  interstate  commerce.     Preston  v.  Finley  (C.  C.)   72  Fed.  850. 

See  also  similar  statute  sustained  in  17  Tex.  App.  253. 

See  also  Phillips  v.  Mobile,  208  U.  S.  472,  52  L.  Ed.  578  (1908),  Muni- 
cipal license  tax  imposed  upon  those  selling  beer  by  the  barrel,  half 
barrel  or  quarter,  held,  as  applied  to  interstate  transactions  in  the 
original  packages  as  an  exercise  of  the  police  power,  permitted  by  the 
license  act  of  1890,  as  lawfully  enacted  in  the  exercise  of  the  police 
powers,  though  revenue  may  be  derived  from  the  ordinance. 


§    164  REGULATION    OF    COMMERCE — CONTINUED.  161 

nan  v.  Titusville,  supra,  Sec.  151,  while  the  court  found  that  the 
ordinance  was  declared  in  the  title  to  be  for  general  revenue  pur- 
poses, it  said  that  even  if  that  declaration  had  been  reversed  and 
the  license  had  been  declared  in  terms  to  have  been  enacted  as  a 
police  regulation,  that  would  not  decide  this  question,  for  what- 
ever may  be  the  reason  given  to  justify,  or  the  power  invoked 
to  sustain,  the  act  of  the  State,  if  that  act  is  one  which  trenches 
directly  upon  that  which  is  exclusively  within  the  jurisdiction 
of  the  national  government,  it  cannot  be  sustained.  The  Supreme 
Court,  however,  in  this  as  in  other  cases,  adopts  the  construction 
given  by  the  State  court  to  the  statute,  and  then  determines 
whether  the  statute  as  thus  construed  and  enforced  by  the  State 
court  is  an  interference  with  interstate  or  foreign  commerce. 
See  supra,  See.  65. 

§  164.  When  a  License  Tax  Act  Void  in  Part  is  Void  in 
Toto. — "When  a  discriminating  feature  of  a  statute,  or  a  pro- 
vision laying  a  tax  upon  sales  by  non-residents  and  thus  inter- 
fering with  commerce,  is  held  void,  whether  other  provisions  of 
the  statute,  providing  for  the  taxation  of  residents  and  parties 
not  engaged  in  interstate  commerce,  are  void  likewise  is  a  matter 
of  construction  of  the  State  statute,  upon  which  the  judgment  of 
the  State  court  is  conclusive,  so  that  no  Federal  question  is 
raised.  The  decision  obviously  depends  upon  whether  it  can  be 
assumed  that  the  legislature  would  have  enacted  the  statute 
without  the  discrimination.!  Thus  in  the  Income  Tax  Oases  the 
Supreme  Court  held  that  the  tax  upon  incomes  constituted  an 
entire  scheme  of  taxation,  which  Congress  would  not  have  en- 
acted except  as  an  entirety;  and  the  invalidity  of  certain  pro- 
visions was  therefore  held  to  invalidate  the  law.2 

For  the  purpose  of  avoiding  judicial  annullment  of  the  entire 
act,  clauses  are  sometimes  inserted  in  revenue  enactments  pro- 
viding that  the  sections  of  the  act  shall  be  deemed  severable  and 
that  the  invalidity  of  one  section  shall  not  affect  the  other 
provisions  of  the  act.     Obviously  the  effect  to  be  given  to  such 


1  See  State  v.   O'Connor,   5   N.   Dak.   629. 

2  Infra,  Sec.  560. 


162  REGULATION   OP    COMMERCE — CONTINUED.  §    166 

legislative  declaration  must  depend  upon  the  facts  of  the  spe- 
cific case,  and  it  must  still  be  a  judicial  question  as  to  how  far 
sections  are  severable,  that  is,  how  far  the  invalidity  of  one  sec- 
tion of  an  act  affects  the  remainder  of  the  act.'^ 

§  165.  The  Separate  Delivery  of  Portrait  Frames  Not  Tax- 
able.— A  dealer  in  New  York  sent  soliciting  agents  to  Vir- 
ginia, who  took  their  orders  on  blanks  furnished  by  the  company 
for  portraits,  giving  the  purchasers  tickets  entitling  them  to  ap- 
propriate frames  to  be  thereafter  shipped,  the  court  held2  that 
this  purchase  of  the  frames  was  not  a  separate  transaction  but  a 
part  of  the  interstate  transaction  between  the  non-resident  manu- 
facturer and  the  customer,  and  from  the  point  of  view  of  com- 
merce the  business  was  one  affair.  The  court  again  said  this  il- 
lustrated that  commerce  among  the  States  was  a  practical 
one  and  not  a  technical  conception.  The  conviction  for  peddling 
without  a  license  was  therefore  reversed. 

To  the  same  effect  was  the  ruling  in  a  North  Carolina  cases 
where  the  delivery  of  pictures  and  frames  was  effected  through 
two  agents  instead  of  one,  and  that  this  made  it  none  the.  less  in- 
terstate commerce.  The  court  said  that  the  negotiations  of  sales 
of  goods  which  are  in  another  State,  for  the  purpose  of  introduc- 
ing them  into  the  State  in  which  the  negotiation  is  made,  is  inter- 
state commerce. 

§  166.  Orders  for  Purchases  or  Sales  on  Future  Deliveries 
Not  Exempt  from  State  Taxation. — There  is  no  interference 
with  interstate  commerce  in  a  tax  on  transfers  of  cor- 
porate stock  under  the  New  York  statute  as  applied  to  the  sales 
for  future  delivery  of  corporate  stock  between  two  non-residents. 
The  court  said  that  the  immediate  object  of  the  sale  was  the  cer- 
tificate of  a  stock  then  present  in  New  York  and  this  was  the  con- 
stituent of  title. 4 


1  See  recent  U.  S.  Revenue  Acts  in  Appendix. 

2  Davis  V.    Virginia,   236   U.    S.   697,   59   L.   Ed.    795,   reversing  113 
Va.  562  (1915). 

3  Caldwell  v.  North  Carolina,  187  U.  S.  622,  47  L.  Ed.  336   (1903). 

4  New  York  ex  rel.  Hatch  v.  Reardon,  204  U.  S.  152,  51  L.  Ed.  415 
(1907),  affirming  184  N.  Y.  431. 


§    166  REGULATION    OF    COMMERCE CONTINUED.  163 

The  license  tax  of  Mobile,  Alabama,  upon  the  business 
of  buying  and  selling  cotton  on  future  delivery  was  not 
interstate  commerce.!  The  court  said  that  the  business  of  taking 
orders  on  commission  for  the  purchase  and  sale  of  grain  and 
cotton  for  future  delivery,  and  transmitting  these  orders  to  other 
States  was  not  interstate  commerce  so  as  to  be  exempt  from  State 
taxation.  Where  these  contracts  resulted  in  actual  delivery,  the 
property  was  bought  in  the  State  to  which  the  orders  were  trans- 
mitted and  there  held  for  the  purchaser,  and  in  those  eases  where 
there  was  a  delivery  upon  a  contract  or  sale  made  by  the  broker, 
the  seller  was  at  liberty  to  acquire  the  property  in  the  market 
where  the  delivery  was  required  or  elsewhere. 


1  Ware  v.  Mobile  County,  209  U.  S.  405,  52  L.  Ed.  855  (1908),  affirm- 
ing 146  Ala.  163. 


CHAPTER     V. 

FOREIGN     CORPORATIONS     IN     INTERSTATE     COMMERCE. 

167.  Rights  of  foreign  corporations  in  interstate  commerce. 

168.  Foreign  corporation  "does  business"  in  State  only  tlirough 

comity  of  State. 

169.  Right  to  impose  discriminating  taxation  as  condition  of  admis- 

sion into  State. 

170.  Foreign  insurance  companies. 

171.  Same  principle  extended   to   foreign  insurance  associations. 

172.  Foreign  corporations  not  admitted  into  State  under  United 

States  treaty. 

173.  State  has  power  to  change  conditions  of  admission  of  foreign 

corporations. 

174.  Retaliatory  legislation  in  condition  for  admission. 

175.  Pembina  Mining  Company  v.   Pennsylvania. 

176.  Horn  Silver  Mining  Company  v.  New  York. 

177.  Right  to  discriminate  against  foreign  corporations. 

178.  Discrimination   limited   to   imposition  of  conditions  for   ad- 

mission. 

179.  Distinction  however  academic  rather  than  practical. 

180.  Impairment  of  obligation  of  a  contract  in  exclusion  of  foreign 

corporation. 

181.  Discontinuance  of  business  by  foreign  life  insurance  company. 

182.  Admission  of  foreign  company  held  to  involve  a  contract  right. 

183.  Holding  United  States  bonds  by  foreign  corporation  does  not 

exempt  it  from  taxation  on  corporate  franchises. 

184.  Nor  is  foreign  corporation  engaged  in  importing  business 

exempt  from  tax  on  corporate  franchises. 

185.  Tax  upon  capital  employed  within  State. 

186.  Discrimination  in  favor  of  State  manufacturers  in  foreign  cor- 

poration tax. 

187.  "Doing  business"  in  State. 

188.  What  is  not  "doing  business"  in  State. 

189.  Ownership  of  property  in  State  does  not  of  itself  constitute 

"doing  business"  in  State. 

190.  Holding  stock   in   domestic   company   by   foreign   company   is 

not  "doing  business"  by  latter  in  State. 

191.  Supreme   Court  of  Pennsylvania  on   what  constitutes   "doing 

business." 

192.  What  is  "doing  business"   in   State. 

(164) 


§    167      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.  165 

193.  "Doing  business"  by  holding  interest  in  limited  partnership. 

194.  Must  have  business  domicile  in  State. 

195.  Corporations  engaged  in  Federal  business  or  interstate  com- 

merce. 

196.  Corporations  engaged  in  "Carrying  on  Interstate  Commerce." 

197.  The  revocation  of  the  right  to  do  business  not  applicable  to 

interstate  carriers. 

198.  Payment  of  tax  under  threat  of  forfeiture  of  right  to  do  busi- 

ness not  voluntary. 

199.  Corporate  franchise  taxes  in  relation  to  interstate  commerce. 

200.  Corporations  carrying  on  interstate  commerce  not  exempt 

from  charges  for  privilege  of  incorporation. 

§  167.  Rights  of  Foreign  Corporations  in  Interstate  Com- 
merce. —  In  the  protection  of  interstate  commerce  against 
discriminating  or  interfering  State  taxation,  there  is  no  distinc- 
tion between  non-resident  individuals  and  corporations.  Corpor- 
ations, it  is  true,  are  not  citizens  within  the  meaning  of  Article 
IV.,  Sec.  2  of  the  Constitution,  providing  that  citizens  of  each 
State  shall  be  entitled  to  all  the  privileges  and  immunities  of 
citizens  in  the  several  States,  though  they  are  persons,  as  will 
be  seen,  within  the  meaning  of  the  Fourteenth  Amendment,  and 
therefore  entitled  to  due  process  of  law  and  the  equal  protec- 
tion of  the  laws.  The  right  to  engage  in  interstate  commerce, 
however,  does  not  depend  upon  citizenship,  and  the  capacity  of 
the  foreign  corporation  to  do  so  must  be  determined  by  its  own 
charter  as  granted  by  the  State  of  its  creation,  and  by  the  law 
of  the  State  in  which  it  is  carrying  on  business.  A  manufactur- 
ing company  therefore,  incorporated  and  doing  business  under 
the  laws  of  one  State,  can  send  its  commercial  travelers  soliciting 
sales  through  other  States,  and  may  ship  its  goods  to  the  pur- 
chasers or  to  its  agents  for  delivery  to  purchasers.  In  like 
manner,  foreign  corporations  may  employ  commercial  agents 
in  different  States,  and  such  agents  will  be  entitled  to  the  same 
protection  in  transacting  interstate  commerce  as  if  they  were 
employed  by  non-resident  individuals.  These  principles  are  so 
well  established  that  it  is  unnecessary  to  cite  authorities  in  their 
support.^ 


1  Coit  V.  Sutton,  102  Mich.  324,  25  L.  R.  A.  819,  and   cases    cited    in 
opinion. 


166  FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.       §    169 

§  168.  Foreig-n  Corporation  Does  Business  in  State  Only 
Through  Comity  of  State.  —  It  is  equally  well  established 
that  the  foreign  corporation,  unless  actually  employed  in 
the  service  of  the  Federal  government  or  in  furnishing  the 
facilities  of  interstate  commerce,  e.  g.,  an  interstate  carrier,  can- 
not come  into  a  State  and  *' do  business"  therein  without  the  con- 
sent of  the  State.  1  While  the  foreign  corporation  may  sell  its 
goods  in  the  State,  or  solicit  sales  in  the  transaction  of  inter- 
state commerce,  as  a  right,  it  can  only  establish  itself  in  the 
State  and  do  business  therein,  as  a  privilege  granted  by  the  State. 
"While  the  State  cannot  tax  the  exercise  of  the  right,  it  can  tax 
the  enjoyment  of  the  privilege.  As  the  State  has  the  right  to 
exclude  foreign  corporations,  it  necessarily  has,  involved  therein, 
the  right  to  impose  conditions  on  their  admission  into  its  juris- 
diction. 2 

§  169.  Right  to  Impose  Discriminating"  Taxation  as  Condi- 
tion of  Admission  Into  State. — As  the  State  has  the  right  to 
determine  the  conditions  of  admission  of  foreign  corporations 
into  the  State  to  do  business  therein,  it  has  the  right  to  make 
the  grant  of  this  privilege  conditional  upon  the  payment  of  a 
license  tax  and  to  fix  the  sum  in  its  discretion.  The  absolute 
power  of  exclusion  includes  the  right  to  allow  a  conditional  and 
restricted  exercise  of  the  corporate  powers  in  the  State.  The 
situation  is  analogous  to  the  grant  of  a  corporate  charter  by  the 
State,  which  confers  the  right  to  act  in  a  corporate  capacity 
upon  such  terms,  as  it  deems  proper.  In  like  manner,  the  grant 
to  a  foreign  corporation  of  the  right  to  act  in  a  corporate  capac- 
ity within  the  State  is  made  upon  such  terms  as  the  State  deems 
proper  to  impose. 

The  taxation  of  shares  of  a  foreign  corporation  owned  by  in- 
habitants in  the  State,  while  shares  in  domestic  corporations  are 
only  taxable  when  the  property  of  the  corporation  is  not  exempt 


iBank  of  Augusta  v.  Earle,  13  Peters  519,  10  L.  Ed.  274  (1839);  La- 
fayette Ind.  Co.  V.  French,  18  How.  451,  452,  15  L.  Ed.  451  (1856). 

2  Waters-Pierce  Oil  Co.  v.  Texas,  177  U.  S.  28,  44  L.  Ed.  657  (1900); 
affirming  19  Tex.  Civ.  ^p.  1. 


§    171      FOREIGN    CORPORATIONS    IN    INTERSTATE   COMMERCE.  167 

and  not  taxable  to  the  corporation  itself,  is  not  inconsistent  with 
substantial  equality  and  does  not  violate  the  commerce  clause  of 
the  Constitution.! 

§  170.    Foreign  Insurance  Companies. — This  principle  was 

illustrated  in  a  case  from  Illinois,  where  the  Supreme  Court 
held  valid  a  license  tax  exacted  from  foreign  insurance  com- 
panies of  two  dollars  upon  every  one  hundred  dollars  of  prem- 
ium collected  in  Illinois.2  This  sum  was  charged  as  the  amount 
of  the  license  to  be  paid  as  a  condition  of  doing  business  in  the 
State.  The  court  quoted  one  of  its  former  decisionss  to  the  effect 
that  a  foreign  insurance  company  has  no  right  to  do  business  in 
the  State  without  the  State's  consent,  and  that  the  business  of 
insurance  is  not  interstate  commerce,  and  concluded :  *  *  as  to  the 
nature  or  degree  of  discrimination,  it  belongs  to  the  State  to  de- 
termine, subject  only  to  such  limitations  on  her  sovereignty  as 
may  be  found  in  the  fundamental  law  of  the  Union." 

§  171.  Same  Principle  Extended  to  Foreign  Insurance  Asso- 
ciations.— The  same  ruling  was  extended  by  the  court  to  an 
English  association  organized  under  what  was  known  as  a 
''deed  of  settlement,"  legalized  and  enlarged  by  the  acts  of  Par- 
liament, which  had  many  of  the  attributes  generally  found  in 
corporations  for  pecuniary  profit.  It  had  a  distinctive  name 
and,  under  the  statute,  could  sue  and  be  sued  in  the  name  of 
one  of  its  officers,  though  it  had  no  common  seal.  The  State  of 
Massachusetts  enacted  a  statute  imposing  a  tax  of  four  per  cent 
upon  all  premiums  collected  by  a  foreign  insurance  company, 
two  per  cent  upon  those  of  companies  incorporated  under  the 
laws  of  another  State  of  the  United  States,  only  one  per  cent 
upon  those  of  a  Massachusetts  company,  and  no  tax  at  all  where 
the  business  of  insurance  was  transacted  by  natural  persons, 
citizens  of  Massachusetts.     It  was  argued  that  this  association 


1  Darnell  v.   Indiana,  226  U.  S.   390,  57  L.  Ed.  267    (1912),  affirming 
174  Ind.  143. 

2  Ducat  V.  Chicago,  10  Wall.  410,  19  L.  Ed.  972  (1871). 
»Paul  V.  Virginia,  8  Wall.  168,  19  L.  Ed.  357   (1869). 


168  FOREIGN    CORPORATIONS   IN   INTERSTATE   COMMERCE.      §    173 

was  not  a  corporation,  but  a  body  of  natural  persons.  But  the 
court  held,  affirming  the  Supreme  Court  of  Massachusetts,'- 
that,  as  the  law  of  corporations  is  understood  in  this  coun- 
try, the  association  was  a  corporation,  and  that  the  court 
could  pay  no  attention  to  the  local  policy  of  England  in  de- 
termining whether  an  association  was  an  incorporated  body. 
The  court  therefore  said  that  the  company  could  not  exer- 
cise its  functions  in  the  State  of  Massachusetts  without  the 
payment  of  this  specific  tax  as  a  condition,  and  that  the  im- 
position of  such  a  tax,  discriminating  as  it  was,  was  no  viola- 
tion of  the  Federal  Constitution  or  of  any  treaty  protected 
by  it. 

§  172.  Foreign  Corporations  Not  Admitted  Into  State  Un- 
der United  States  Treaty. — As  the  right  of  the  State  to  deter- 
mine who  shall  act  in  a  corporate  -capacity  within  its  limits  is 
an  attribute  of  its  sovereignty,  subject  only  to  the  control  of  the 
Constitution  of  the  United  States,  it  follows  that  a  corporation 
organized  in  a  foreign  country,  having  its  principal  place  of 
business  there,  can  derive  no  right  to  do  business  in  the  State 
through  treaty  stipulations  between  the  United  States  and  that 
country.  Thus  it  was  held  that  a  corporation  organized  in  Eng- 
land was  not  a  subject  of  that  country  within  the  meaning  of  the 
treaty  giving  its  subjects  the  right  to  do  business  in  any 
State  of  the  Union  on  the  same  terms  as  natives.- 

§  173.  State  Has  Power  to  Change  Conditions  of  Admis- 
sion of  Foreign  Corporations. — As  the  State  has  poAver  to  ex- 
elude  entirely,  it  has  power  also  to  change  the  conditions  of  ad- 
mission of  foreign  corporations  at  any  time  for  the  future,  and 
to  impose  as  a  condition  the  payment  of  a  new  tax  or  the  pay- 


1  Liverpool  Ins.  Co.  v.  Massachusetts,  10  Wall.  566,  19  L.  Ed.  1029 
(1871).  Justice  Bradley  concurred  in  the  result,  but  thought  the  com- 
pany was  a  special  partnership  or  joint-stock  company,  which  came 
nevertheless  within  the  scope  of  the  Massachusetts  statute.  See  also 
Southern  B.  &  L.  Assn.  v.  Norman,  98  Ky.  294. 

2  Scottish  Union  Ins.  Co.  v.  Herriott,  109  Iowa  606.  See  also  Liver- 
pool Ins.  Co.  V.  Massachusetts,  supra,  Sec.  171. 


§    174      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.  169 

nieiit  of  a  further  tax  as  a  license  fee.  Wheu  it  requires  such  li- 
cense fee  as  a  prerequisite,  for  the  future,  the  foreign  cor- 
poration, until  it  pays  it,  is  not  admitted  within  the  State. 
''It  is  outside,  at  the  threshold,  seeking  admission,  with  con- 
sent not  yet  given."  It  is  immaterial  what  is  the  occasion  of  the 
change.  This  was  the  decision  of  the  Supreme  Court^  in  a  case 
from  New  York,  where  a  change  in  the  amount  of  the  annual 
license  was  complained  of,  which  effected  a  discrimination  as 
between  corporations  coming  from  one  State  and  those  of  the 
same  class  coming  from  others. 

This  power  of  the  State  to  exact  a  further  tax  does  not  mean 
that  the  State  can  deny  any  contract  rights  secured  to  the  cor- 
poration by  its  admission,  see  infra,  Sec.  182 ;  nor  can  it  place  a 
tax  upon  the  corporation's  rights  beyond  the  jurisdiction  of  the 
State,^  nor  a  tax  which  is  an  interference  with  or  a  burden 
upon  interstate  commerce.^ 

§  174.    Retaliatory  Legislation  in  Condition  for  Admission. 

— In  the  case  of  the  Philadelphia  State  Association,  the  change 
in  the  conditions  of  admission  was  effected  through  what  is 
known  as  retaliatory  legislation,  that  is,  the  statute  provided 
that,  whenever  the  laws  of  any  State  should  require  from  a 
New  York  insurance  company  a  greater  license  fee  than  the  laws 
of  New  York  should  then  require  of  all  insurance  companies  of 
such  other  State,  all  such  companies  of  such  other  State  should 
pay  in  New  York  a  license  fee  equal  to  that  imposed  by  such 
other  State  on  New  York  companies.  This  act  was  contested  in 
the  State  court  on  the  ground  that  it  was  an  unlawful  delega- 
tion of  legislative  power.     But  the  court  held  that  the  act  of 


1  Philadelphia  Fire  Association  v.  New  York,  119  U.  S.  1.  c.  110,  p. 
119,  30  L.  Ed.  342  (1886).  Justice  Harlan  dissented,  saying  that  Penn- 
sylvania corporations  could  not  be  subjected  to  higher  taxes  in  N.  Y. 
than  are  imposed  there  upon  corporations  of  the  same  class  from  other 
States;  that  this  was  a  violation  of  the  equality  required  by  the  Four- 
teenth Amendment.    See  infra,  "Equal  Protection  of  the  Laws,"  Ch.  XV. 

'•:  See  Green  Company  v.  Looney,  218  Fed.  260,  N.  Dist.  of  Texas 
(1914),  three  judges  sitting. 

3  See  infra,  Sec.  196. 


170  FOREIGN    CORPORATIONS   IN   INTERSTATE   COMMERCE.      §    175 

legislation  was  complete,  and  that  it  was  competent  to  make 
the  increase  take  effect  in  a  given  contingency.^  Such  provisions 
exist  in  the  statutes  of  many  of  the  States,  and  have  been  al- 
most uniformly  sustained.^ 

In  the  Kansas  ease  cited  it  was  said  in  the  opinion  by 
Judge  Brewer,  afterwards  Justice  Brewer  of  the  Supreme 
Court,  that  such  a  provision  is  more  properly  to  be  deemed 
one  for  reciprocity  than  for  retaliation,  and  that  it  is  no 
violation  of  the  provision  of  the  State  constitution  for  equality 
in  taxation,  as  the  classification  of  foreign  corporations  by 
States  is  a  reasonable  and  proper  one. 

The  Supreme  Court  in  Philadelphia  Fire  Assn.  v.  New  York, 
supra,  Sec.  173,  only  discussed  the  Federal  question,  as  the  case 
was  brought  before  it  on  writ  of  error  to  the  highest  court  of 
the  State,  and  the  decision  was  put  upon  the  single  ground  that 
the  change  in  the  conditions  of  admission  was  within  the  power 
of  the  State.  It  was  said  in  the  State  court,  on  the  claim  that 
the  conditions  violated  the  Fourteenth  Amendment,  that  "until 
they  (the  foreign  corporations)  are  within  our  jurisdiction,  the 
final  clause  of  article  14,  by  its  own  terms,  does  not  apply. 
While  they  stand  at  the  door  bargaining  for  the  right  to  come 
in  they  may  decline  to  come,  but  cannot  question  our  condi- 
tions if  they  do.  "^ 

§  175.    Pembina  Mining  Company  v.  Pennsylvania.* — The 

power  of  the  State  was  forcibly  illustrated  in  the  case  of  the 
Pembina  Mining  Company  v.  Pennsylvania,  where  plaintiff  was 
a  Colorado  company  having  its  principal  office  in  its  home  State, 
but  having  another  in  Philadelphia  for  the  use  of  its  officers. 
Pennsylvania  assessed  against  the  corporation  for  an  office  li- 
cense a  tax  which  amounted  to  $250,  one-quarter  of  a  mill  on 
each  dollar  of  its  million  dollars  of  capital  stock.    The  Supreme 


1  People  V.  Fire  Association,  92  N.  Y.  311;  see  also  infra,  Sec.  187. 

2  Phoenix  Ins.  Co.  v.  Welch,  29  Kansas  672;  Home  Ins.  Co.  v.  Swigert, 
104  111.  653;  State  ex  rel.  v.  Insurance  Co.,  115  Ind.  257.  But  see  contra, 
Clark  V.  Mobile,  67  Ala.  217. 

3  92  N.  Y.  p.  327. 

4  125  U.  S.  181,  31  L.  Ed.  650  (1888). 


§    176     FOREIGN    CORPORATIONS   IN   INTERSTATE   COMMERCE.  171 

Court,  affirming  the  Supreme  Court  of  Pennsylvania,  held  that 
the  tax  was  valid,  and  said  at  page  186 : 

''The  recognition  of  its  (the  corporation's)  existence  in 
Pennsylvania,  even  to  the  limited  extent  of  allowing  it  to  have 
an  office  with  its  limits  for  the  use  of  its  officers,  stockholders, 
agents  and  employees,  was  a  matter  dependent  on  the  will  of  the 
State.  It  could  make  the  grant  of  the  privilege  conditional  upon 
the  payment  of  a  license  tax,  and  fix  the  sum  according  to  the 
amount  of  the  authorized  capital  of  the  corporation.  The  ab- 
solute power  of  exclusion  includes  the  right  to  allow  a  condi- 
tional and  restricted  exercise  of  its  corporate  powers  within  the 
State." 

§  176.    Horn    Silver   Mining    Company  v.  New  York. — A 

New  York  statute  provided  that  every  corporation,  domestic  and 
foreign,  should  be  subject  to  a  tax  upon  its  corporate  franchises 
or  business,  to  be  computed  by  a  certain  percentage  of  its  capital 
stock,  measured  by  the  dividend  on  the  par  value  of  that  stock, 
or  where  there  were  no  dividends,  or  its  dividends  were  less  than 
a  certain  percentage  upon  the  par  value  of  the  capital  stock, 
then  according  to  a  certain  percentage  upon  the  actual  value  of 
the  capital  stock.  A  Utah  corporation  had  a  capital  stock 
of  ten  million .  dollars  and  the  tax  assessed  thereon  was  thirty 
thousand  dollars,  which  however  it  refused  to  pay,  claiming 
that  the  tax  was  illegal.  The  evidence  showed  that  it  paid 
taxes  both  in  Utah  and  in  the  State  of  Illinois,  and  that  the 
greater  part  of  the  capital  used  in  its  business,  was  out  of 
the  State  of  New  York.  But  the  Supreme  Court  sustained  the 
tax,^  saying,  1.  c,  p.  313: 

"The  granting  of  the  rights  and  privileges  which  constitute 
the  franchises  of  a  corporation  being  a  matter  resting  entirely 
within  the  control  of  the  legislature,  to  be  exercised  in  its  good 
pleasure,  it  may  be  accompanied  with  any  such  conditions  as 
the  legislature  may  deem  most  suitable  to  the  public  interests 
and  policy.  It  may  impose  as  a  condition  of  the  grant,  as  well 
as,  also,  of  its  continued  exercise,  the  payment  of  a  specific  sum 
to  the   State  each   year,   or  a  portion   of  .the  profits  or  gross 


1  Horn  Silver  Mining  Co.  v.  New  York,  143  U.  S.  305,  36  L.  Ed.  164 
(1892),  affirming  105  N.  Y.  76. 


172  FOREIGN    CORPORATIONS   IN    INTERSTATE    COMMERCE.       §    178 

receipts  of  the  corporation,  and  may  prescribe  such  mode  in 
which  the  sum  shall  be  ascertained  as  may  be  deemed  conven- 
ient and  just.  There  is  no  constitutional  inhibition  against  the 
legislature  adopting  any  mode  to  arrive  at  the  sum  which  it  will 
exact  as  a  condition  of  the  creation  of  the  corporation  or  of  its 
continued  existence.  There  can  be,  therefore,  no  possible  ob- 
jection to  the  validity  of  the  tax  prescribed  by  the  statute  of 
New  York,  so  far  as  it  relates  to  its  own  corporations.  Nor  can 
there  be  any  greater  objection  to  a  similar  tax  upon  a  foreign 
corporation  doing  business  by  its  permission  within  the  State. 
As  to  a  foreign  corporation — and  all  corporations  in  States 
other  than  the  State  of  their  creation  are  deemed  to  be  foreign 
corporations — it  can  claim  a  right  to  do  business  in  another 
State  to  any  extent,  only  subject  to  the  conditions  imposed  by  its 
laws. ' ' 

§  177.  Right  to  Discriminate  Against  Foreign  Corpora- 
tions.— It  is  not  essential  that  the  State  should  impose  the 
same  tax,  as  a  condition  for  a  foreign  corporation  to  act  in  a  cor- 
porate capacity  in  the  State,  that  it  charges  its  own  citizens  for 
organizing  under  its  own  laws  and  acting  in  a  corporate  capac- 
ity. In  the  sense  that  it  has  the  right  to  determine  what  shall  be 
paid  in  each  case  for  the  privilege  of  acting  in  a  corporate 
capacity,  it  has  the  right  to  discriminate.  Therefore  the  State 
can  make  the  admission  of  a  foreign  corporation  dependent  upon 
the  payment  of  a  specific  license  tax,  or  of  a  sum  proportionate 
to  the  amount  of  its  capital,  and  it  is  not  necessary  that  this  tax 
should  be  specifically  entitled  a  license.  Thus,  in  the  case  last 
cited,  the  court  said  at  page  315: 

"The  counsel  for  the  appellant  objects  that  the  statute  of 
New  York  is  to  be  treated  as  a  tax  law,  and  not  as  a  license 
to  the  corporation  for  permission  to  do  business  in  the  State. 
Conceding  such  to  be  the  case  we  do  not  perceive  how  it  in 
any  respect  affects  the  validity  of  the  tax.  However,  it  may 
be  regarded,  it  is  the  condition  upon  which  a  foreign  corpora- 
tion can  do  business  in  the  State,  and  in  doing  such  business  it 
puts  itself  under  the  law  of  the  State,  however  that  may  be 
characterized." 

§  178.  Discrimination  Limited  to  Imposition  of  Conditions 
for  Admission. — It  w^as  said  in  the  same  opinion,  that  neither 


§    179      FOREIGN    CORPORATIONS   IN    INTERSTATE    COMMERCE.  173 

an  individual  member  of  a  foreign  corporation,  nor  the  corpora- 
tion itself  can  call  in  question  the  validity  of  any  exaction  which 
the  State  may  require  for  the  grant  of  its  privileges.  This  ob- 
viously refers  to  the  tax  imposed  for  the  privilege  of  acting  in 
a  corporate  capacity  in  the  State.  It  does  not  mean  that,  after 
the  corporation  has  been  admitted  into  the  State  and  paid  the 
charge  exacted  for  admission,  it  is  not  entitled  to  due  process  of 
law,  or  the  equal  benefit  of  the  laws  under  the  Federal  Constitu- 
tion, or  equality  and  uniformity  of  taxation  under  the  State 
government.  The  situation  is  therefore  analogous  to  that  of  a 
domestic  corporation.  The  State  may  impose  such  exaction  as 
it  pleases  as  a  condition  for  granting  the  corporate  franchise, 
but  when  the  corporation  is  organized,  its  property  is  to  be 
taxed  as  other  property,  subject  to  such  classification  and  speci- 
fication as  may  lawfully  be  made. 

§  179.  Distinction  However  Academic  Rather  Than  Prac- 
tical.— So  far  as  the  taxing  power  of  the  State  is  concerned 
with  reference  to  foreign  corporations  admitted  through  its 
consent,  the  limitation  of  the  power  to  discriminate  in  taxa- 
tion to  the  imposing  of  conditions  for  admission  is  academic 
rather  than  practical,  for  the  reason  that  the  State  may  require 
the  submission  by  the  foreign  corporation  to  discriminating  tax- 
ation as  a  condition  of  its  continuing  in  force  or  renewing  the 
license  of  the  corporation  to  do  business  within  its  confines.^ 
It  is  true  the  State  cannot  require  foreign  corporations  to  submit 
to  an  unconstitutional  requirement  as  a  condition  of  admission. 
Thus  a  stipulation  in  the  license  to  do  business  that  the  foreign 
corporation  will  not  remove  a  case  to  the  Federal  court  is  void, 
and  will  not  prevent  the  removal  of  a  ease,^  nor  can  the  com- 
pany's agent  continuing  to  do  business  be  punished  for  viola- 
tion of  a  statute  containing  such  a  requirement.^  But  on  the  other 
hand,  the  Federal  court  will  not  enjoin  the  enforcement  of  the 
revocation  of  a  license  to  do  business,  though  made  according 


1  See  Philadelphia  Fire  Association  v.  New  York,  supra. 

2  Insurance  Co.  v.  Morse,  20  Wall.  445,  22  L.  Ed.  365  (1874). 

3  See  Barron  v.  Burnside,  121  U.  S.  186,  30  L.  Ed.  915  (1887). 


174  FOREIGN    CORPORATIONS   IN   INTERSTATE   COMMERCE.      §    181 

to  the  terms  of  a  statute  directing  sueli  revocation  when  the  com- 
pany removes  a  case  to  the  Federal  court.*  In  this  latter  case 
the  court  said  that  the  State  had  the  power  to  exclude  the 
foreign  corporation,  and  that  its  intention  or  reason  in  exclud- 
ing it  could  not  be  inquired  into.2 

§  180.  Impairment  of  Obligation  of  a  Contract  in  Exclusion 
of  Foreign  Corporation. — ^A  contract,  under  which  a  foreign 
corporation  is  to  have  the  management  of  a  factory  within 
the  State,  calls  for  the  transaction  of  business  within  the  State, 
within  the  meaning  of  a  statute  forbidding  foreign  corpora- 
tions to  transact  business  until  they  have  filed  a  copy  of  their 
charter  with  the  [Secretary  of  State.  The  obligation  of  such  a 
contract  is  not  impaired  by  a  statute  making  such  contracts 
wholly  void  on  the  corporation's  behalf,  but  the  contract  is  en- 
forcible  against  the  corporation,  although  such  statute  was  by  its 
terms  not  to  go  into  effect  until  after  the  contract  was  entered 
into.  3' 

§  181.  Discontinuance  of  Business  by  Foreign  Life  Insur- 
ance Company. — Where  a  foreign  life  insurance  company 
which  had  been  doing  business  in  the  State  by  maintaining  an 
office  and  complying  with  the  State  law  regulating  the  admis- 


1  See  Doyle  v.  Insurance  Co.,  94  U.  S.  535,  24  L.  Ed.  148  (1877). 

2  Justices  Bradley,  Swayne  and  Miller  dissented,  saying  that  though 
the  State  may  have  the  power,  if  it  sees  fit,  to  subject  its  citizens  to  the 
inconvenience  of  prohibiting  all  foreign  corporations  from  transacting 
business  within  its  jurisdiction,  it  has  no  power  to  impose  unconstitu- 
tional conditions  upon  their  transacting  business.  .  .  .  "Any  agree- 
ment, stipulation  or  State  law  precluding  them  from  this  right  is  abso- 
lutely void."  They  said  further  that  the  argument  that  the  greater 
always  includes  the  less,  and  that  therefore  if  a  State  may  exclude 
without  any  cause,  it  may  exclude  for  a  bad  cause,  is  unsound.  The 
practical  difficulty  with  this  reasoning  is  that  the  State  may  decline  to 
renew  the  periodical  license  without  assigning  any  reason.  In  Waters 
Pierce  Oil  Co.  v.  Texas,  supra,  it  was  held  that  a  foreign  corporation 
was  bound  by  the  conditions  of  the  permit,  whatever  its  limitations  and 
discriminations. 

3  Diamond  Glue  Co.  v.  U.  S.  Glue  Co.,  187  U.  S.  611,  47  L.  Ed.  328 
(1903),  affirming  103  Fed.  838. 


§    182      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.  175 

siou  of  a  foreign  insurance  company,  has  discontinued  its  office, 
and  has  no  office  or  agents  in  the  State,  the  mere  continuance  of 
the  obligation  of  its  existing  policies,  together  with  the  receipt 
of  the  renewal  premium  of  these  policies  at  the  company's 
home  office,  does  not  constitute  in  itself  the  doing  of  a  local  -bus- 
iness in  the  State,  and,  therefore,  the  privilege  tax  upon  the 
amount  of  premiums  paid  was  unlawfully  exacted^  after  such  dis- 
continuance of  its  office  in  the  State. 

§  182.  Admission  of  Foreign  Company  for  a  Definite  Term 
May  Involve  a  Contract  Right  for  that  Term. — While  a  State 
has  the  power  to  exclude  foreign  corporations  and  to  fix  the  terms 
of  their  admission,  if  the  statute  provides  that  foreign  corporations 
shall  do  business  during  the  lifetime  of  domestic  corporations 
without  being  subject  to  other  and  greater  liabilities  than  are  im- 
posed upon  domestic  corporations,  a  contract  right  is  thereby  ac- 
quired by  a  foreign  corporation,  which  is  impaired  by  a  subse- 
quent act  imposing  upon  foreign  corporations  a  corporate  tax  or 
license  fee  based  on  entire  capital  stock  in  double  the  amount  im- 
posed on  domestic  corporations. 

This  was  illustrated  in  a  Colorado  ease  where  the  court  held  that 
a  contract  right  thus  acquired  by  a  foreign  corporation  was  un- 
lawfully impaired  by  such  a  discrimination  between  domestic  and 
foreign  corporations.2    The  court  said : 

' '  The  power  to  impose  different  liabilities  was  with  the  State  at 
the  outset.  It  could  make  that  greater  or  less  than  in  case  of  a 
domestic  corporation,  or  it  could  make  that  the  same.  Having  the 
general  power  to  do  as  it  pleased,  when  it  enacted  that  the  for- 
eign corporation,  upon  coming  into  the  State,  should  be  subjected 
to  all  the  liabilities  of  domestic  corporations,  it  amounted  to  the 
same  thing  as  if  the  statute  had  said  the  foreign  corporation 
should  be  subjected  to  the  same  liabilities.  ...  It  was  not  a 
mere  license  to  come  in  the  State  and  do  business  therein  upon 
payment  of  the  sum  named,  liable  to  be  revoked  or  the  sum  in- 


1  Providence  Savings  Life  Assurance  Society  v.  Ky.,  239  U.  S.  103 
(1915),  60  L.  Ed.  167,  reversing  155  Ky.  197;    160  Ky.  16. 

2  American  Smelting  &  Refining  Co.  v.  Colorado,  204  U.  S.  103,  51  L. 
Ed.  93  (1907),  reversing  34  Colo.  240,  Chief  Justice  Fuller  and  Jus- 
tices Holmes,  Harlan  and  Moody  dissenting. 


176  FOREIGN    CORPORATIONS   IN    INTERSTATE   COMMERCE.      §    183 

creased  at  the  pleasure  of  the  State,  without  further  limitation.  It 
was  a  clear  contract  that  the  liability,  etc.,  should  be  the  same  as 
the  domestic  corporation  and  the  same  treatment  in  that  regard 
should  be  measured  out  to  both.  If  it  were  desired  to  increase  the 
liabilities  of  the  foreign,  it  could  only  be  done  by  increasing  those 
of  the  domestic  corporation  at  the  same  time  and  to  the  same  ex- 
tent." 

As  domestic  corporations  had  in  the  State  a  corporate  life  of 
twenty  years,  the  court  held  that  this  was  the  term  of  the  contract. 

§  183.  Holding'  United  States  Bonds  by  Foreign  Corpora- 
tion Does  Not  Exempt  it  from  Taxation  on  Corporate  Fran- 
chises.— Where  the  tax  is  upon  the  privilege  of  acting  or 
doing  business  in  a  corporate  capacity,  it  is  immaterial  that  a 
portion  of  the  capital  stock  of  the  corporation  is  invested  in 
securities  of  the  United  States.  As  before  seen,  see  Sec.  16, 
supra,  it  is  otherwise  where  the  tax  is  upon  the  capital  stock 
or  property  of  the  company.  It  therefore  follows  that  where  a 
foreign  corporation  is  admitted  to  do  business  in  the  State,  a 
tax  imposed  upon  its  corporate  franchise  or  right  to  do  business, 
and  graduated  according  to  the  dividends  of  the  company,  is 
not  invalidated  by  the  fact  that  a  portion  of  the  dividends  may 
be  derived  from  interest  on  capital  invested  in  United  States 
bonds.^ 

The  lawful  substitution,  by  a  foreign  insurance  company,  of 
United  States  bonds  in  place  of  municipal  bonds  deposited  by  it 
with  the  Superintendent  of  Insurance  for  the  protection  of  local 
policy  holders,  as  a  condition  for  doing  business  in  the  State, 
when  made  before  the  day  on  which  the  company  is  required 
to  list  its  property  for  taxation  for  a  certain  year,  prevents  the 
levying  of  any  tax  thereon  for  that  year ;  but  such  exemption  of 
the  bonds  from  taxation  did  not  prevent  their  distraint  to 
satisfy  taxes  lawfully  levied  on  unexempted  personal  property 
of  the  owner  of  such  bonds.^ 


iHome  Ins.  Co.  v.  New  York,  134  U.  S.  594,  33  L.  Ed.  1025  (1890). 
2  Scottish  Union  &  National  Ins.  Co.  v.  Boland,  196  U.  S.  611,  49  L. 
Ed.  619    (1995). 


§    185      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE,  177 

§  184.    Nor  is  Foreign  Corporation  Engaged  in  Importing 
Business  Exempt  from  Tax  on  Corporate  Franchises. — The 

same  principle  has  been  extended  to  the  case  where  a  foreign 
corporation  is  engaged  in  importing  foreign  goods  and  selling 
the  same  in  the  original  packages.  Thus  in  a  New  York  ease  where 
the  tax  was  imposed,  as  a  tax  upon  the  franchise,  upon  the 
amount  of  the  capital  stock  employed  within  the  State,  and  a 
part  of  the  business  of  a  Michigan  corporation  doing  business 
in  New  York  consisted  in  the  importation  of  crude  drugs  and 
their  sale  in  original  packages,  it  was  contended  that  such  part 
of  their  business,  under  the  doctrine  of  Brown  v.  Maryland, 
could  not  be  taxed  by  the  State.     The  court  however  replied  :^ 

"But  that  case  is  inapplicable.  Here  no  tax  is  sought  to  be 
imposed  directly  on  imported  articles  or  on  their  sale.  This 
is  a  tax  imposed  on  the  business  of  a  corporation,  consisting  in 
the  storage  and  distribution  of  various  kinds  of  goods,  some  pro- 
ducts of  their  own  manufacture  and  some  imported  articles. 
From  the  very  nature  of  the  tax,  being  laid  as  a  tax  upon  the 
franchise  of  doing  business  as  a  corporation,  it  cannot  be  af- 
fected in  any  way  by  the  character  of  the  property  in  which 
its  capital  stock  is  invested." 

§  185.  Tax  Upon  Capital  Employed  Within  State. — Some 
State  have  required,  as  a  condition  of  the  admission  of  a  for- 
eign corporation,  the  payment  of  such  part  of  the  incorporating 
tax,  fixed  by  the  laws  of  the  State,  as  represents  the  portion  of 
the  capital  of  the  foreign  corporation  employed  within  the 
State.  Such  a  tax  as  to  corporations  doing  business  in  the 
State  only  through  its  consent  is  clearly  within  the  power  of 
the  State  to  impose.  In  other  States  the  foreign  corporation,  in 
consideration  of  the  privilege  of  doing,  business  in  the  State,  is 
required  to  pay  an  annual  tax  upon  that  portion  of  its  entire 
capital  employed  within  the  State.  Such  capital  "employed 
within  the  State"  would  in  any  event  be  subject  to  the  taxing 
power  of  the  State  as  property  or  business  within  its  jurisdic- 
tion, and  the  validity  of  such  a  tax  does  not  depend  upon  the 


iNew  York  State  v.  Roberts,  171  U.  S.  658,  43  L.  Ed.   323    (1898), 
affirming  149  N.  Y.  608. 


178  FOREIGN   CORPORATIONS  IN  INTERSTATE   COMMERCE.      §    186 

consent  of  the  State  to  the  admission  of  the  foreign  corporation. 
The  validity  of  such  a  method  of  taxing  a  foreign  corporation 
is  therefore  clear.^ 

Under  the  rule  laid  down  in  the  Horn  Silver  Mining  Company- 
ease,  supra,  Sec.  176,  the  State  could  exact  a  tax  discriminating 
against  the  foreign  corporation,  as  a  condition  of  admitting  it, 
and  in  such  event  the  only  remedy  would  he  an  appeal  to  the 
State  legislature  to  remedy  the  unjust  discrimination.  But 
where  the  tax  is  only  upon  the  capital  employed  within  the 
State,  there  is  no  discrimination  to  complain  of. 

What  is  the  amount  of  the  capital  employed  within  the 
State  is  a  question  of  fact,  whereon  the  corporation,  when 
allowed  a  hearing,  is  concluded  hy  the  action  of  the  State 
tribunal;  and  errors  in  the  determination  of  it  would  not 
present  a  Federal  question  for  review.- 

§  186.  Discrimination  in  Favor  of  State  Manufactures  in 
Foreign  Corporation  Tax. — The  provision  in  a  State  law  tax- 
ing foreign  corporations  upon  the  capital  employed  in  the 
State,  but  exempting  corporations  or  companies  wholly  engaged 
in  manufacturing  in  the  State,  was  held  in  New  York  State  v. 
Roberts,  supra,  to  involve  no  unlawful  discrimination  against 
the  manufactured  goods  of  other  States.  The  court  said,  at  page 
665:  "It  is  said  that  the  operation  of  that  portion  of  this  taxing 
law  which  exempts  from  a  business  tax  corporations  which  are 
wholly  engaged  in  manufacturing  within  the  State  of  New  York, 
is  to  encourage  manufacturing  corporations  which  seek  to 
do  business  in  that  State  to  bring  their  plants  into  New  York. 
Such  may  be  the  tendency  of  the  legislation,  but  so  long  as  the 
privilege  is  not  restricted  to  New  York  corporations  it  is  not 
perceived  that  thereby  any  ground  is  afforded  to  justify  the  in- 
tervention of  the  Federal  courts. '  '3 


1  See  New  York  State  v.  Roberts,  supra,  Sec.  171. 

2  New  York  State  v.  Roberts,  supra. 

3  Justice  Harlan,  with  whom  Justice  Brown  concurred  (Justice  White 
not  sitting),  dissented,  saying  that  such  statutes  would  amount  to  a 
tariff  protecting  goods  manufactured  in  that  State  against  competition 
in  the  markets  there  with  goods  manufactured  in  other  States.     And 


§    187      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.  179 

The  reference  in  the  last  sentence  quoted  to  the  fact  that 
the  privilege  was  not  restricted  to  New  York  corporations, 
seems  to  have  been  made  to  show  that  there  was  no  unlawful 
discrimination  against  the  manufactured  products  of  other 
States,  and  thus  no  interference  with  interstate  commerce.i 

§  187.  "Doing'  Business"  in  State. — A  State  cannot  tax 
the  foreign  corporation  for  the  privilege  of  doing  business  in 
its  jurisdiction  unless  it  actually  does  business  therein,  and 
what  constitutes  doing  business  must  therefore  be  determined. 
In  a  number  of  States  statutes  have  been  enacted,  prescribing 
terms  upon  which  foreign  corporations  shall  be  permitted  to  do 
business.  These  usually  include  the  filing  of  a  certificate  in  a 
public  office,  designating  the  principal  place  of  business  of  the 
corporation  in  the  State,  and  the  resident  agent  on  whom  process 
may  be  served.  Where  such  certificate  is  filed,  the  corporation 
is  concluded  by  the  admission  thereby  made  that  it  is  doing 
business  in  the  State,  and  .is  accordingly  liable  for  the  taxation 
imposed  upon  it  by  way  of  license  fee  or  otherwise  as  a  condi- 
tion of  its  admission.  2  Penalties  are  provided  for  the  trans- 
action of  business  in  the  State  on  behalf  of  such  foreign  cor- 
poration without  the  filing  of  a  certificate,  and  questions  have 
arisen  as  to  what  constitutes  "doing  business"  with  reference 
to  these  statutes.  But  it  is  not  within  the  scope  of  this  work 
to  consider  the  effect  of  non-compliance  with  them  upon  the  con- 


as  to  the  fact  that  the  exemption  was  not  limited  to  New  York  cor- 
porations, said  at  p.  683:  "This  view  falls  short  of  meeting  the  diffi- 
culty presented,  namely,  that  the  statute  by  its  necessary  operation  in- 
juriously discriminates  against  goods  manufactured  in  other  States,  in 
that  such  goods  are  not  permitted  to  go  into  the  markets  of  New  York 
and  compete  there  upon  equal  terms  with  like  goods  wholly  manufac- 
tured in  that  State.  This  court  has  often  said  that  the  objection  that 
a  local  statute  was  invalid  as  restraining  or  binding  commerce  among 
the  States  was  not  met  by  the  suggestion  that  it  operated  equally  upon 
citizens  of  the  State  which  enacted  it." 

1  Philadelphia  Fire  Association  v.  New  York,  supra,  Sec.  173,  ct  seq. 
A  different  system  is  now  adopted  in  New  York.  See  appendix  Laws 
of   New    York,    infra. 

2  People  V.  Philadelphia  Fire  Association,  92  N.  Y.  311. 


180  FOREIGN   CORPORATIONS  IN  INTERSTATE  COMMERCE.      }    188 

tracts  of  the  eorporation,  or  upon  the  rights  of  foreign  corpora- 
tions to  bring  suits  in  the  courts  to  enforce  such  contracts 
made  in  the  State,  i 

§  188.  What  is  Not  "Doing  Business"  in  State. — ^Irrespec- 
tive of  such  statutes  however,  a  corporation  is  only  liable  to 
State  taxation,  based  upon  its  ''doing  business,"  if  it  in  fact 
does  business  in  the  State,  and  what  constitutes  "doing  busi- 
ness" under  such  circumstances  is  to  be  determined  from  what 
it  actually  does.  It  cannot  consist  in  the  corporation  doing 
what  it  has  the  right  to  do  without  the  consent  of  the  State. 

Thus  a  foreign  corporation  is  not  doing  business  in  the  State, 
when  it  ships  its  goods  to  its  customers  or  sends  its  commercial* 
agents  through  the  State  offering  to  sell  or  buy,  in  the  course  of 
interstate  commerce. 

Making  a  contract  in  the  State  was  held  by  the  Supreme 
Court  not  to  constitute  doing  business  therein,  within  the  mean- 
ing of  the  statute  requiring  the  filing  of  a  certificate  and  the 
appointment  of  an  agent. 2  The  court  said  that  as  the  statute 
contemplated  one  or  more  known  places  of  business  in  the  State, 
it  could  not  apply  to  a  case  where  a  corporation  had  only  done 
a  single  act  and  did  not  propose  to  do  more.3 

The  doing  business  necessary  to  make  a  corporation  amena- 
ble to  the  taxing  power  of  a  State  must  be  distinguished  from 
the  doing  business  which  may  subject  a  corporation's  agent  to 
punishment  for  violation  of  the  penal  laws  of  the  State,  where 


1  See  Taylor  on  Corporations,  4th  Ed.,  Sec.  401  and  cases  cited. 

2  Cooper  Mfg.  Co.  v.  Ferguson,  113  U.  S.  727,  28  L.  Ed.  1137  (1885). 
Justices  Matthews  and  Blatchford  basing  their  concurrence  on  the 
ground  that  the  transaction  itself  was  one  in  interstate  commerce  and 
not  under  control  of  the  State. 

3  As  to  the  distinction  between  making  a  contract  and  "carrying  on 
business,"  see  also  Bamberger  v.  Schoolfield,  160  U.  S.  149,  40  L.  Ed. 
374  (1895),  Fifth  Cir.;  Wagner  v.  Meakin,  33  C.  C.  A.  577,  92  Fed.  76 
(1899);  Vaughan  Machine  Co.  v.  Lighthouse,  71  N.  Y.  S.  799;  Empire 
Milling  and  Mining  Co.  v.  Tombstone  Co.,  100  Fed.  910;  Swann  v. 
Mutual  Reserve  Fund  Assn.,  100  Fed.  922;  Sullivan  v.  Sheehan,  89 
Fed.  247. 


§    189      FOREIGN    CORPORATIONS   IN    INTERSTATE    COMMERCE.  181 

he  undertakes  to  act  therein  in  behalf  of  a  foreign  corporation 
without  the  State's  consent.  A  single  act  by  such  an  agent 
might  subject  him  to  punishment,  but  could  not,  whether  author- 
ized by  the  corporation  or  not,  constitute  doing  business  within 
the  State  so  as  to  subject  the  corporation  to  its  taxing  laws. 

Where  a  non-resident  corporation  had  one  or  more  local 
agents  in  Mississippi  to  control  the  salesmen  selling  sewing  ma- 
chines throughout  a  limited  number  of  counties,  and  reporting 
to  svh  'of^al  agency,  which  in  turn  reported  to  a  district  agency 
in  another  State,  the  corporation  during  such  period  was  doing 
biisiness  witiiiii  the  State  and  was  taxable  on  credits,  as  pro- 
vided by  the  statute  of  the  State ;  but  it  was  not  so  doing  busi- 
ness in  the  State  during  a  period  when  it  had  neither  office,  nor 
store,  nor  managing  salesmen  in  the  State,  and  did  business  only 
through  traveling  salesmen,  and  transmitted  all  cash  collected 
and  contracts  arising  from  a  disposition  of  merchandise  to  agen- 
cies outside  the  State.i 

§  189.  Ownership  of  Property  in  State  Does  Not  of  Itself 
Constitute  "Doing  Business"  in  State.  —  Neither  does  the 
ownership  within  its  jurisdiction  of  property,  which  becomes 
subject,  as  property,  to  the  taxing  laws  of  the  State,  constitute 
of  itself  doing  business  by  the  corporation  therein.2  Thus  a  for- 
eign corporation  may  ship  goods  into  the  State  to  a  commission 
merchant  to  be  sold  for  its  account,  and  cause  them  to  be  stored 
in  a  warehouse  in  the  State  so  that  they  become  subject  as 
property  to  the  taxing  laws  of  the  State,  see  supra,  Sec  156,  but 
that  does  not  of  itself  locate  the  corporation  in  the  State. 

Thus  it  was  held  in  Pennsylvania  that  the  American  Bell 
Telephone  Company  of  Boston,  a  Massachusetts  corporation, 
which  leased  its  telephones  to  Pennsylvania  corporations,  to  be 
by  them  operated  under  patents  owned  by  the  patent  company 
according  to  license  contracts,  did  not  in  consequence  of  the 


1  Singer  Sewing  Machine  Co.  v.  Adams,  C.  C.  A.,  5th  Cir.  (1909),  165 
Fed.  877;  Anderson  v.  Morris  &  E.  R.  Co.,  216  Fed.  83,  C.  C.  A.,  2nd 
Cir.  1914. 

2  Missouri  Coal  &  Mining  Co.  t.  Ladd,  160  Mo.  435. 


182  FOREIGN    CORPORATIONS   IN   INTERSTATE   COMMERCE.      §    189 

o^ynersllip  and  leasing  of  sucli  property  become  subject  to  tax- 
ation as  a  foreign  corporation  doing  business  in  Pennsylvania.^ 
The  court  said  the  tax  was  not  upon  the  telephone  instruments 
as  property,  but  upon  the  capital  stock  of  the  company.  The 
property  was  in  the  State  and  subject  to  taxation,  but  the  com- 
pany was  not. 

In  the  same  ease  also,  it  was  held  that  the  furnishing  of 
means  to  the  domestic  company  by  the  lessor  company  to  trans- 
act business  under  the  patents  did  not  constitute  a  doing  busi- 
ness in  the  State  by  the  foreign  company. 

Though  not  a  taxation  case,  the  opinion  of  U.  S.  Circuit 
Judge  Jackson,  later  Justice  of  the  Supreme  Court,  in  United 
States  V.  American  Bell  Tel.  Co.,  involving  the  same  company, 
is  illustrative.  It  was  claimed  that  the  Massachusetts  company 
was  "carrying  on  business"  in  Ohio  so  "as  to  be  subject  to 
service  of  process"  through  its  "managing  agent"  in  that 
State,  and  that  the  agent  of  the  domestic  company  was  the 
'"managing  agent"  of  the  defendant  through  the  relation  be- 
tween the  two  corporations.  The  court  said  that  none  of  the 
facts,  which  were  the  same  as  the  facts  in  the  Pennsylvania 
case  above,  constituting  the  relation  between  the  parties  was  a 
"carrying  on  of  business"  in  Ohio  by  the  foreign  company; 
and  that  the  authorities  do  not  define  with  exactness  what 
amounts  to  "carrying  on  business,"  but  none  go  to  the  extent 
of  holding  that  such  transactions  as  those  then  under  consid- 
eration are  sufficient.  On  the  matter  of  owning  property  in  the 
State,  the  court  said  at  p.  44 : 

"But  it  will  hardly  do  to  say  that  the  ownership  of  property 
in  the  State  is  the  doing  of  business  here  within  the  meaning 
and  intent  of  the  law  so  as  to  make  the  owner  personally  pre- 
sent. It  is  undoubtedly  true  that,  in  respect  to  the  particular 
property  so  owned  and  located  within  its  limits,  the  State  has 
the  authority  to  proceed  against  it  (in  rem)  for  the  purpose  of 
taxation,  or  to  subject  it  to  the  payment  of  valid  claims  and 


1  Commonwealth  v.  American  Bell  Telephone  Co.,  129  Pa.  217;  see 
also  People  v.  American  Bell  Telephone  Co.,  117  N.  Y.  241;  Common- 
wealth V.  Standard  Oil  Co.,  101  Pa.  119;  United  States  v.  American 
Bell  Telephone  Co.,  29  Fed.  17   (Ohio). 


§    191      FOREIGN    CORPORATIONS   IN   INTERSTATE    COMMERCE.  183 

demands  against  the  foreign  owner.  It  cannot,  however,  serve 
to  bring  the  person  of  such  owner  within  its  jurisdiction,  whether 
that  person  be  a  private  individual  or  a  patent-holding  corpora- 
tion." 

§  190.  Holding"  Stock  in  Domestic  Company  by  Foreign 
Company  is  Not  "Doing  Business"  by  Latter  in  State. — The 

argument  was  advanced  in  People  v.  American  Bell  Tel.  Co.,^ 
that  the  holding  stock  by  the  foreign  corporation  in  the  domestic 
company  constituted  a  doing  business  by  the  former  in  the  State. 
The  court  held  that  this  was  untenable,  saying  at  p.  255 : 

"In  no  legal  sense  can  the  business  of  a  corporation  be  said  to 
be  that  of  its  individual  stockholders.  It  is  true  that  they  have 
an  interest  in  the  business  carried  on  and  an  influence  in  con- 
trolling its  conduct ;  but  they  have  created  a  legal  entity  to  con- 
trol such  business,  make  its  contracts  and  be  responsible  for  its 
obligations,  and  that  entity  is  alone  responsible  to  persons  deal- 
ing with  it  for  the  conduct  of  such  business.  The  taxation  of  a 
foreign  or  domestic  stockholder  in  a  domestic  corporation  upon 
the  business  of  such  corporation,  upon  the  theory  that  it  was  his 
business,  would  be  an  unreasonable  exercise  of  the  power  of 
taxation. ' ' 

§  191.  Supreme  Court  of  Pennsylvania  on  What  Consti- 
tutes "Doing  Business"  in  State. — A  very  illustrative  case  as 

to  what  is  and  what  is  not  a  doing  business  in  the  State  is  the 
decision  of  the  Supreme  Court  of  Pennsylvania  in  the  case  of 
Commonwealth  v.  Standard  Oil  Company.  The  defendant  was  a 
corporation  of  Ohio,  with  authority  to  manufacture  petroleum 
or  its  products.  It  had  received  no  special  authority  from  the 
State  of  Pennsylvania  to  transact  business  within  its  jurisdiction, 
but  it  bought  crude  petroleum  in  that  State  through  brokers  and 
shipped  it  to  its  refineries  outside  of  the  State.  During  the  years 
1872  to  1880  it  owned  interests  in  individual  partnerships  doing 
business  in  Pennsylvania  as  producers,  refiners  or  transporters 
of  oil.  It  owned  some  shares  of  stock  in  Pennsylvania  corpora- 
tions, and  also  had  interests  in  limited  partnerships  in  the  same 
business  in  different  parts  of  that  State.    During  these  years  it 

1117  N.  Y.  241. 


184  FOREIGN    CORPORATIONS   IN    INTERSTATE   COMMERCE.       §    192 

had  declared  dividends  upon  its  entire  property  in  and  out  of 
the  State  exceeding  the  amount  of  its  nominal  capital  stock. 
The  court  held^  that,  under  the  Pennsylvania  statute  requiring 
foreign  corporations  doing  business  in  the  State  to  pay  a  tax  upon 
their  capital  stock,  the  ownership  of  the  shares  of  stock  in  a 
Pennsylvania  corporation  and  of  interests  in  the  limited  part- 
nerships and  the  purchases  of  oil  through  brokers  did  not  con- 
stitute doing  business  in  Pennsylvania  so  as  to  subject  defend- 
ant to  taxation  under  that  statute. 

§  192.  What  is  "Doing  Business"  in  State.— On  the  other 
hand,  it  was  held  in  the  case  last  cited  that  the  holding  of  part- 
nership interests  in  Pennsylvania  partnersliips  and  directly  shar- 
ing in  the  profits  did  constitute  doing  business  within  the  State. 

An  illustrative  case  as  to  what  constitutes  doing  business  was 
decided  in  the  United  States  Circuit  Court  in  New  York. 2  There 
a  New  Jersey  corporation  had  its  sales  agency  and  office  in  New 
York  City,  but  its  plant  and  factory  in  another  State.  It  was 
held  to  be  '  *  doing  business ' '  in  New  York,  within  the  meaning  of 
the  statute  of  that  State  imposing  a  tax  upon  the  corporate  fran- 
chise of  any  foreign  corporation  doing  business  in  the  State. 
The  court  said,  referring  to  the  decisions  of  the  New  York  Court 
of  Appeals  in  the  construction  of  the  same  statute: 3  ''applying 
them  to  the  present  case,  the  occasional  refining  of  oil  in  New 
York  and  the  occasional  storage  of  products  in  advance  of  sales 
there  by  complainant,  without  more,  would  not  constitute  doing 
business  here.  .  .  .  But  a  foreign  corporation  which  estab- 
lishes a  business  domicile  here  and  brings  its  property  within 
the  jurisdiction,  and  mingles  it  with  the  general  mass  of  com- 
mercial capital,  is  taxable  here."    The  statute  meant,  by  "doing 


1  Commonwealth  v.  The  Standard  Oil  Co.,  101  Pa.  119;  also  Shepp  t. 
Traction  Co.,  17  Montgomery  Law  Rep.  52. 

2  Southern  Cotton  Oil  Co.  v.  Wemple,  44  Fed.  24.  In  People  ex  rel. 
Southern  Hotel  Co.  v.  Wemple,  131  N.  Y.  64,  the  New  York  Court  of 
Appeals  made  the  same  ruling  as  to  the  same  corporation,  saying  that 
the  tax  was  not  imposed  upon  the  property,  but  upon  the  privilege  of 
doing  business  in  the  State  as  a  corporation. 

3  People  V.  Trust  Co.,  96  N.  Y.  387;  People  v.  Mining  Co.,  105  N.  Y.  76. 


5   193     FOREIGN    CORPORATIONS  IN   INTERSTATE  COMMERCE.  185 

business  within  the  State,"  using  the  State  as  a  business  domicile 
for  transacting  any  substantial  part,  even  though  a  comparatively 
small  part,  of  the  business  which  the  company  was  organized  to 
carry  on  and  in  which  its  capital  was  embarked.  The  court  con- 
cluded, p.  27 : 

•  "It  would  seem  that  a  manufacturing  company  which  main- 
tains an  established  location  here,  and  an  agent,  for  the  purpose 
of  selling  its  products  or  facilitating  their  sale,  carries  on  a  part 
of  its  ordinary  business  here,  and  has  a  business  domicile  here ; 
and  if  it  keeps  funds  here  for  maintaining  its  place  of  business, 
and  to  enable  it  to  carry  on  the  operations  of  its  agents,  such  a 
foreign  company  would  seem  to  be  taxable  under  the  statute. 
Certainly  it  cannot  matter  that  the  volume  of  business  done  is 
small,  or  that  the  location,  instead  of  being  a  warehouse  or  a 
shop,  is  an  office  or  a  sample  room."^ 

In  this  case  the  corporation  had  done  no  business  of  any  kind 
in  the  State  of  New  York  except  keeping  this  sales  agency  and 
office,  and  the  proceeds  of  sale  were  sent  to  the  Philadelphia 
office,  or  deposited  in  bank  subject  to  the  draft  of  that  office,  ex- 
cepting only  a  small  bank  account  of  some  $2,500  kept  in  New 
York  for  office  expenses.  The  court  said  that  the  case  was  not 
free  from  doubt,  but  their  conclusion  was  that  the  tax  was  au- 
thorized by  the  statute. 

A  foreign  pipe  line  company,  laying  pipes  in  a  State,  and  hav- 
ing pumping  stations,  storage  tanks,  distributing  apparatus  and 
a  branch  business  office  in  the  State  was  held  in  New  Jersey  to  be 
"doing  business"  in  the  State,  and  subject  to  a  corporate  fran- 
chise license  for  the  privilege.^ 

§  103.  "Doing  Business"  by  Holding  Interest  in  Limited 
Partnership. — The  Supreme  Court  of  Pennsylvania,  in  the 
Standard  Oil  Company  case,  supra,  Sec.  191,  ruled  that  the  own- 
ership of  shares  in  a  limited  partnership  in  that  State  did  not 
constitute  doang  business  by  a  foreign  corporation  under  the 
statute  of  that  State.  It  was  held,  however,  by  the  New  York 
Court  of  Appeals,  construing  the  statute  of  New  York,  that  the 


^  See  also  infra,  Sec.  181. 

2  Tide  Water  Pipe  Co.  v.  Assessors,  57  N.  J.  L.  516. 


186  FOREIGN    CORPORATIONS  IN   INTERSTATE   COMMERCE.      §    195 

tax  was  properly  imposed  in  that  State  upon  a  corporation  or- 
ganized in  Germany,  which  had  become  a  special  partner  with 
an  investment  of  $150,000  in  a  limited  partnership  in  New  York, 
the  latter  being  sole  agent  for  the  sale  of  its  products  in  this 
country.^  It  was  decided  that  the  foreign  corporation  was  tax- 
able upon  the  amount  of  its  contributed  capital  stock  employed 
in  the  State  of  New  York.  The  court  declared  that  it  considered 
the  statute  in  the  light  of  the  public  policy  of  the  State  and 
looked  through  the  form  at  the  substance.  It  said  of  the  foreign 
corporation :  "It  has,  in  effect,  by  this  method  of  a  limited  part- 
nership established  a  place  within  this  State  for  the  doing  of  a 
part  of  its  business,  and  though  I  come  to  the  conclusion  with 
some  hesitation,  I  think  that  it  may  be  regarded  as  coming  within 
the  operation  of  the  statute. ' ' 

§  194.  Must  Have  Business  Domicil  in  State. — The  foreign 
corporation  therefore  must  establish  a  business  domicil  of  some 
sort  in  the  State  before  it  can  become  subject  as  a  corporation  to 
the  taxing  laws  of  the  State  by  reason  of  "carrying  on  business" 
therein.  It  may  have  property  in  the  State  which  is  taxable  as 
property,  but  neither  the  ownership  of  such  property,  nor  the 
relation  of  stockholder,  patent  licensor,  nor  creditor  to  a  domes- 
tic corporation,  constitutes  "carrying  on  business"  in  the  State 
unless  it  has  a  business  domicil  in  the  State,  a  sales  agency,  manu- 
facturing plant,  distribution  warehouse  or  an  interest  in  a  do- 
mestic partnership.  It  must  in  some  way  establish  a  place  within 
the  State  for  doing  some  part  of  its  corporate  business. 

§  195.  Corporations  Engaged  in  Federal  Business  or  Inter- 
state Commerce. — While  the  States  can  thus  levy  even  a  dis- 
criminating tax  upon  foreign  corporations  engaged  in  doing 
business  in  the  State,  they  cannot  exclude  corporations  engaged 
directly  in  the  business  of  the  Federal  government,  nor  can  they 
impose  any  license  charge  or  other  tax  in  consideration  of  per- 
mitting such  corporation  to  do  business  in  the  State.  They  may, 
however,  tax  property  actually  employed  in  such  business  equally 
with  other  property  of  the  same  class  in  the  State.    Thus  the  Su- 


1  People  ex  rel.  v.  Roberts,  152  N.  Y.  59,  O'Brien,  J.,  dissenting. 


§    196      FOREIGN    CORPORATIONS   IN    INTERSTATE    COMMERCE.  187 

preme  Court  said  in  Pembina  Mining  Co.  v.  Pennsylvania,  supra, 
Sec.  175: 

"And  undoubtedly  a  corporation  of  one  State,  employed  in  the 
business  of  the  general  government,  may  do  such  business  in 
other  States  without  obtaining  a  license  from  them.  Thus,  to 
take  an  illustration  from  the  opinion  of  Mr.  Justice  Bradley  in  a 
case  recently  decided  by  him,  'if  Congress  should  employ  a  cor- 
poration of  ship  builders  to  construct  a  man-of-war,  they  would 
have  the  right  to  purchase  the  necessary  timber  and  iron  in  any 
State  of  the  Union,'  and,  we  may  add,  without  the  permission 
and  against  the  prohibition  of  the  State.  Stockton  v.  Baltimore 
and  New  York  Railroad  Co.,  32  Fed.  9,  14." 

§  196.  Corporations  Engaged  in  "Carrying*  on  Interstate 
Commerce." — In  one  sense  all  commercial  business  between 
citizens  of  different  States  is  interstate  commerce.  The  manu- 
facturer, who  ships  his  goods  to  a  purchaser  in  another  State,  is 
engaged  in  interstate  commerce.  But  in  this  connection  the 
term  "carrying  on  interstate  commerce"  has  a  peculiar  and 
technical  meaning,  which  limits  it  to  corporations  actually  en- 
gaged in  carrying  on  interstate  commerce,  that  is,  common  car- 
riers and  others,  who  afford  the  facilities  whereby  commerce  is 
carried  on  between  the  States.  Thus  all  public  carriers,  rail- 
roads, steamboats,  telegraph  or  telephone  companies,  bridge  and 
ferry  companies,  are  carrying  on  interstate  commerce  in  this 
sense,  that  is  they  are  direct  agencies  of  int;erstate  commerce.  The 
State  can  neither  exclude  corporations  of  this  class  actually  en- 
gaged in  carrying  on  interstate  commerce,  nor  caii  it  impose  any 
conditions  upon  the  transaction  of  their  business  in  the  State.  A 
railroad  or  telegraph  company  opening  an  office  in  the  State  for 
its  business  and  a  manufacturing  corporation,  which  establishes 
there  a  sales  office  or  a  sales  agency,  are  both,  broadly  speaking, 
engaged  in  interstate  business,  but  in  a  different  .sense.  The  lat- 
ter can  be  taxed  by  the  State  for  the  privilege  or  excluded,  the 
former  cannot. 

It  has  been  showu^  tliat  insurance  companies  are  not  engaged 
in  iiit(rs1at(;  commerce,  and  can  therefore  establish  agencies  in 


1  Kupra,  Sec.  155. 


188  FOREIGN   CORPORATIONS  IN   INTERSTATE   COMMERCE.      §    197 

the  State  only  by  its  consent,  and  subject  to  such  conditions  as 
the  State  may  impose  upon  foreign  corporations  wishing  to  do 
business  in  its  jurisdiction. 

"What  therefore  has  been  said  as  to  the  power  to  exclude  for- 
eign corporations  and  to  impose  discriminating  taxation  for  the 
privilege  of  doing  business  in  the  State  does  not  apply  to  inter- 
state railroads  and  other  corporations  which  are  the  direct  agen- 
cies for  the  conduct  of  interstate  commerce,  but  the  property  of 
such  corporations  in  the  State  can  be  taxed  as  other  property 
of  the  same  class  is  taxed,  and  as  will  hereafter  be  shown,  such 
property  may  be  valued  as  part  of  the  entire  system  of  the  com- 
pany under  the  so-called  mileage  and  apportionment  rules.i 

It  is  immaterial  that  such  taxation  upon  the  agencies  of 
interstate  commerce  may  be  imposed  in  the  form  of  a 
license  to  do  business  in  the  State  provided  it  is  in  effect 
only  a  non-discriminating  tax  upon  the  property  in  the  State 
and  does  not  interfere  with  interstate  commerce  or  tax  the  prop- 
erty which  is  out  of  the  jurisdiction  of  the  State. 2 

§  197.  The  Revocation  of  Right  to  do  Business  Not  Appli- 
cable to  Interstate  Carriers. — The  license  to  do  business  in  the 
State  ordinarily  provides  for  the  revocation  of  the  same,  or  a 
refusal  to  renew  in  case  of  a  non-payment  of  the  franchise  or 


iChs.  VII  and  VIII. 

2  St.  Louis  &  S.  W.  R.  Co.  v.  Arkansas,  ex  rel.  235  U.  S.  350,  59  L.  Ed. 
265   (1914),  affirming  106  Ark.  321. 

See  also  Baltic  Mining  Co.  v.  Massachusetts,  231  U.  S.  68,  58  L.  Ed. 
127  (1913),  affirming  207  Mass.  381,  212  Mass.  35,  where  the  court  sus- 
tained the  validity  of  a  Massachusetts  statute  and  its  right  to  exclude 
for  non-payment  of  an  excise  tax,  and  distinguished  the  case  of  South- 
ern Railway  Company  v.  Green,  216  U.  S.  400,  54  L.  Ed.  536,  reversing 
160  Ala.  396  (1910),  where  the  court  held  invalid  an  additional  fran- 
chise tax  for  the  privilege  of  doing  business  within  the  State  when  no 
such  tax  was  Imposed  upon  domestic  corporations  carrying  on  a  pre- 
cisely similar  business. 

See  also  A.  T.  &  S.  F.  R.  Co.  v.  O'Connor,  223  U.  S.  280,  56  L.  Ed. 
436  (1912). 

See  also  Allen  v.  Pullman  Palace  Car  Co.,  191  U.  S.  171,  48  L.  Ed.  134 
(1903),  illustrating  the  distinction  between  the  power  of  a  State  in  re- 
gard to  intrastate  and  interstate  traffic. 


§    199      FOREIGN    CORPORATIONS   IN    INTERSTATE   COMMERCE.  189 

other  tax.  Suoli  a  metliod  of  enforcing  tlie  payment  of  a  tax 
could  not  be  enforced  against  the  interstate  business  of  a  railroad 
or  other  interstate  carrier  without  interfering  with  interstate 
commerce,  and  is  therefore  invalid  as  to  such  business.  Such  a 
provision,  however,  in  a  statute  will  not  invalidate  the  statute  as 
it  will  be  deemed  separable  therefrom,  in  the  absence  of  an  author- 
itative adjudication  of  the  State  courts  that  it  is  not  separable, 
and  in  such  case  the  statute  would  be  adjudged  invalid.^ 

The  validity  of  a  tax  as  a  tax  is  therefore  distinct  from  the 
validity  of  the  means  of  enforcing  the  tax  by  revocation  of  the 
license.  The  tax  may  be  held  valid,  even  though  this  method  of 
enforcement  cannot  be  construed  as  applicable  only  to  State 
business." 

§  198.  Payment  of  Tax  Under  Threat  of  Forfeiture  of 
Right  to  do  Business  Not  Voluntary.— Where,  however,  an 
unconstitutional  tax  is  paid  by  an  interstate  carrier  under  such 
a  threat  of  a  revocation  of  its  right  to  do  business  in  the  State, 
it  is  not  a  voluntary  payment  but  is  made  under  duress  and 
therefore  a  suit  may  be  brought  to  recover  the  same,  even  if 
the  forfeiture  of  the  right  to  do  business  could  be  confined  by 
construction  to  business  wholly  within  the  State. s  The  court  said 
that  it  was  reasonable  that  anyone  who  denied  the  legality  of  a 
tax  should  have  a  clear  and  certain  remedy,  and  a  railroad  there- 
fore was  not  called  upon  to  take  the  risk  of  having  its  contracts 
disputed  and  its  business  injured,  and  a  payment  made  under 
such  conditions  was  made  under  duress  and  was  involuntary. 

§  199.  Corporate  Franchise  Taxes  in  Relation  to  Inter- 
state Commerce. — While  a  State  cannot  levy  any  tax  on  inter- 
state commerce  in  any  form,  either  by  imposing  such  tax  upon 
interstate  business,  or  the  privilege  of  engaging  in  such  business 
or  the  receipts  as  such  derived  from  it,  the  State  can  tax  the 
privilege  of  being  a  corporation  and  the  exercise  of  such  privi- 
lege by  a  foreign  or  domestic  cori3oration  and  within  its  limits. 


1  St.  Louis  &  S.  W.  R.  Co.  v.  Arkansas,  supra. 
2A.  T.  &  S.  F.  R.  Co.  V.  O'Connor,  suT)ra. 
3  A.  T.  &  S.  F.  R.  Co.  V.  O'Connor,  supra. 


190  FOREIGN    CORPORATIONS   IN    INTERSTATE    COMMERCE.       §    199 

Such  a  tax  is  not  made  invalid  because  it  is  measured  by  the 
capital  stock,  which  in  the  case  of  either  a  foreign  or  a  domestic 
corporation  may  in  part  represent  property  which  is  not  subject 
to  the  taxing  power  of  the  State.  The  State  has  the  power  to 
impose  such  a  tax  as  supplemental  to  or  in  lieu  of  what  is  known 
as  the  general  property  tax.  In  the  former  case,  however,  the 
amount  of  the  tax  may  become  material  in  determining  whether 
it  constitutes  a  burden  upon  interstate  commerce. 

These  principles  were  applied  by  the  Supreme  Court  in  sus- 
taining the  annual  corporation  franchise  tax  imposed  by  the 
State  of  Kansas  graduated  according  to  paid-up  capital  stock, 
but  the  maximum  being  limited  to  $2500.00.  The  court  said  that 
this  tax  was  not  a  burden  upon  interstate  commerce  though  im- 
posed as  supplemental  to  a  general  property  tax  in  the  case  of 
an  interstate  railroad  doing  business  in  Kansas  with  a  paid-up 
capital  exceeding  $3,000,000.00.^ 

The  same  principle  was  applied  at  the  following  term  in  sus- 
taining a  corporation  franchise  tax  of  Alabama  based  upon  capi- 
tal stock  in  a  case  of  a  consolidated  corporation  organized  under 
concurrent  acts  of  three  States,  which  was  also  organized  as  a 
domestic  corporation  under  the  laws  of  Alabama.  The  court 
said  that  this  case  was  controlled  by  the  same  principle  as  the 
Kansas  case;  that  every  such  case  must  depend  upon  its  own 
circumstances,  and  that  while  a  State  could  not  tax  property  be- 
yond its  borders,  it  might  measure  a  tax  within  its  authority  by 
capital  stock,  which  in  part  represented  property  without  the 
taxing  power  of  the  State.^ 

The  court  said  also  this  was  not  of  the  character  condemned  in 
the  Western  Union  Telegraph  Company  case,^  as  there  the  tax 
was  found,  under  the  facts,  to  be  in  substance  an  attempt  to  tax 
the  right  to  do  interstate  business  and  to  tax  property  beyond 
the  confines  of  the  State.     Such  a  tax  was  distinguished  from  a 


iK.  C,  S.  F.  &  M.  R.  Co.  V.  Bodkin,  240  U.  S.  27,  60  L.  Ed.  617 
(1916). 

2K.  C,  Memphis  &  Birmingham  R.  R.  Co.  v.  Stiles,  242  U.  S.  — ,  61 
L.  Ed.  —  (1916),  affirming  192  Ala.  687. 

3  Western  Union  Telegraph  Co.  v.  Kansas,  216  U.  S.  1,  54  L.  Ed. 
355  (1910). 


§    199      FOREIGN    CORPORATIONS   IN    INTERSTATE   COMMERCE.  191 

franchise  tax  levied  upon  a  corporation  consolidated  under  the 
laws  of  that  State  by  its  own  acceptance  of  that  law  by  incor- 
porating under  it. 

In  the  Western  Union  ease  the  tax  was  applied  only  to  foreign 
corporations  doing  business  in  the  State,  and  the  property  of 
the  corporation  in  the  State  was  insignificant  as  compared  with 
the  aggregate  of  its  capital  stock,  and,  under  the  facts,  the 
amount  of  the  tax  being  considered,  it  was  condemned  as  an  il- 
legal burden  upon  interstate  commerce.  In  the  later  cases  the 
amount  of  the  tax  was  comparatively  small,  and  it  was  imposed 
upon  all  corporations  for  the  privilege  of  doing  business  in  the 
State. 

This  recognition  of  the  right  of  a  State  to  impose  a  tax  supple- 
mental to  a  general  property  tax  for  the  exercise  of  a  corporate 
privilege  in  the  State  is,  however,  subject  to  the  Federal  protec- 
tion against  discrimination  in  the  imposition  of  such  an  addi- 
tional franchise  tax  upon  foreign  corporations,  when  no  such  tax 
is  imposed  upon  domestic  corporations  carrying  on  a  precisely 
similar  business.^ 

In  the  later  Alabama  case-  the  court  said  that  where  the 
franchise  tax  was  'imposed  equally  upon  all  its  corporations,  con- 
solidated and  otherwise,  the  fact  that  an  intrastate  corporation 
may  own  no  property  outside  of  the  corporation,  while  a  consoli- 
dated corporation  did,  presented  no  class  of  arbitrary  classifica- 
tion. The  court  said  there  was  no  denial  of  equal  protection  of 
the  laws,  because  a  State  may  impose  a  different  rate  of  taxation 
upon  a  foreign  corporation  for  the  privilege  of  doing  business 
within  the  State  than  it  applies  to  its  own  corporations  upon  the 
franchise,  which  the  State  grants  in  creating  them.  It  follows 
therefore  that  such  a  franchise  tax  imposed  for  the  exercise  of 


1  Southern  Railway  Co.  v.  Green,  216  U.  S.  400,  54  L.  Ed.  536  (1910). 
The  court  said  it  would  be  a  fanciful  distinction  to  say  that  there  is 
any  real  difference  in  the  burden  imposed  because  the  one  is  taxed  for 
the  privilege  of  a  foreign  corporation  to  do  business  in  the  State  and 
the  other  for  the  right  to  be  a  corporation.  Chief  Justice  White,  Jus- 
tice McKenna  and  Justice  Holmes  dissenting. 

2  K.  C,  Memphis  &  Birmingham  R.  R.  Co.  v.  Stiles,  242  U.  S.  — ,  61. 
L.  Ed.  —  (1916),  affirming  192  Ala.  687. 


192  FOREIGN    CORPORATIONS   IN    INTERSTATE   COMMERCE.      §    200 

the  corporate  privilege  in  the  State  should  Bte  imposed  without 
discrimination  and  apply  to  domestic  and  foreign  railroad  cor- 
porations, domestic  and  foreign  and  public  carriers  of  the  same 
class. 

This  corporate  franchise  tax,  as  it  is  termed,  which  the  State 
thus  imposes  on  the  privilege  of  doing  business  in  the  State,  may 
be  lawfully  based  upon  the  gross  earnings  within  the  State  of  an 
interstate  corporation,  and  when  reasonable  in  amount  will  be 
sustained,  though  it  is  supplemental  to  a  general  property  tax. 
(See  infra,  Sec.  254.) 

§  200.  Corporations  Carrying'  on  Interstate  Commerce  Not 
Exempt  from  Charges  for  Privilege  of  Incorporation.  —  But 

this  exemption  of  corporations,  e.  g.,  railroad  companies  and  pub- 
lic carriers,  engaged  as  instrumentalities  of  interstate  commerce, 
from  discriminating  State  taxation  and  conditions  imposed  upon 
the  privilege  of  entering  a  State,  does  not  include  exemption  from 
charges  for  the  privilege  of  incorporating  under  the  laws  of  a 
State.  This  was  illustrated  in  an  interesting  case  from  Ohio.  The 
Wabash  Railroad,  as  reorganized  after  foreclosure,  being  a  con- 
solidation of  companies  existing  under  the  laws  of  Ohio,  Michi- 
gan, Indiana,  Illinois  and  Missouri,  wished  to  file  its  articles  of 
consolidation  under  the  laws  of  Ohio,  as  it  had  in  other  States. 
Its  aggregate  capitalization  was  fifty-two  million  dollars,  and 
the  State  insisted  on  one-tenth  of  one  per  cent  of  the  entire  stock 
as  the  fee  for  incorporation  under  the  Ohio  law,  making  the  sum 
of  fifty-two  thousand  dollars.  The  company  offered  to  pay  seven 
hundred  dollars,  being  one-tenth  of  one  per  cent  on  the  capital 
stock,  amounting  to  only  seven  hundred  thousand  dollars,  of  the 
only  Ohio  corporation  which  went  into  the  consolidation.  They 
claimed  that  this  charge  of  fifty-two  thousand  dollars  was  an 
attempt  on  the  part  of  Ohio  to  lay  a  burden  on  commerce  and  to 
give  extra-territorial  force  to  its  taxing  power.  But  the  Supreme 
Court  said^  that  it  was  for  the  State  of  Ohio  to  determine  what 
conditions  it  would  annex  to  the  privilege  of  incoi-poration  under 
its  laws ;  that  the  purpose  of  tendering  the  articles  to  the  Secre- 


1  Ashley  v.  Ryan,  153  U.  S.  436,  38  L.  Ed.  773  (1894). 


§   200     FOREIGN   CORPORATIONS  IN  INTERSTATE   COMMERCE.  193 

tary  of  State  was  to  secure  to  the  consolidated  company  certain 
powers,  immunities  and  privileges  which  appertained  to  a  cor- 
poration under  the  laws  of  Ohio ;  that  the  State  in  granting  cor- 
porate privileges  to  its  own  citizens,  or  what  was  equivalent 
thereto,  permitting  foreign  corporations  to  become  constituent 
elements  of  a  consolidated  corporation  organized  under  its  laws, 
could  'impose  such  conditions  as  it  deemed  proper ;  and  that  this 
incorporation  fee  involved  no  interference  with  interstate  com- 
merce or  taxation  of  property  beyond  the  limits  of  the  State. 


CHAPTER     VI. 

THE    TAXATION    OF    STEAMBOATS    AND    VESSELS. 

§  201.  Taxation  of  vessels  as  property. 

202.  Taxable  situs  of  steamboats  and  vessels  at  home  port. 

203.  Situs  not  affected  by  temporary  enrollment  as  coaster  elsewhere. 

204.  The  taxable  situs  either  the  domicil  of  the  owner  or  the  actual 

situs  of  the  vessel. 

205.  Steamboats  on  rivers  and  great  lakes. 

206.  Home  port  when  not  conclusive  as  to  situs. 

207.  State  cannot  tax  privilege  of  navigating  public  waters. 

208.  Steam  tugs  cannot  be  taxed  for  privilege  of  navigating  rivers. 

209.  The  State  may,  however,  tax  the  privilege  of  carrying  on  the 

towing  business  in  a  corporate  capacity. 

210.  Police  control  by  State  over  vessels  in  harbor  or  in  transit. 

211.  Power  of  State  to  license  oyster  boats  and  fisheries. 

212.  State  may  exact  tolls  for  using  rivers  and  harbors  improved  at 

its  own  cost. 

213.  Taxation  of  ferries  and  bridges. 

214.  Gloucester  Ferry  Co.  v.  Pennsylvania. 

215.  Taxation  of  interstate  bridges. 

216.  Taxation  of  interstate  bridge  not  interference  with  interstate 

commerce. 

217.  Taxation  of  tonnage. 

218.  Property  taxation  and  compensation  for  services  distinguished 

from  tonnage. 

219.  Supreme  Court  on  tonnage  duties  and  wharfage  charges. 

220.  Wharfage  charges  may  be  graduated  by  tonnage. 

221.  But  wharfage  and  similar  charges  must  be  without  discrimina- 

tion. 

222.  Quarantine  and  pilotage  charges. 

223.  Taxation  of  land  under  harbors. 

"No  State  shall,  without  the  consent  of  Congress,  lay  any  duty  of 
tonnage." 

Constitution  of  the  United  States,  Art.  1,  Sec.  10,  Par.  3. 

§  201.  Taxation  of  Vessels  as  Property. — The  taxation  of 
steamboats  and  other  vessels  navigating  the  public,  that  is  the 
navigable  waters  of  the  United  States — those  which  by  them- 
selves or  in  connection  with  other  waters  form  a  continuous 
channel  for  commerce  between  the  States  or  with  foreign  nations 

(194) 


§    202  THE   TAX^VTION    OF    STEAMBOATS   AND   VESSELS.  195 

— has  a  direct  relation  to  the  regulation  of  such  commerce,  and 
the  taxing  power  of  the  State  is  therefore  limited  not  only  by  the 
specific  prohibition  in  the  Constitution  against  levying  any  tax 
upon  tonnage,  but  also  by  the  necessity  of  not  interfering  with 
the  paramount  control  over  commerce  vested  in  Congress. 

Steamboats  and  other  vessels  employed  upon  waters  entirely 
within  the  jurisdiction  of  the  State  and  having  no  water  con- 
nection with  other  States  or  foreign  countries,  are  taxable  like 
other  property  within  the  jurisdiction  of  the  State,  and  no  Fed- 
eral question  is  involved  in  such  taxation.  But  when  they  are 
employed  in  interstate  or  foreign  commerce,  the  taxing  power 
of  the  State  is  limited,  both  as  to  the  place  and  manner  of  taxa- 
tion, so  that  they  can  only  be  taxed  where  they  have  a  taxable 
situs.  Any  attempted  taxation  in  other  places  is  void  as  an  in- 
terference with  commerce,  and  while  they  can  be  taxed  at  their 
situs  as  property,  no  tax  can  be  laid  upon  tonnage. 

§  202.  Taxable  Situs  of  Steamboats  and  Vessels  at  Home 
Port. — Steamboats  and  vessels  navigating  the  public  or  navig- 
able waters  of  the  United  States  are  taxable  as  property,  irre- 
spective of  the  residence  of  the  owners,  in  the  home  port  of  the 
vessels,  which  is  said  to  be  their  situs  for  taxation.  Thus  the 
steamers  of  the  Pacific  Mail  Steamship  Company  owned  by  a 
New  York  corporation,  registered  at  the  custom  house  in  New 
York,  and  employed  in  transporting  passengers  and  freight  be- 
tween Panama  and  San  Francisco,  had  no  taxable  situs  in  San 
Francisco.^    The  court  said  : 

"Our  merchant  vessels  are  not  unfrequently  absent  for  years 
in  the  foreign  carrying  trade,  seeking  cargo,  carrying  and  un- 
lading it  from  port  to  port,  during  all  the  time  absent ;  but  they 
never  lose  their  national  character  nor  their  home  port,  as  in- 
scribed upon  their  stern. 

"The  distdnction  between  a  vessel  in  her  home  port  and  when 
lying  at  a  foreign  one,  or  in  the  port  of  another  State  is  familiar 
in  the  admiralty  law.    She  is  subjected  in  many  cases  to  the  ap- 


1  Hays  V.  Pacific  Mail  Steamsliip  Co.,  17  Howard  596,  15  L.  Ed.  254 
(1855);  see  also  Transportation  Co.  v.  Wheeling,  99  U.  S.  273,  25  h. 
Ed.  412  (1879). 


196  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  §    203 

plication  of  a  different  set  of  principles.     7  Pet.  324;  4  Wheat. 
438. 

"We  are  satisfied  that  the  State  of  California  had  no  jurisdic- 
tion over  these  vessels  for  the  purpose  of  taxation,  they  were  not, 
properly,  abiding  within  its  limits,  so  as  to  become  incorporated 
with  the  other  personal  property  of  the  State;  they  were  there 
but  temporarily,  engaged  in  lawful  trade  and  commerce,  with 
their  sihis  at  the  home  port,  where  the  vessels  belonged,  and 
where  the  owners  were  liable  to  be  taxed  for  the  capital  in- 
vested, and  where  the  tiaxes  had  been  paid." 

§  203.  Situs  Not  Affected  by  Temporary  Enrollment  as 
Coaster  Elsew^here. — The  fact  that  a  vessel  enrolled  in  one 
State  at  the  port  nearest  where  her  owner  usually  resides  is  en- 
rolled as  a  coaster  at  a  port  in  another  State,  where  she  is  em- 
ployed as  one  of  a  daily  line  of  steamers  between  that  port  and 
a  port  in  a  third  State,  does  not  cause  her  to  become  incorporated 
in  the  personal  property  of  the  State  in  which  she  is  thus  en- 
rolled as  a  coaster.  The  fact,  that  the  vessel  was  physically 
within  the  limits  of  the  State  at  the  time  the  tax  was  levied,  did 
not  decide  the  question  any  more  than  his  physical  presence 
would  decide  it,  in  case  of  a  traveler  passing  through  with  his 
private  carriage.^ 

The  ferry  boats  operating  between  St.  Louis  and  East  St. 
Louis  belonged  to  an  Illinois  corporation,  and  though  enrolled  in 
the  city  of  St.  Louis,  when  not  in  actual  use,  were  laid  up  on  the 
Illinois  shore.  They  were  held  to  have  no  taxable  sitiis  as  prop- 
erty in  St.  Louis.^  It  was  said  in  this  case  that  the  home  port  of 
the  vessel  under  the  United  States  Registry  Laws,  declaring  the 
home  port  shall  be  that  at  or  near  which  her  owner  resides,  de- 
pends wholly  upon  the  locality  of  the  owner's  residence,  and  not 
upon  the  place  of  the  inrollment.  The  purpose  in  this  case,  said 
the  court,  was  not  to  tax  the  property  through  the  proprietor, 


1  Morgan  v.  Parham,  16  Wallace  477,  21  L.  Ed.  303   (1873). 

2  St.  Louis  v.  Wiggins  Ferry  Co.,  11  Wall.  423,  20  L.  Ed.  192  (1870), 
on  appeal  from  the  U.  S.  Circuit  Court.  In  another  case  the  Supreme 
Court  of  Missouri  had  held  the  boats  taxable  in  St.  Louis,  St.  Louis  v. 
Wiggins  Ferry  Co.,  40  Mo.  580.  As  to  the  home  port  of  a  vessel  under 
these  decisions,  see  The  Lotus  No.  2,  26  Fed.  637.  See  also  2  Dillon's 
Municipal  Corporations,  4th  Ed.,  Sec.  786  et  seq.  and  cases  cited. 


§    204  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  197 

but  to  tax  the  property  itself  by  reason  of  its  being  ''within  the 
city,"  and  the  boats  were  not  "in  the  city"  within  the  meaning 
of  the  statute. 

§  204.  The  Taxable  Situs  Either  the  Domicil  of  the  Owner 
or  the  Actual  Situs  of  the  Vessel.— The  settled  rule  that  the 
domicil  of  the  owner  or  the  actual  situs  of  the  vessel,  and  not 
the  place  of  enrollment  of  the  vessel  pbnng  between  ports  of  dif- 
ferent States,  engaged  in  the  coastwise  trade,  and  the  consequent 
marking  of  the  sterns  of  the  vessels  with  the  port  of  enrollment 
as  provided  for  in  U.  S.,  R.  S.  4178,  4334,  was  the  criterion  by 
which  to  determine  the  situs  of  the  vessels  for  taxation  was  not 
changed  by  the  declaration  in  the  act  of  June  6,  1884,  23  Stat- 
utes at  Large  58,  that  the  word  "port"  as  used  in  this  section 
shall  be  construed  to  mean  either  the  port  where  the  vessel  is  en- 
rolled or  the  place  where  it  was  built,  or  where  one  of  the  owners 
resides,  which  simply  enables  the  owner  to  select  a  place  other 
than  the  place  of  enrollment  to  mark  upon  the  vessel.^ 

The  inability  of  vessels  by  reason  of  draft  of  the  depth  of 
water  to  go  to  the  situs  of  the  domicil  of  the  owner,  does  not 
prevent  their  taxation  at  that  domicil  where  they  have  gained 
no  actual  situs  elsewhere.  It  was  therefore  held  that  ocean- 
going steamships  owned  by  a  Kentucky  corporation  and 
plying  between  the  ports  of  New  York  and  New  Orleans, 
and  New  York  and  Galveston  and  New  Orleans  and 
Havana,  were  taxable  in  Kentucky,  the  domicil  of  the  owner, 
although  the  vessels  are  enrolled  at  the  port  of  New  York  and 
carries  the  words  "New  York"  on  their  sterns.  These  facts 
were  not  sufficient  to  give  the  vessel  actual  situ^  in  New  York.^ 

The  owner  does  not  have  the  arbitrary  right,  however,  to 
select  the  place  of  taxation,  although  he  does  have  the  right  to 
select  the  name  of  the  place  of  enrollment  and  the  place  where 
the  vessel  is  built,  or  the  place  where  he  resides,  as  the  place  to  be 
marked  on  the  stern  as  the  home  port. 


lAger  &  Lord  Tie  Co.  v.  Kentucky,  202  U.  S.  409,  50  L.  Ed.  1086 
(1906),  reversing  26  Ky.  L.  Rep.  585. 

i!  Southern  Pacific  v.  Kentucky,  222  U.  S.  63,  56  L.  Ed.  96  (1911), 
affirming  134  Ky.  417. 


198  THE   TAXATION    OP    STEAMBOATS   AND   VESSELS.  §    206 

§  205.  Steamboats  on  Rivers  and  Great  Lakes. — Steamboats 
owned  by  a  West  Virginia  company  having  its  principal  office 
in  Wheeling,  plying  between  different  ports  on  the  Ohio  River, 
were  properly  taxable  by  the  State  of  West  Virginia  in  Wheel- 
ing on  their  value  as  personal  property,  under  a  statute  au- 
thorizing that  city  to  assess  and  collect  an  annual  tax  for  the 
use  of  the  State  on  personal  property  within  its  precincts.^  It 
was  said  that  the  State  could  not  tax  ships  as  the  instruments  of 
commerce,  but  could  tax  the  owners  for  their  interest  in  them  a,8 
personal  property. 

Thus  steamers  and  vessels  employed  on  the  great  lakes,  having 
the  name  of  their  home  port  and  the  city  of  their  owner's 
domicil  painted  thereon,  as  required  by  the  United  States  Re- 
vised Statutes,  Section  4178,  have  their  situs  for  the  purposes 
of  taxation  at  their  home  port,  and  cannot  be  taxed  as  property 
of  another  State.2  Where  the  place  of  enrollment  is  the  same  as 
the  residence  of  the  owner,  that  place  is  of  course  the  home  port 
and  the  sitits  for  taxation.  Under  the  provision  of  the  Registry 
Laws  referred  to  above,  that  port  will,  as  a  rule,  be  the  place  of 
State  taxation,  and  it  would  seem  that  the  same  port,  the  place 
of  enrollment,  would  be  the  situs  for  taxation,  even  if  one  or 
more  of  the  part  owners  reside  elsewhere.  3 

Vessels  which,  though  engaged  in  interstate  commerce,  are 
employed  in  such  commerce  wholly  within  the  limits  of  a  State, 
are  subject  to  taxation  in  that  State,  although  they  may  have 
been  registered  and  enrolled  under  U.  S.  R.  S.,  Sees.  4141,  4311, 
at  a  port  outside  the  limits  of  the  State.4 

§  206.  Home  Port,  When  Not  Conclusive  as  to  Situs. — It 
has  been  held  in  a  recent  case  in  a  State  court,  though  the  ques- 
tion does  not  seem  to  have  been  definitely  decided  by  the  United 
States  Supreme  Court,  that,  while  the  place  of  enrollment  is  pre- 


.     1  Transportation  Co.  v.  Wheeling,  99  U.  S.  273   (supra.  Sec.  186). 

2  Yost  V.  Lake  Erie  Transportation  Co.,  6th  Circuit,  112  Fed.  746. 

3  See  2  Dillon  on  Municipal  Corporations,  Sec.  786  et  seq.  and  cases 
cited. 

4  Old  Dominion  Co.  v.  West  Virginia,  198  U.  S.  299,  49  L.  Ed.  1059 
(1905),  affirming  102  Va.  576. 


§    207  THE   TAXATION    OP    STEAMBOATS   AND   VESSELS.  199 

sumptive  evidence  of  situs  for  taxation,  it  is  not  conclusive. 
Ocean-going  tug-boats  were  declared  subject  to  taxation  by  the 
State  of  Washington,  because  they  were  used  exclusively  in  the 
waters  of  that  State,  although  they  were  registered  and  owned 
in  the  State  of  California.i  The  court  said  in  that  case,  1.  c, 
p.  215 : 

"Sound  reasons  exist  for  the  right  of  the  State  to  tax  these 
vessels  that  are  permanently  here  transacting  local  business. 
They  receive  the  full  protection  of  the  local  government,  and  if 
mere  registry  in  another  port  is  conclusive  against  the  right  to 
tax  here,  a  boat  can  operate  in  our  local  waters,  confined  entirely 
to  local  business,  and,  if  owned  elsewhere,  may  evade  all  taxa- 
tion in  this  State.  Such  construction  should  not  be  adopted  un- 
less imperatively  demanded  by  superior  authority.  Under  the 
revenue  law  of  this  State,  personal  property  is  taxed  at  its  situs, 
and  without  reference  to  the  residence  of  the  owner." 

And  it  was  also  said,  quoting  from  the  Supreme  Court  of  Ala- 
bama: 

' '  The  question  indeed  is  at  last  one  of  situs  in  fact,  and  where 
this  is  shown,  neither  foreign  registry  nor  foreign  ownership  is 
of  any  consequence." 

It  was  held,  however,  by  the  Supreme  Court  of  Florida,  that 
steamboats  belonging  to  a  New  York  company  and  registered  in 
New  York,  employed  during  the  winter  season  on  the  St.  John's 
Eiver,  but  during  the  remainder  of  the  year  in  such  waters  as 
would  be  most  profitable  in  other  parts  of  the  country,  were  not 
taxable  in  Florida.    The  court  said: 

"We  do  not  say  that  registration  in  a  foreign  port  and  non- 
resident ownership  should  control  absolutely.  But  such  owner- 
ship and  registration  render  them  primarily  and  presumptively 
taxable  only  in  their  home  port. "2 

§  207.  State  Cannot  Tax  Privilege  of  Navigating  Public 
Waters. — The  power  of  the  State  is  limited  to  the  taxation  of 


1  Northwestern  Lumber  Co.  v.  Chehalis  County  (Wash.),  54  L.  R.  A. 
212.     See  also  National  Dredging  Co.  v.  State,  99  Ala.  462. 

2  Johnson  v.  De  Bary-Baya  Merchants'  Line,  37  Fla.  499,  37  L.  R.  A. 
518. 


200  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  §   207 

boats  and  other  instrumentalities  of  commerce  as  property.  Thus 
a  municipal  ordinance  of  the  city  of  New  Orleans,  imposing  a 
license  on  the  business  of  running  tug  tow-boats  to  and  from  the 
Gulf  of  Mexico,  was  an  attempted  regulation  of  commerce  and 
invalid,!  The  Supreme  Court  said  that  it  is  undoubtedly  true, 
as  has  often  been  judicially  declared,  that  vessels  engaged  in 
foreign  and  interstate  commerce  and  duly  enrolled  and  licensed 
under  the  Acts  of  Congress  may  be  taxed  by  State  authority  as 
property,  provided  the  tax  is  not  a  tonnage  duty  and  is  levied 
only  at  the  port  of  registry,  and  the  vessels  are  valued  like  other 
property  in  the  State,  without  unfavorable  discrimination  on  ac- 
count of  their  employment.    It  added,  p.  75 : 

"The  sole  occupation  sought  to  be  subjected  to  the  tax  is  that 
of  using  and  enjoying  the  license  of  the  United  States  to  em- 
ploy these  particular  vessels  in  the  coasting  trade ;  and  the  State 
thus  seeks  to  burden  with  an  exaction,  fixed  at  its  own  pleasure, 
the  very  right  to  which  the  plaintiff  in  error  is  entitled  under, 
and  which  he  derives  from,  the  Constitution  and  laws  of  the 
United  States.  The  Louisiana  statute  declares  expressly  that  if 
he  refuses  or  neglects  to  pay  the  license  tax  imposed  upon  him, 
for  using  his  boats  in  this  way,  he  shall  not  be  permitted  to  act 
under,  and  avail  himself  of  the  license  granted  by  the  United 
States,  but  may  be  enjoined  from  so  doing  by  judicial  process. 
The  conflict  between  the  two  authorities  is  direct  and  express. 
What  the  one  declares  may  be  done  without  the  tax,  the  other 
declares  shall  not  be  done  except  upon  payment  of  the  tax.  In 
such  an  opposition,  the  only  question  is,  which  is  the  superior 
authority;  and  reduced  to  that,  it  furnishes  its  own  answer." 

The  principle  is  the  same,  whether  the  vessels  are  owned  by  a 
home  or  a  foreign  corporation.  Thus  a  foreign  corporation, 
whose  vessels  while  e7i  route  between  the  ports  of  two  different 
States  stop  at  the  port  of  a  third  State,  is  not  liable  at  that  port 
for  a  license  tax,  because  it  there  leases  a  wharf  or  landing,  and 
has  a  plant  and  machinery  for  the  taking  on  and  discharge  of 
its  freight  and  passengers,  employees,  an  agent,  a  bank  account 
and  an  office,  and  occasionally  purchases  supplies.  All  such 
operations  are  an  essential  and  integral  part  of  interstate  busi- 


1  Moran  v.  New  Orleans,  112  U.  S.  69,  28  L.  Ed.  653  (1884). 


§  208  THE  TAXATION  OF   STEAMBOATS   AND  VESSELS.  201 

ness,  and  the  State  cannot  impose  a  tax  upon  the  privilege  of 
conducting  such  business.^ 

§  208.  Steam  Tugs  Cannot  Be  Taxed  for  Privilege  of  Navi- 
gating Rivers. — The  same  principle  has  been  applied  by  the 
Supreme  Court  to  steam  tugs  engaged  in  the  business  of  towing 
vessels  into  and  out  of  the  Chicago  river  and  harbor  from  and 
to  the  lake.  They  were  engaged  in  interstate  and  foreign  com- 
merce, their  business  could  not  be  distinguished  from  that  in 
which  the  vessels  towed  were  engaged,  and  they  could  not  be 
compelled  to  pay  a  license  fee  to  the  city  of  Chicago.2  It  was 
also  immaterial  that  the  Chicago  river  had  been  deepened  for 
navigation  purposes  by  dredging,  under  the  direction  and  at  the 
expense  of  the  city,  for  the  license  was  not  exacted  as  a  toll  for 
the  specific  purpose  of  improving  the  river,  and  the  ease  there- 
fore did  not  come  within  the  principle  of  those  decisions  which 
hold  that  a  tax  or  toll  levied  by  a  State  upon  those  using  its 
rivers  and  harbors  improved  at  its  own  cost  is  not  in  violation 
of  the  Federal  Constitution.3  The  opinion,  referring  to  one  of 
these  cases.  Sands  v.  Manistee  River  Improvement  Co.,  infra, 
See.  212,  said,  p.  412 : 

''"Wlien  the  ease  came  before  this  court  it  was  held  that  the 
internal  commerce  of  a  State,  that  is,  the  commerce  which  is 
wholly  confined  within  its  limits,  is  as  much  under  its  control 
as  foreign  or  interstate  commerce  is  under  the  control  of  the 
general  government,  and,  to  encourage  the  growth  of  that  com- 
merce and  render  it  safe,  States  might  provide  for  the  removal 
of  obstructions  from  their  rivers  and  harbors  and  deepen  their 
channels  and  improve  them  in  other  ways,  and  levy  a  general 
tax  or  toll  upon  those  who  use  the  improvements  to  meet  their 
cost,  provided  the  free  navigation  of  the  waters,  as  permitted  by 
the  laws  of  the  United  States,  was  not  impaired,  and  provided 
any  system  for  the  improvement  of  their  navigation  instituted 
by  the  general  government  was  not  defeated.    No  legislation  of 


1  Clyde  S.  S.  Co.  v.  City  Council  of  Charleston,  76  Fed.  46. 

2  Harman  v.  City  of  Chicago,  147  U.  S.  396,  37  L.  Ed.  216  (1893),  re- 
versing 140  III.  374.     See  also  Frere  v.  Von  Schoeler,  47  La.  Ann.  324. 

3  Sands  v.  Manistee  River  Impt.  Co.,  123  U.  S.  288,  31  L.  Ed.  149 
(1887),  Huse  v.  Glover,  119  U.  S.  543,  30  L.  Ed.  487  (1886),  infra, 
Sec.  194. 


202  THE   TAXATION    OP    STEAMBOATS   AND   VESSELS.  §    210 

Congress  was,  by  the  statute  of  Michigan,  in  that  ease  interfered 
■with,  nor  any  right  conferred,  under  the  legislation  of  Congress, 
in  the  navigation  of  the  river  by  licensed  or  enrolled  vessels,  im- 
paired, defeated  or  burdened  in  any  respect.  It  was  the  im- 
provement of  a  river  wholly  within  the  State,  and,  therefore, 
until  the  Congress  took  action  on  the  subject,  wholly  under  the 
control  of  the  authorities  of  the  State. ' ' 

§  209.  The  State  May,  However,  Tax  the  Privilege  of  Car- 
rying" on  the  Towing  Business  in  a  Corporate  Capacity. — An 

annual  license  fee  equal  to  five-tenths  of  one  per  cent  upon  the 
gross  earnings  from  transportation  originating  and  terminating 
within  a  State,  which  was  imposed  by  New  York  upon  transpor- 
tation and  transmission  corporations  as  an  assessment  for  the 
privilege  of  carrying  on  business  in  the  State  in  a  corporate  and 
organized  capacity,  was  not  an  invalid  regulation  of 
commerce  as  applied  to  a  public  navigation  company  engaged  in 
the  business  of  towing  upon  the  Hudson  River  under  the  au- 
thority granted  by  the  United  States,  since  the  charge  was  not 
upon  the  navigation  of  the  river,  but  upon  the  doing  of  business 
within  the  State  as  a  corporation  of  the  State,  which  could  be 
carried  on  by  individuals  without  paying  any  charge.^ 

§  210.  Police  Control  By  State  Over  Vessels  in  Harbor  or  in 
Transit. — The  police  control  of  the  State  or  of  a  municipality 
acting  under  State  authority  is  co-extensive  with  its  jurisdic- 
tion. Pilot  and  harbor  regulations,  when  not  in  conflict  with  the 
Federal  Constitution  or  Federal  regulation,  are  valid.  But  ves- 
sels in  transit  are  not  within  the  jurisdiction  of  the  State  so  as 
to  be  subject  to  the  local  license  taxes,  as  for  selling  liquors  on 
board.2  Police  regulations,  however,  licensing  and  regulating 
public  exhibitions  on  board  steamboats  in  the  harbors  have  been 


1  New  York  ex  rel,  Cornell  Co.  v.  Sohmer,  235  U.  S.  549,  59  L.  Ed.  359 
(1915),  affirming  206  N.  Y.  651. 

2  State  v.  Frappart,  31  La.  Ann.  340. 

3  A  city  ordinance  exacting  a  license  from  boats  in  the  Mississippi 
river  was  held  invalid  as  to  a  towboat  licensed  under  Act  of  Congress 
in  the  coasting  trade,  St.  Louis  v.  Coal  Co.,  158  Mo.  342.  For  earlier 
State  cases  sustaining  licenses  held  invalid  under  the  rule  in  Moran  v. 
New  Orleans,  sup7-a.  Sec.  207,  and  Harman  v.  Chicago,  supra,  Sec.  208, 


§211  THE   TAXATION    OP    STEAMBOATS   AND   VESSELS.  203 

held  valid  as  police  regulations  and  not  invalid  as  regulations  of 
commerce. 1 

In  Kentucky  a  license  tax  upon  any  person  residing  upon  a 
boat  in  a  navigable  river  was  held  valid. 2  The  court  said  in  that 
case  that  plaintiff  had  no  right  to  use  the  public  highway  except 
in  common  with  the  public  and  in  pursuance  of  the  purposes  of 
its  dedication,  unless  by  consent  of  the  government;  that  the 
waters  of  the  Ohio  were  within  the  jurisdiction  of  Kentucky  and 
the  statute  in  question  was  justified  under  the  police  power.' 

§  211.  Power  of  State  to  License  Oyster  Boats  and  Fish- 
eries.— Subject  to  the  paramount  right  of  navigation,  the  regu- 
lation of  which  has  been  granted  to  the  Federal  government, 
each  State  owns  the  beds  of  all  tide-waters  and  public  waters 
within  its  jurisdiction,  and  may  appropriate  them  to  be  used  as 
a  common  by  its  citizens.3  Thus  a  State  may  provide  that  none 
may  take,  plant  or  cultivate  oysters  under  its  tidal  waters,  ex- 
cept such  as  shall  be  licensed,  and  may  confine  the  right  to  ob- 
tain licenses  to  its  own  citizens.4  But  a  statute  prohibiting  the 
use  of  vessels  to  buy  oysters  on  Chesapeake  Bay,  unless  under 
license  obtained  from  the  State  conditioned  upon  a  twelvte 
months  residence  therein  and  payment  of  a  tonnage  fee,  was  un- 
constitutional on  the  double  ground  that  it  denied  to  citizens 
of  other  States  the  privileges  enjoyed  by  citizens  of  that  State 
and  that  it  imposed  a  tonnage  tax.s  A  license  fee,  however,  of 
three  dollars  per  ton,  required  from  every  vessel  employed  in 
dredging  for  oystei-s  within  the  waters  of  the  State  was  held  a 
valid  exercise  of  the  State's  proprietary  rights.e  A  vessel  en- 
rolled and  licensed  under  the  laws  of  the  United  States  is  not  on 


see  Chilvers  v.  People,  11  Mich.  43;  Lightburne  v.  Taxing  District,  4 
Lea  219;  Newport  v.  Taylor,  16  B.  Monroe  699;  New  Orleans  v.  Eclipse 
Towboat  Co.,  33  La.  Ann.  647. 

1  Board  of  Selectmen  v.  Spalding,  8  La.  Ann.  87. 

2  Robertson  v.  Commonwealth  of  Kentucky,  19  Ky.  Law  Rep.  442. 
sMcCready  v.  Virginia,  94  U.  S.  391,  24  L.  Ed.  248   (1877). 

*  State  V.  Corson,  65  N.  J.  L.  502,  50  Atl.  Rep.  780. 
5  Booth -v.  Lloyd  (Md.),  33  Fed.  598. 

oDize  V.  Lloyd   (Md.),  36  Fed.  651;   State  v.  Loper,  46  N.  J.  L.  321; 
Morgan  v.  Commonwealth  (Va. ),  98  Va.  812. 


204  THE   TAXATION   OP    STEAMBOATS   AND   VESSELS.  §    212 

that  account  exempt  from  such  State  regulations.^  "The  right 
which  the  people  of  the  State  thus  acquire"  in  the  oyster  beds 
and  fisheries  ''comes  not  from  their  citizenship  alone,  but  from 
their  citizenship  and  property  combined, ' '  in  the  language  of  the 
Supreme  Court  in  McCready  v.  Virginia,  "It  is  in  fact  a  prop- 
erty right,  and  not  a  mere  privilege  or  immunity  of  citizenship. ' ' 
The  State  therefore  determines  the  conditions  on  which  the  pro- 
ducts of  the  oyster  beds  and  fisheries  become  subjects  of  com- 
merce. 

§  212.  State  May  Exact  Tolls  for  Using  Rivers  and  Har- 
bors Improved  At  Its  Own  Cost. — A  State  may  make  improve- 
ments in  a  navigable  stream  within  its  borders  and  collect  rea- 
sonable tolls  from  vessels  as  a  compensation  for  using  the  im- 
proved facilities.  This  principle  was  first  applied  by  the  Supreme 
Court^  in  holding  valid  the  regulations  made  by  the  city  of  Chi- 
cago for  the  use  of  the  Chicago  river.  The  court  said  that,  until 
Congress  acted,  the  State  of  Illinois  had  plenary  authority  over 
the  bridges  across  the  river  and  could  vest  in  the  city  of  Chicago 
jurisdiction  over  the  construction,  repair  and  use  of  such  bridges, 
and  that  there  was  nothing  in  the  Northwestern  Ordinance  of 
1787  or  in  the  subsequent  legislation  of  Congress,  which  pre- 
cluded the  State  from  exercising  this  power. 

The  principle  was  further  applied  in  sustaining  the  right  of 
the  State  to  exact  tolls  from  vessels  passing  through  the  Illinois 
river,  which  had  been  improved  at  the  expense  of  the  State.^ 
Such  a  charge,  said  the  court,  was  not  a  duty  upon  tonnage  but 
was  analogous  to  a  charge  for  the  use  of  wharves  and  docks  con- 
structed to  facilitate  the  landing  of  passengers  and  freight  and 
taking  them  on  board  and  for  the  repair  of  vessels.  In  this  case 
the  rates  of  toll  were  prescribed  according  to  the  tonnage  of  the 
vessels  and  the  amount  of  freight  carried  by  them  through  the 
locks  of  the  river.  The  court  said  that  this  was  simply  a  mode 
of  fixing  the  rate  according  to  the  size  of  the  vessel  and  the 


1  Manchester  v.  Massachusetts,  139  U.  S.  240,  35  L.  Ed.  159   (1891); 
Smith  V.  Maryland,  18  How.  269,  15  L.  Ed.  269    (1855). 

2Escanaba  Company  v.  Chicago,  107  U.  S.  678,  27  L.  Ed.  442   (1883). 
3  Huse  V.  Glover.  119  U.  -S.  543,  supra. 


§    213  THE   TAX.VTION   OP    STEAMBOATS   AND   VESSELS.  205 

amount  of  property  it  carried,  and  was  in  no  sense  a  duty  upon 
tonnage  wnthin  the  prohibition  of  the  Constitution. 

The  question  came  before  the  court  again  in  a  ease  involving 
the  improvement  made  by  the  State  of  IMichigan  in  the  Manistee 
river. ^  The  court  held  that,  as  the  Manistee  river  was  wholly 
within  the  limits  of  Michigan,  the  State  could  authorize  any  im- 
provement which  in  its  judgment  would  enhance  the  value  of  the 
river  as  a  means  of  transportation  from  one  part  of  the  State  to 
another,  and  to  meet  the  cost  of  such  improvement  the  State 
could  levy  a  general  tax  or  lay  a  toll  upon  all  who  used  the  river 
and  harbors  as  improved.  It  was  urged  that  the  terms  of  the 
Northwestern  Ordinance,  respecting  the  freedom  of  the  navigable 
waters  of  the  territory,  bound  the  people  of  the  territory  when 
subsequently  formed  into  States.  The  court  replied  that,  al- 
though it  was  doubtless  supposed  by  the  framers  of  that  ordi- 
nance that  its  words  would  always  be  considered  a  binding  obliga- 
tion, yet,  from  the  very  conditions  under  which  the  States  formed 
from  its  territory  were  admitted  into  the  Union,  the  provisions 
of  the  ordinance  became  inoperative  except  as  adopted  by  them. 
But,  independently  of  this  consideration,  nothing  in  the  ordinance 
•prevented  the  State  from  improving  the  river  and  charging  a 
reasonable  toll  as  compensation  for  the  improvement. 

§  213.  Taxation  of  Ferries  and  Bridg-es.— The  establishment 
and  licensing  of  ferriesz  and  the  establishment  of  bridges  across 
the  na\agable  waters  of  a  States  are  within  what  is  termed  the 
concurrent  jurisdiction  of  the  State  and  Federal  governments  in 
the  regulation  of  commerce.  As  to  this  class  of  cases,  it  is  not 
the  mere  existence  of  the  power  but  its  exercise  by  Congress, 
which  is  incompatible  with  the  exercise  of  the  same  power  by  the 
States,  and  the  latter  may  legislate  in  the  absence  of  congressional 
h'gi.slation.  The  State  may.  therefore  establish  and  license  a 
ferry  or  a  bridge  over  a  navigable  stream,  though  tlie  latter  must 


1  Sands  v.  Manistee  River  Improvement  Co.,  123  U.  S.  288,  supra. 

2  Conway  v.  Taylor,  1  Black  603,  17  L.  Ed.  191   (1861). 
aCardwell    v.    American    Bridge   Co.,    113    U.    S.    205,    28    L.    Ed.    959 

(1885)  ;  Covington  Bridge  Co.  v.  Kentucky,  154  U.  S.  204,  38  L.  Ed.  962 
(1894). 


206  THE   TAXATION    OF    STEAMBOATS    AND   VESSELS.  §    213 

be  approved  by  Congress  as  being  a  lawful  structure  not  inter- 
fering with  navigation,  and  it  was  held  by  the  Supreme  Court  in 
a  recent  casei  that  Congress  alone  possesses  the  requisite  power 
to  regulate  charges  upon  such  a  bridge. 

There  is  a  distinction  between  bridges  and  ferries  over  navig- 
able rivers  which  separate  States,  and  those  which  are  wholly 
within  the  limits  of  a  State,  as  Congress  has  no  control  over  com- 
merce which  is  entirely  within  the  limits  of  a  State.2 

Applying  the  principle  declared  in  the  cases  above  quoted, 
distinguishing  between  the  property  employed  as  instrumentali- 
ties of  commerce  and  the  business  of  conducting  the  commerce 
itself,  the  taxing  power  of  the  State  would  seem  to  be  limited  in 
the  taxation  of  bridges  and  ferries  to  the  taxation  of  the  prop- 
erty employed  therein,  such  as  the  bridge  and  approaches,  the 
ferry-boats  and  other  property  of  the  ferry.  The  Supreme  Court 
sustained,  however,3  a  license  of  a  certain  sum  for  each  boat 
levied  by  the  city  of  East  St.  Louis  upon  the  ferry  company, 
saying  that  the  power  to  license  is  a  police  power,  although  it 
can  also  be  used  for  purposes  of  revenue,  and  that  the  exaction 
of  the  license  fee  by  the  State  within  which  the  property  had  its 
situs  was  not  a  regulation  of  commerce.  The  license  fee  w^as 
levied,  not  on  the  ferry-boat,  but  on  the  ferry-keeper.4 


1  Covington  Bridge  Co.  v.  Kentucky,  supra.  Four  judges  dissented, 
holding  that  the  States  had  the  power  to  regulate  tolls  both  on  bridges 
and  ferries,  subject  to  the  paramount  authority  of  Congress,  and  the 
failure  of  Congress  to  act  manifested  its  intention  that  the  rates  of  toll 
should  be  as  established  by  the  two  States,  in  the  case  of  an  interstate 
bridge. 

2  See  United  States  v.  Morrison,  Federal  Cases  No.  15,465;  but  see 
also  United  States  v.  Jackson,  Federal  Cases  No.  15,458. 

3  Wiggins  Ferry  Co.  v.  East  St.  Louis,  107  U.  S.  365,  27  L.  Ed.  419 
(1883),  affirming  the  Supreme  Court  of  Illinois,  102  111.  514. 

4  This  case  was  referred  to  in  the  opinion  in  Covington  Bridge  Co. 
V.  Kentucky,  supra.  In  United  States  Express  Co.  v.  Allen,  39  Fed. 
714,  it  is  said  that  the  Supreme  Court  in  Leloup  v.  Mobile,  127  U.  S. 
640,  32  L.  Ed.  311  (1888),  substantially  overrules  this  case,  as  well  as 
that  of  Osborne  v.  Mobile,  16  Wall.  479,  21  L.  Ed.  470  (1873),  and  that 
the  language  of  the  court,  though  directed  to  the  Osborne  case,  must  in 
principle  apply  with  equal  force  to  the  Wiggins  Ferry  case.  Wiggins 
Ferry  Co.  v.  East  St.  Louis  was  also  distinguished  by  the  United  States 


§    213  THE   TAXATION   OF    STEAMBOATS   AND   VESSELS.  207 

Thus  a  Kentucky  corporation,  operating  a  ferry  across  the 
Ohio  river,  was  held  to  be  deprived  of  its  property  without  due 
process  of  law  by  the  action  of  that  State  in  including  for  the 
purposes  of  taxation  in  the  valuation  of  the  franchise  derived 
by  the  corporation  from  Kentucky,  the  value  of  an  Indiana 
franchise  for  a  ferry  from  the  Indiana  to  the  Kentucky  shore, 
which  the  corporation  had  acquired.'^ 

An  unconstitutional  burden  was  also  held  to  be  imposed  upon 
interstate  commerce  by  the  Illinois  law  of  1874,  Chapter  55, 
penalizing  the  carrying  on  of  a  ferry  service  without  a  license, 
when  applied  to  the  transportation  of  loaded  or  unloaded  rail- 
road cars  across  the  Mississippi  river  from  the  Illinois  to  the 
Missouri  shore.  The  court  said  that  even  assuming  that  the 
State  may  regulate  a  ferry  between  two  States,  the  statute  made 
the  granting  of  a  license  discretionary,  with  the  citizens  of  Illi- 
nois preferred,  and  compelled  the  licensee  to  conduct  a  general 
ferry  business.2 

The  same  principle  was  applied  in  holding  that  neither  a  city 
or  municipality  acting  under  its  authority  could  inquire  a 
Canadian  corporation  operating  a  ferry  over  a  boundary  stream 
lying  between  such  State  and  Canada  to  take  out  a  license  and 
to  pay  a  license  fee  as  a  condition  precedent  to  receiving  and 
landing  persons  and  property  at  its  wharf  in  such  muni- 
cipality.^ 


Circuit  Court  for  the  Southern  District  of  Illinois,  in  St.  Clair  County  v. 
The  Interstate  Car  Transfer  Co.,  109  Fed.  741,  where  it  was  held  that 
the  county  of  St.  Clair,  wherein  the  city  of  East  St.  Louis  is  situated, 
could  not  exact  a  license  fee  for  the  operation  of  a  ferry  transferring 
railroad  cars  across  the  Mississippi  from  East  St.  Louis  to  St.  Louis. 
There  the  corporation  owning  and  operating  the  ferry  was  a  Missouri 
corporation  domiciled  in  St.  Louis,  and  the  boats  had  their  situs  in 
St.  Louis,  and  the  only  property  in  Illinois  consisted  of  a  landing 
place  and  facilities. 

1  Louisville,  Etc.,  Ferry  Co.  v.  Kentucky,  188  U.  S.  385,  47  L.  Ed.  513 
(1903),  reversing  22  Ky.  Law  Rep.  446. 

-  St.  Clair  County  v.  Interstate  Land  &  C.  Co.,  192  U.  S.  454,  48  L.  Ed. 
518   (1904),  affirming  109  Fed.  741. 

3  Sault  Ste.  Marie  v.  International  Transit  Co.,  234  U.  S.  333,  58  L 
Ed.  1337   (1914). 


208  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  §    214 

§  214.  Gloucester  Ferry  Co.  v.  Pennsylvania.— The  ferry- 
boats between  Gloucester  in  New  Jersey  and  the  city  of  Philadel- 
phia belonged  to  a  New  Jersey  company  and  were  registered  in 
Camden,  N.  J.  No  property  was  owned  by  the  company  in  Phila- 
delphia except  the  docks  where  the  boats  were  landed  and  where 
they  remained  only  long  enough  to  receive  and  discharge  passen- 
gers and  freight.  The  Supreme  Court,  reversing  the  Supreme 
Court  of  Pennsylvania,^  decided  that  the  ferry  company  was  not 
taxable  in  Pennsylvania  upon  its  capital  stock.  Its  business  was 
interstate  commerce,  and,  whether  this  was  conducted  by  indi- 
viduals or  corporations,  the  property  employed  in  it  could  be 
taxed  only  where  it  had  its  taxable  situs. 

After  reviewing  the  cases,  the  court  stated  at  page  217,  that, 
although  the  privilege  of  keeping  a  ferry,  with  the  right  to  take 
toll  for  passengers  and  freight,  is  a  franchise  grantable  by  the 
State,  still  the  fact  remains  that  such  a  ferry  is  a  necessary 
means  of  commercial  intercourse  between  the  States  bordering 
on  their  dividing  waters,  and  it  must  therefore  be  conducted 
without  the  imposition  by  the  States  of  taxes  or  other  burdens 
upon  the  commerce  between  them.  Freedom  from  such  imposi- 
tions does  not  of  course  imply  exemption  from  reasonable  charges 
for  the  carriage  of  persons,  in  the  way  of  tolls  or  fares,  or  from 
the  ordinary  taxation  to  which  other  property  is  subjected. 
Reasonable  charges  for  the  use  of  property,  either  on  water  or 
land,  are  not  an  interference  with  the  freedom  of  interstate 
transportation. 

"How  conflicting  legislation  of  the  two  States  on  the  subject 
of  ferries  on  waters  dividing  them  is  to  be  met  and  treated  is 
not  a  question  before  us  for  consideration,  Pennsylvania  has 
never  attempted  to  exercise  its  power  of  establishing  and  regu- 
lating ferries  across  the  Delaware  river.  Any  one,  so  far  as  her 
laws  are  concerned,  is  free,  as  we  are  informed,  to  establish  such 
ferries  as  he  may  choose.  No  license  fee  is  exacted  from  ferry- 
keepers.  She  merely  exercises  the  right  to  designate  the  places 
of  landing,  as  she  does  the  places  of  landing  for  all  vessels  en- 
gaged in  commerce.     The  question,  therefore,  respecting  the  tax 


1  Gloucester  Ferry  Co.  v.  Pennsylvania,  114  U.  S.  196,  29  L.  Ed.  158 
(1885). 


§   216  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  209 

ill  the  present  case  is  not  complicated  by  any  action  of  that  State 
concerning  ferries.  However  great  her  power,  no  legislation  on 
her  part  can  impose  a  tax  on  that  portion  of  interstate  comnierce 
which  is  involved  in  the  transportation  of  persons  and  freight, 
whatever  be  the  instrumentality  by  which  it  is  carried  on. ' ' 

§  215.  Taxation  of  Interstate  Bridges.— Bridges  over  na- 
vigable rivers  separating  two  States  have  been  held  properly 
taxable  by  each  State  for  that  part  of  the  tangible  and  intangible 
property  of  the  bridge  located  therein.^  The  court  said  that  the 
company  was  chartered  by  the  State  of  Kentucky  to  build  and 
operate  a  bridge,  and  that  State  could  properly  include  the  value 
of  the  franchises  it  had  granted  in  the  valuation  of  the  com- 
pany's property.  The  Act  of  Congress  conferred  on  the  com- 
pany no  right  or  franchise  to  erect  the  bridge  or  to  collect  tolls 
for  its  use.  It  merely  regulated  the  height  of  the  bridge  over 
the  river  and  the  width  of  its  spans,  in  order  that  it  might  not 
interfere  with  navigation. 

In  a  later  case-  the  same  bridge  company  was  held  properly 
taxable  by  the  city  of  Henderson  on  so  much  of  its  property  as 
was  permanently  between  low  water  mark  on  the  Kentucky 
shore  and  low  water  mark  on  the  Indiana  shore  of  the  Ohio 
River,  it  being  settled  that  the  boundary  of  Kentucky  extended 
to  that  point,  and  that  the  power  of  Kentucky  to  tax  the  bridge 
was  not  affected  by  the  fact  that  it  was  erected  by  the  authority 
and  with  the  consent  of  Congress. 

§  216.  Taxation  of  Interstate  Bridge  Not  Interference  With 
Interstate  Commerce. — As  to  the  alleged  interference  with  in- 
terstate commerce,  the  court  said,  at  p.  153 : 

"Clearly  the  tax  was  not  a  tax  on  the  interstate  business  car- 
ried on  over  or  by  means  of  the  bridge,  because  the  bridge  com- 
pany did  not  transact  such  business.     That  business  was  carried 


1  Henderson  Bridge  Co.  v.  Kentucky,  166  U.  S.  150,  41  L.  Ed.  953 
(1897);  Justices  White,  Field,  Harlan  and  Brown  dissenting,  affirming 
31  S.  W.  486. 

2  Henderson  Bridge  Co.  v.  Henderson,  173  U.  S.  592,  43  L.  Ed.  823 
(1899),  affirming  36  S.  W.  561.  See  infra,  Ch.  VII,  "Taxation  of  Inter- 
state Carriers." 


210  THE   TAXATION    OP    STEAMBOATS    AND   VESSELS.  §    217 

Oil  by  the  persons  and  corporations  which  paid  the  bridge  com- 
pany tolls  for  the  privilege  of  using  the  bridge.  The  fact  that 
the  tax  in  question  was  to  some  extent  affected  by  the  amount  of 
the  tolls  received,  and  therefore  might  be  supposed  to  increase 
the  rate  of  tolls,  is  too  remote  and  incidental  to  make  it  a  tax 
on  the  business  transacted. ' ' 

In  a  later  case,  involving  the  taxation  of  the  Keokuk  and 
Hamilton  Bridge,  the  boundary  line  which  divided  the  bridge 
was  declared  to  be  the  boundary  line  between  the  two  States  of 
Iowa  and  Illinois,  and  this  was  the  middle  of  the  main  navigable 
channel  of  the  Mississippi  river.  The  determination  therefore 
of  the  line  which  divided  the  bridge  between  the  two  States  was 
a  question  of  fact,  and  it  was  not  within  the  province  of  the 
court  to  review  the  findings  of  the  Supreme  Court  of  Illinois  as 
to  the  part  assessed  in  Illinois.^  It  was  claimed  in  this  case  that 
no  part  of  the  capital  stock  was  assessable,  because  the  tax  upon 
it  was  a  tax  upon  interstate  commerce  and  upon  a  franchise  con- 
ferred by  the  Federal  government,  but  this  position  was  ad- 
judged untenable. 

The  increased  value  of  a  track  by  reason  of  a  bridge,  when 
the  bridge  is  part  of  a  line  of  railway,  in  another  case  was  said 
to  be  properly  taken  into  consideration  in  the  assessment  of  the 
value  of  the  track,  the  separate  assessment  of  the  value  of  the 
bridge  and  track  being  a  difference  of  form  rather  than  of  sub- 
stance.2 

§  217.  Taxation  of  Tonnage.— The  prohibition  of  any  tax 
upon  tonnage  was  obviously  supplementary  to  the  grant  to  Con- 
gress of  control  over  interstate  and  foreign  commerce,  and  should 
be  construed  in  connection  therewith. 


1  Keokuk  &  Hamilton  Bridge  Co.  v.  Illinois,  175  U.  S.  626,  44  L.  Ed. 
299   (1900),  affirming  176  111.  267. 

2  Pittsburgh,  Etc.,  R.  Co.  v.  Board  of  Public  Works  of  West  Vir- 
ginia, 172  U.  S.  32,  43  L.  Ed.  354  (1898);  see  also  Lumberville  Bridge 
Co.  V.  State  Board  of  Assessors,  55  N.  J.  L.  529,  and  25  L.  R.  A.  134, 
holding  that  a  tax  by  the  State  of  New  Jersey  of  one-tenth  of  one  per 
cent  upon  the  whole  of  the  capital  stock  of  a  bridge  company,  incor- 
porated for  building  a  bridge  between  New  Jersey  and  Pennsylvania 
and  requiring  concurrent  legislation  of  both  States,  was  valid. 


§217  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  211 

What  is  a  tax  upon  tonnage  within  the  meaning  of  this  prohi- 
bition can  only  be  determined  by  the  judicial  process  of  inclu- 
sion and  exclusion.  A  duty  upon  tonnage  within  the  meaning 
of  the  Constitution  is  a  charge  upon  a  vessel  as  an  instrument 
of  commerce  according  to  its  tonnage,  for  the  privilege  of  en- 
tering or  lea"ving  a  port  or  navigating  the  public  waters  of  the 
country;  and  the  prohibition  was  designed  to  prevent  the  States 
from  imposing  hindrances  of  this  kind  on  trading  in  vessels.^ 

The  prohibition  however,  is  not  limited  to  charges  based  upon 
tonnage.  Thus  a  statute  of  Louisiana,  that  the  Master  and  War- 
dens of  the  Port  should  be  entitled  to  demand  and  receive  in  addi- 
tion to  other  fees  the  sum  of  five  dollars,  whether  called  on  to  per- 
form any  service  or-not,  for  every  vessel  arriving  in  port,  was  de- 
clared to  be  a  duty  on  tonnage.    The  court  said  at  page  34 : 

''In  the  most  obvious  and  general  sense  it  is  true,  those  words 
describe  a  duty  proportioned  to  the  tonnage  of  the  vessel ;  a 
certain  rate  on  each  ton.  But  it  seems  plain  that,  taken  in  this 
restricted  sense,  the  constitutional  provision  would  not  fully 
accomplish  its  intent.  ...  It  was  not  only  a  pro  rata  tax 
which  was  prohibited,  but  any  duty  on  the  ship,  whether  a  fixed 
sum  upon  its  whole  tonnage,  or  a  sum  to  be  ascertained  by  com- 
paring the  amount  of  tonage  with  the  rate  of  duty.  "^ 

In  the  State  Tonnage  Tax  Cases  from  Alabama, 3  a  tax  levied 
by  Alabama  on  all  steamboats,  vessels  and  other  craft  plying 
in  the  navigable  Waters  of  the  State,  at  the  rate  of  one  dollar 
per  ton  of  the  registered  tonnage,  was  held  to  be  a  tax  upon 
tonnage,  and  the  language  of  the  act  showed  clearly  that  it 
was  intended  to  be  a  tax  on  the  boats  as  instruments  of  com- 
merce and  not  as  property  in  the  State.  The  court  said  that 
it  was  immaterial  whether  the  ships  or  vessels  taxed  belonged 
to  citizens  of  that  State  or  to  citizens  of  other  States,  as  the 
prohibition  was  general,  withdrawing  altogether  from  the  State 
the  power  to  lay  any  duties  on  tonnage,  under  any  circumstances, 
without  the  consent  of  Congress. 


1  See  Huse  v.  Glover,  119  U.  S.  543,  supra. 

2  Steamship  Co.  v.  Portwardens,  6  Wall.  31,  18  L.  Ed.  749   (1867). 
8  12  Wallace  204,  20  L.  Ed.  370   (1871). 


212  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  §    217 

An  ordinance  of  the  city  of  New  Orleans  levying  duties  at  the 
rate  of  ten  cents  per  ton  on  all  steamboats  mooring  or  landing  at 
the  port,  if  in  port  not  exceeding  five  days,  and  of  five  dollars 
per  day  after  the  five  days,  though  the  port  of  New  Orleans 
includes  some  twenty-two  miles  on  which  wharves  had  been 
built  for  only  about  two  miles,  was  a  tax  upon  tonnage  in  viola- 
tion of  the  Constitution.!  The  court  said  that  it  could  not  be 
supported  as  a  compensation  for  the  use  of  the  city's  wharves 
and  was  really  a  tax  for  the  privilege  of  arriving  and  de- 
parting from  the  port.  A  fee  of  one  and  one-half  cents  per  ton, 
required  by  the  New  York  statute  to  be  paid  by  all  ships  or  ves- 
sels entering  the  ports  of  New  York  and  loading  or  unloading 
therein,  was  a  tax  upon  tonnage." 

So  also  was  an  act  of  Texas  invalid,  which  required  every 
vessel  arriving  at  quarantine  stations  in  the  State  to  pay  five 
dollars  for  the  first  one  hundred  tons  and  one  and  one-half  cents 
for  each  additional  ton.  As  this  was  for  defraying  the  ex- 
penses of  the  quarantine  regulations,  it  was  claimed  to  be  justi- 
fied by  the  decision  in  Gibbons  v.  Ogden,  where  the  court  speaks 
of  quarantine  and  inspection  laws  as  being  within  the  juris- 
diction justly  exercised  by  the  States  themselves  in  the  regula- 
tion of  commerce.  The  Supreme  Court  saids  that,  while  the 
power  to  establish  quarantine  laws  rests  "with  the  States,  it 
cannot  be  exercised  in  violation  of  the  restrictions  imposed  by  the 
Federal  Constitution  upon  their  taxing  power,  and  the  tax 
was  adjudged  invalid  as  being  upon  tonna-ge.  An  example  of  a 
valid  quarantine  regulation,  involving  the  payment  of  a  fee 
graduated  according  to  tonnage,  may  be  found  in  Morgan's 
Steamship  Co.  v.  Board  of  Health.^ 

A  law  of  New  York  which  provided  that  the  master,  owner 
or  assignee  of  every  steamboat  or  vessel  entering  the  port  of 
Albany,  or  loading,  unloading  or  making  fast  to  any  wharf 
thereof,  shall  within  forty-eight  hours  after  the  arrival  therein 


1  Cannon  v.  New  Orleans,  20  Wallace  577,  22  L.  Ed.  417    (1874). 
2lnman  Steamship  Co.  v.  Tinker,  94  U.  S.  238,  24  L.  Ed.  118  (1877). 
sPeete  v.  Morgan,  19  Wallace  581,  22  L.  Ed.  201   (1874). 
4  118  U.  S.  455,  30  L.  Ed.  237  (1886). 


§    218  THE   TAX.\.TION   OF    STEAMBOATS   AND   VESSELS.  213 

pay  to  the  Harbor  Master  for  his  services  a  sum  of  one  and 
one-half  cents  per  annum,  which  shall  be  computed  upon  the 
registered  tonnage  of  such  steamboat  or  vessel,  was  adjudged 
void  as  imposing  a  tonnage  tax  in  violation  of  the  Constitution.  ^ 

§  218.  Property  Taxation  and  Compensation  for  Services 
Distinguished  From  Tonnage.— A  property  tax  levied  upon 
the  vessel  as  property,  where  it  has  a  taxable  situs,  is  not  a  duty 
upon  tonnage.  Thus  in  Transportation  Co.  v.  Wheeling,2  the 
boats  used  in  navigating  the  Ohio  river  between  Wheeling  and 
Parkersburg,  and,  when  not  in  use,  laid  up  at  Wheeling,  owned 
by  a  West  Virginia  company,  whose  principal  office  was  at 
Wheeling  and  whose  stock  belonged  principally  to  citizens  of 
West  Virginia  and  Ohio,  were  held  properly  taxable  at  Wheeling. 
A  tax  so  levied  moreover  was  not  a  tax  upon  tonnage.  The  court 
said  that  taxes  levied  by  the  State  upon  vessels  owned  by  its 
citizens  as  property,  based  on  the  value  of  the  same  as  property, 
are  not  within  the  prohibition  of  the  Constitution,  and  that  as- 
sessments of  this  kind,  when  levied  for  municipal  purposes, 
must  be  made  against  the  owner  of  the  property  and  can  only 
be  made  in  the  municipality  where  the  owner  resides. 

On  the  other  hand  it  is  not  a  duty  upon  tonnage  where  the 
charge  imposed  is  only  a  reasonable  charge  for  services  rendered, 
as  for  the  use  of  an  improved  wharf  in  a  municipality,  even  if  the 
charge  is  proportioned  to  the  tonnage  of  the  vessel.  Such 
charges  have  been  sustained  in  a  number  of  cases.3 

Thus,  in  the  case  of  Transportation  Company  v.  Parkersburg, 
the  exaction  of  the  fee  was  sustained,  although  plaintiff  claimed 
that  the  rates  charged  were  exorbitant  and  were  merely  a  pre- 
text for  a  duty  on  tonnage.  P>ut  the  court  refused  to  inquire 
into  the  secret  purpose  of  the  city.  Upon  the  distinction  be- 
tween a  duty  on  tonnage  and  wharfage  charges  it  said: 

1  Way  V.  New  Jersey  Steamboat  Co.,  133  Fed.  188   (1908). 

2  99  U.  S.  273,  supra. 

3  Packet  Co.  v.  Keokuk,  95  U.  S.  80,  24  L.  Ed.  377  (1877);  Packet 
Co.  V.  St.  Louis,  100  U.  S.  423,  25  L.  Ed.  688  (1880);  Vicksburg  v. 
Tobin,  100  U.  S.  430,  25  L.  Ed.  690  (1880);  Packet  Co.  v.  Catlettsburg, 
105  U.  S.  559.  26  L.  Ed.  1169  (1882);  Transportation  Co.  v.  Parkers- 
burg, 107  U.  S.  691,  27  L.  Ed.  584   (1883). 


214  THE   TAXATION    OP    STEAMBOATS    AND   VESSELS.  §    220 

§  219.  Supreme  Court  on  Tonnage  Duties  and  Wharfage 
Charges. — "When  the  Constitution  declares  that  'No  State 
shall,  without  the  consent  of  Congress,  lay  any  duty  of  ton- 
nage ; '  and  when  Congress,  in  Sec.  4220  of  the  Eevised  Statutes, 
declares  that  'no  vessel  belonging  to  any  citizen  of  the  United 
States,  trading  from  one  port  within  the  United  States  to  an- 
other port  within  the  United  States,  or  employed  in  the  bank, 
whale  or  other  fisheries,  shall  be  subject  to  tonnage  tax  or  duty, 
if  such  vessel  be  licensed,  registered,  or  enrolled,'  they  mean  by 
the  phrases,  'duty  of  tonnage,'  and  'tonnage  tax  or  duty,'  a 
charge,  tax,  or  duty  on  a  vessel  for  the  privilege  of  entering  a 
port;  and  although  usually  levied  according  to  tonnage,  and  so 
acquiring  its  name,  it  is  not  confined  to  that  m.ethod  of  rating 
the  charge.  It  has  nothing  to  do  with  wharfage,  which  is  a 
charge  against  a  vessel  for  using  or  lying  at  a  wharf  or  landing. 
The  one  is  imposed  by  the  government,  the  other  by  the  owner  of 
the  wharf  or  landing.  The  one  is  a  commercial  regulation,  dic- 
tated by  the  general  policy  of  the  country  upon  considerations 
having  reference  to  its  commerce,  or  revenue ;  the  other  is  a  rent 
charged  by  the  owner  of  the  property  for  its  temporary  use. 
It  is  obvious  that  the  mode  of  rating  the  charge  in  either  case, 
whether  according  to  the  size  or  capacity  of  the  vessel,  or  other- 
wise, has  nothing  to  do  with  its  essential  nature.  It  is  also 
obvious  that  since  a  wharf  is  property,  and  wdiarfage  is  a  charge 
or  rent  for  its  temporary  use,  the  question  whether  the  owner 
derives  more  or  less  revenue  from  it,  or  whether  more  or  less 
than  the  cost  of  building  and  maintaining  it,  or  what  disposition 
he  makes  of  such  revenue,  can  in  no  way  concern  those  who  make 
use  of  the  wharf  and  are  required  to  pay  the  regular  charges 
therefor;  provided,  always,  that  the  charges  are  reasonable  and 
not  exorbitant."^ 

§  220.    Wharfage  Charges  May  be  Graduated  by  Tonnage. 

Charges  for  w^harfage  may  be  graduated  by  the  tonnage  of  ves- 
sels using  the  wharves,  and  this  is  not  a  duty  on  tonnage.  An 
ordinance  of  New  Orleans  therefore  fixing  the  rates  at  so  much 
per  ton  for  using  the  new  wharf,  the  proceeds  being  used  to  repair 


1  The  opinion  contains  an  exhaustive  reviev/  of  the  cases,  but  holds 
that  the  reasonableness  of  the  charge  for  wharfage  must  be  deter- 
mined by  the  laws  of  the  State  within  whose  jurisdiction  the  wharf  is 
situated.  Justice  Harlan  dissented,  holding  that  the  courts  of  the 
Union  are  empowered  to  protect  the  rights  of  free  commerce  against 
unreasonable  exactions. 


§    221  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS,  215 

that  wharf  and  construct  new  ones,  was  valid.^  The  tolls  levied 
by  the  State  of  Illmois  upon  the  passage  of  vessels  through  the 
locks  of  the  Illinois  upon  the  passage  of  vessels  through  the  locks 
of  the  Illinois  river,  as  compensation  for  the  outlay  of  the  State 
in  improving  the  navigation  of  the  river,  were  held  to  be  valid 
on  the  same  principle,  as  the  State  was  allowed  to  charge  compen- 
sation for  the  use  of  wharves  and  docks,  and  there  was  nothing 
in  the  objection  that  the  rates  of  toll  were  according  to  tonnage 
and  the  amount  of  freight.^ 

§  221.  But  Wharfage  and  Similar  Charges  Must  be  With- 
out Discrimination. — But  the  right  of  the  State,  or  municipal- 
ity acting  under  State  authority,  to  make  reasonable  charges  for 
the  use  of  improved  wharves  and  similar  privileges  is  sub- 
ject to  the  qualification  incident  to  the  exercise  of  its  taxing 
authority  by  a  State  in  any  case,  that  it  must  be  without  dis- 
crimination against  the  citizens  and  products  of  other  States. 
This  was  forcibly  illustrated  in  the  case  of  Guy  v.  Baltimore,^ 
where  a  city  wharfage  charge  had  been  in  force  some  fifty  years 
and  was  declared  invalid  as  interfering  with  commerce,  on  the 
ground  that  it  was  exacted  only  from  vessels  transporting  goods 
or  articles  other  than  the  products  of  the  State.  It  was  argued 
that  the  city,  as  the  owner  of  the  wharves,  had  the  right  to  permit 
their  free  use  by  vessels  loaded  with  the  products  of  Maryland, 
and  that  others  could  not  complain  so  long  as  they  were  not 
required  to  pay  more  than  a  reasonable  compensation.  The  court 
said  that  the  vice  was  in  the  discrimination,  and  that  the  city 
could  no  more  discriminate  in  the  use  of  the  wharves  than  it  could 
in  the  use  of  the  public  streets  or  other  highways.  If  it  permit- 
ted citizens  of  that  State  to  use  them  without  charge,  it  must 
give  the  same  privilege  to  citizens  and  vessels  of  other  States,  and 
the  State  could,  by  neither  direct  nor  indirect  means,  build  up  its 
domestic  commerce  through  the  imposition  of  unequal  and  oppres- 


1  Ouachita  Packet  Co.  v.  Aiken,  121  U.  S.  444;  30  L.  Ed.  976   (1887). 

2  Huse  V.  Glover,  119  U.  S.  543,  supra;  see  also  Escanaba  Co.  v. 
Chicago,  107  U.  S.  678,  supra;  Sands  v.  Manistee  Improvement  Co., 
123  U.  S.  288,  suprn. 

3  100  U.  S.  434,  27)  L.   Ed.  74.3    (1880). 


216  THE   TAXATION    OF    STEAMBOATS    AND   VESSELS.  §    222 

sive  burdens  upon  tlie  business  and  industries  of  other  States. 
The  opinion  continues  at  page  443 : 

"Such  exactions,  in  the  name  of  wharfage,  must  be  regarded 
as  taxation  upon  interstate  commerce.  Municipal  corporations, 
owning  wharves  upon  the  public  navigable  waters  of  the  United 
States,  and  quasi  public  corporations  transporting  the  products 
of  the  country,  cannot  be  permitted  by  discriminations  of  that 
character  to  impede  commercial  intercourse  and  traffic  among 
the  several  States  and  with  foreign  nations." 

§  222.  Quarantine  and  Pilotage  Charges. — Inspection  laws 
of  the  State  are  expressly  authorized  by  the  Constitution,  see 
supra,  Sec.  129,  and  quarantine  laws  belong  to  that  class  of 
State  legislation  which  is  valid  until  forbidden  by  Congi-ess, 
unless  it  covers  the  same  ground  that  is  covered  by  the  legisla- 
tion of  Congress.^  In  the  absence  of  such  Federal  legislation, 
Congress  is  deemed  to  have,  in  effect,  adopted  the  State  laws 
and  forbidden  interference  with  their  enforcement.  The  fees 
collected  under  the  quarantine  laws  of  Louisiana  were  therefore 
valid;  they  were  not  tonnage  taxes  within  the  meaning  of  the 
word  as  used  in  the  Constitution,  but  compensation  for  services 
rendered.  The  court  said,  at  page  463,  that  the  fee  complained  of, 
$30  a  vessel,  was  not  a  tax  within  the  meaning  of  that  word  as 
used  in  the  Constitution,  nor  did  the  exaction  of  the  fee  amount 
to  a  regulation  of  commerce  under  the  Constitution. 2  The  en- 
forcement of  these  quarantine  regulations  and  the  collection  of 
these  charges  did  not  give  the  ports  of  any  other  State  a  prefer- 
ence over  those  of  Louisiana. 

State  pilotage  laws  and  the  fees  connected  therewith  for 
pilotage  services  were  held  by  the  Supreme  Court  in  the  lead- 
ing cases  to  be  regulations  of  commerce  of  the  class  which  do 
not  require  a  uniform  rule  and  which  can  properly  be  governed 
by  rules  varying  with  the  locality,  subject  however,  to  the  para- 
mount control  of  Congress  whenever  Congi'ess  deems  proper  to  ex- 


1  Morgan's    Steamship    Co.    v.    Louisiana,    118    U.    S.    455,    30    L.    Ed. 
237  (1886). 

2  Justice   Bradley   dissented. 

3  Cooley  V.  Port  Wardens,  12  Howard  229,  13  L.  Ed.  996   (1851). 


§    223  THE   TAXATION    OF    STEAMBOATS   AND   VESSELS.  217 

ercise  its  power. i  The  court  in  this  case  sustained  the  act  of 
Pennsylvania,  according  to  which  a  vessel  refusing  to  take  a 
pilot  forfeited  to  the  Master  Warden  of  the  Pilots  for  the 
use  of  a  society  for  the  relief  of  pilots  one-half  of  the  amount 
of  pilotage.  Such  a  law  did  not  give  a  preference  to  the  ports 
of  one  State  over  those  of  another,  nor  was  it  a  violation  of  the 
Cons'titution  providing  that  the  vessels  to  or  from  one  State 
shall  not  be  obliged  to  enter,  clear  or  pay  duties  in  another.  The 
pilotage  fees  were  not  duties  within  the  meaning  of  the  Consti- 
tution.    This  ruling  has  been  consistently  adhered  to.2 

§  223.  Taxation  of  Land  Under  Harbors.  —  Lands  under 
water  of  an  harbor  designated  as  the  boundaries  of  the  munici- 
pality have  been  held  taxable  as  real  estate  within  the  munici- 
pality. 3 

It  has  been  held  that  jurisdiction  for  taxing  purposes  of  harbor 
areas  and  navigable  waters  within  the  defined  limits  of  Porto  Rico 
was  not  denied  the  Insular  government  by  the  reservation  of  such 
areas  and  waters  in  favor  of  the  United  States  made  by  the  act 
of  April  12,  1900,  and  the  act  of  July  1,  1902,  which  are  to  be 
construed  as  proprietary  reservations  only,  and  not  as  limitations 
upon  the  exercise  of  government.4 


1  Sinnott  v.  Com.  of  Mobile,  22  How.  227,  16  L.  Ed.  243  (1859) ;  Fos- 
ter V.  Com.  of  Pilotage,  22  How.  245,  16  L.  Ed.  248    (1859). 

^Ex  parte  McNeil,  13  Wall.  236,  20  L.  Ed.  624  (1872).  See  also 
Covington  Bridge  Co.  v.  Kentucky,  154  U.  S.  204,  211,  supra;  Huus  v. 
Porto  Rico  Steamship  Co.,  182  U.  S.  392,  45  L.  Ed.  1146  (1901),  hold- 
ing that  a  vessel  engaged  in  trade  between  Porto  Rican  ports  and  the 
ports  of  the  United  States  was  not  subject  to  the  New  York  pilotage 
laws,  because  it  was  engaged  in  the  coastwise  commerce  of  the  coun- 
try within  the  meaning  of  the  Act  of  Congress,  subjecting  such  vessels 
to  the  navigation  laws  of  the  United  states.  This  coasting  trade  was 
intended  to  include  the  domestic  trade  of  the  United  States  by  other 
than  interior  waters.   Olsen  v.  Smith,  195  U.  S.  332,  49  L.  Ed.  224  (1904). 

3  Leary  v.  Jersey  City  Co.,  189  Fed.  89  (1911). 

4  Gromer  v.  Standard  Dredging  Co.,  224  U.  S.  362,  56  L.  Ed.  801 
(1912),  reversing  5  Porto  Rico  Fed.  142. 


CHAPTER    VII. 

TAXATION    OF    INTERSTATE    COMMERCE. 

§  224.  Difficulty  of  defining  line  between  Federal  and  State  power. 

225.  License   taxation. 

226.  Osborne  v.  Mobile. 

227.  Osborne  v.  Mobile  overruled. 

228.  License  tax  on  agents  of  interstate  railroads  held  invalid. 

229.  Immaterial    that   license    interfering   with    commerce    purports 

to  be  for  regulation  and  not  for  revenue. 

230.  License  for  privilege  of  transacting  local  business  is  valid. 

231.  Decision  of  State  court  that  license  only  applies  to  local  busi- 

ness conclusive. 

232.  It  must  clearly  appear  that  intra-state  business  alone  is  taxed. 

233.  License  must  not  be  condition  for  transacting  interstate  busi- 

ness. 

234.  License  or  privilege  tax  must  not  exceed  amount  of  tax  on 

property. 

235.  Tax  on  interstate  telegraph  messages  invalid. 

236.  Privilege  tax  on  sleeping  cars. 

237.  Compensation  exacted  by  city  for  use  of  poles  in  streets  not 

regulation  of  commerce. 

238.  Payment  reserved  as  bonus  in  railroad  charter  not  regulation 

of  commerce. 

239.  Taxation  of  rolling  stock. 

240.  Rule  of  average  of  habitual  use  adopted. 

241.  Supreme  Court  on  taxable  situs  of  railroad  cars. 

242.  Taxation  of  refrigerator  cars. 

243.  Mileage  apportionment   in   taxation  of  rolling  stock. 

244.  State  tax  on  freight  invalid. 

245.  State  tax  on  railway  gross  receipts. 

246.  Mileage  apportionment  in  interstate  railway  taxation. 

247.  Taxation  of  net  earnings  sustained. 

248.  Tax  on  gross  earnings  held  invalid. 

249.  Tax  on  gross  receipts  held  invalid  in  State  courts. 

250.  Maine  v.   Grand   Trunk   R.   R.    Co. 

251.  Tax  on  gross  earnings  apportioned  by  mileage  valid  as  excise 

tax. 

252.  Principle  reaffirmed. 

253.  Immaterial  whether  corporation  is  domestic  or  foreign. 

254.  Tax  on   gross  earnings   when  an  Interference  with   interstate 

commerce. 


(218) 


§   225  TAXATION   OF   INTERSTATE    COMMERCE.  219 

255.  Tax  not  upon  receipts  as  such  but  excise  tax  apportioned  to 

receipts. 

256.  State  tax  on  net  receipts. 

257.  Valuation  of  property  by  capitalization  of  receipts. 

§  224.  DiflEiculty  of  Defining  Line  Between  Federal  and 
State  Power. — The  most  important  and  difficult  questions,  in 
defining  the  line  between  the  Federal  regulation  of  commerce  and 
the  taxing  power  of  the  State,  have  arisen  in  connection  with 
taxation  upon  the  great  railroad,  telegraph  and  express  systems, 
which  penetrate  the  different  States  and  transact  both  local  and 
interstate  business.  Every  form  of  taxation  upon  these  great 
properties  which  has  been  attempted  has  been  contested  in  its 
application,  on  account  of  alleged  interference  with  interstate 
commerce.  The  decisions  of  the  Supreme  Court  upon  the  ques- 
tions presented  in  this  class  of  cases  have  not  been  uniform,  and 
the  difficulty  of  defining  the  line  where  the  State  and  Federal 
powers  meet  is  illustrated  by  the  frequent  dissents  in  the  court 
and  the  overruling  of  decisions  by  the  same  judges  who  pro- 
nounced them.     Thus  the  court  said  :^ 

''Owing  to  the  paramount  necessity  of  maintaining  unt'ram- 
meled  freedom  of  commercial  intercourse  between  the  citizens 
of  the  different  States,  and  to  the  fact  that  so  frequently  trans- 
portation and  telegraph  companies  transact  both  local  and  inter- 
state business,  it  has  been  found  difficult  to  clearly  define  the 
line  where  the  State  and  the  Federal  powers  meet.  That  diffi- 
culty has  been  chiefly  felt  by  this  court  in  dealing  with  ques- 
tions of  taxation,  and  is  shown  by  the  not  infrequent  dissents  by 
members  of  the  court  when  the  effort  has  been  made  to  formulate 
a  general  statement  of  the  law  applicable  to  such  questions." 

§  225.  License  Taxation. — The  exaction  of  license  fees  for 
the  purpose  of  revenue  is  a  common  method  of  taxation,  espec- 
ially in  the  Southern  States.  Thus  there  are  business,  occupa- 
tion and  privilege  taxes,  which  arc  levied  both  by  the  State 
directly  and  by  the  municipalities  under  State  authority,  and 
all  of  which  are  in  some  States  called  by  the  generic  name  of 
"privilege"  taxes.     As  heretofore  shown,  such  taxation  as  to 


lErie   R.    R.    Co.   v.    Pennsylvania,    158    U.    S.    437,    39    L.    Ed.    1045 
(1895). 


220  TAXATION    OP   INTERSTATE   COMMERCE.  §    226 

all  persons  and  occupations  within  the  jurisdiction  of  the  State 
is  a  legitimate  method  of  State  taxation  limited  only  by  its 
own  discretion  and  the  restrictions  of  its  own  constitution.^  In 
some  States  taxes  are  laid  in  this  form  of  license  or  privilege 
taxation,  which  in  others  are  levied  usually  as  ad  valorem  taxes 
upon  property,  and  this  applies  to  corporations,  especially  that 
class  known  as  public  utility  or  quasi  public  corporations,  includ- 
ing common  carriers.  The  amount  of  the  license  fee  is  some- 
times graduated  according  to  amount  of  earnings,  or  character 
of  business,  or  according  to  capital  invested,  and  in  the  latter 
case  it  does  not  differ  materially,  except  in  name,  from  ad  val- 
orem or  property  taxation.  It  was  natural  then  that  the  forms 
of  taxation  which  were  customary  in  the  States  should  be  applied 
by  them  in  the  local  taxation  of  the  property  and  business  of 
the  interstate  railroad,  telegraph  and  express  companies.  As  the 
system  of  taxing  the  State 's  interest  in  the  aggregate  property  of 
such  corporations  was  not  then  developed,  the  privilege  or  occu- 
pation tax  seemed  the  only  practical  method,  where  the  busi- 
ness transacted  might  be  very  large  and  the  property  located 
in  the  State  of  small  value. 

§  226.  Osborne  v.  Mobile. — It  is  an  interesting  illustration 
of  the  tremendous  development  of  the  transportation  and  com- 
mercial interests  of  the  country  in  recent  years,  that  the'  deci- 
sions of  the  Supreme  Court  relating  to  the  right  of  the  State  to  tax 
the  agencies  of  interstate  commerce,  which  have  been  so  num- 
erous during  the  past  twenty-five  years,  really  began  after 
the  close  of  the  Civil  War  period.  The  first  case  in  the  Su- 
preme Court  on  license  taxation  of  an  interstate  carrier,  that  is, 
on  the  privilege  of  maintaining  an  office  and  doing  business  in  the 
State,  was  that  of  Osborne  v.  Mobile,  decided  in  1873.2  An  ordi- 
nance of  the  city  of  Mobile  required  every  express  or  railroad 
company  doing  business  in  that  city  to  pay  an  annual  license. 
The  fee  was  graded,  so  that  $500  was  charged  for  a  first-class 
license,  where  the  business  extended  beyond  the  limits  of  the 


1  See  supra,  Ch.  IV. 

2  16  Wallace  479,  21  L.  Ed.  470   (1873), 


§    227  TAXATION    OF   INTERSTATE   COMMERCE.  221 

State,  $100  for  a  second-class  license  for  business  wholly  within 
the  State,  and  $50  for  a  third-class  license  for  business  wholly 
within  the  city.  The  agent  of  an  interstate  express  company  was 
convicted  of  operating  his  agency  without  paying  his  license  tax, 
and  this  conviction  was  sustained  in  the  State  Supreme  Court. 
The  judgment  was  affirmed  by  the  Supreme  Court;  Chief  Justice 
Chase  delivering  the  unanimous  opinion.  He  said  in  part  at 
page  481 : 

' '  The  difficulty  of  drawing  the  line  between  constitutional  and 
unconstitutional  taxation  by  the  State  was  acknowledged  and  has 
always  been  acknowledged  by  this  court ;  but  that  there  is  such 
a  line  is  clear,  and  the  court  can  best  discharge  its  duty  by  de- 
termining in  each  case  on  which  side  the  tax  complained  of  is.  It 
is  as  important  to  leave  the  rightful  powers  of  the  State  in  respect 
to  taxation  unimpaired  as  to  maintain  the  powers  of  the  Fed- 
eral government  in  their  integrity." 

The  court  said  that  there  was  no  discrimination  in  the  tax, 
between  the  express  company  and  the  corporations  and  citizens 
of  Alabama,  because  the  license  was  the  same  for  whomsoever 
the  business  was  transacted;  and  that,  as  Congress  has  nevei 
undertaken  to  exercise  its  power  to  regulate  commerce  in  any 
manner  inconsistent  with  this  municipal  ordinance,  the  right  of 
State  taxation  was  not  taken  away.  The  court  concluded  at 
page  482 : 

"The  license  tax  in  the  present  case  was  upon  a  business  car- 
ried on  within  the  city  of  Mobile.  The  business  licensed  in- 
eluded  transportation  beyond  the  limits  of  the  State,  or  rather  the 
making  of  contracts,  within  the  State,  for  such  transportation 
beyond  it.  It  was  with  reference  to  this  feature  of  the  busi- 
ness that  the  tax  was,  in  part,  imposed ;  but  it  was  no  more  a  tax 
upon  interstate  commerce  than  a  general  tax  on  drayage  would 
be  because  the  licensed  drayman  might  sometimes  be  employed 
in  hauling  goods  to  vessels  to  be  transported  beyond  the  limits 
of  the  State. 

"We  think  it  would  be  going  too  far  so  to  narrow  the  limits 
of  State  taxation." 

§  227.  Osborne  v.  Mobile  Overruled. — The  decision  in  Os- 
borne v.  Mobile  was  followed  by  the  State  courts,  which  accord- 
ingly sustained  license  taxation,  both  by  the  States  and  mimici- 


222  TAXATION    OF   INTERSTATE    COMMERCE.  §    227 

palities,  upon  common  carriers,  for  the  privilege  of  conducting 
their  business  and  maintaining  offices  within  the  State  or  city. 
They  held  that  there  was  no  interference  with  interstate  com- 
merce where  the  license  was  without  discrimination  as  between 
citizens  of  the  State  and  non-residents.^ 

About  fifteen  years  later  the  question  came  again  before  the 
Supreme  Court  in  reference  to  a  license  tax  levied  by  the  same 
city  upon  telegraph  companies.  The  agent  of  the  "Western  Union 
Telegraph  Company  was  fined  for  failing  to  pay  an  annual 
license  tax  of  $225,  and  the  conviction  was  sustained  in  the 
State  court,  which  overruled  the  defense  that  the  license  was  an 
interference  with  interstate  commerce. 2 

But  the  Supreme  Court,  in  an  exhaustive  opinion  by  Justice 
Bradley,  without  dissent,3  held  that  the  ordinance  was  void,  as 
the  tax  affected  the  whole  of  the  company's  business,  interstate 


1  Thus,  in  Virginia,  W.  U.  Tel.  Co.  v.  Richmond,  26  Grattan  1;  Ten- 
nessee, Lightburn  v.  Taxing  District  of  Shelby  County,  4  Lea  219, 
sustaining  a  privilege  tax  on  a  steamboat  engaged  in  interstate  com- 
merce; Memphis  &  L.  R.  Co.  v.  Dolan,  14  Fed.  532,  where  the  U.  S. 
Circuit  Court  in  Tennessee  sustained  a  privilege  tax  on  an  express 
company  engaged  in  interstate  commerce;  and  in  Texas,  W.  U.  Tel. 
Co.  V.  State,  55  Tex.  314.  All  of  these  cases  followed  Osborne  v.  Mo- 
bile. 

2  The  State  court  in  its  opinion,  as  quoted  at  page  644  in  the 
opinion  of  the  Supreme  Court,  said: 

"We  will  not  gainsay  that  this  license  tax  was  imposed  as  a  revenue 
measure — as  a  means  of  taxing  the  business,  and  thus  compelling  it  to 
aid  in  supporting  the  city  government.  That  no  revenue  for  State 
or  municipal  purposes  can  be  derived  from  the  agencies  or  instru- 
mentalities of  commerce,  no  one  will  contend.  The  question  generally 
mooted  is,  how  shall  this  end  be  attained?  In  the  light  of  the  many 
adjudications  on  the  subject,  the  ablest  jurists  will  admit  that  the 
line  which  separates  the  power  from  its  abuse  is  sometimes  very 
difficult  to  trace.  No  possible  good  could  come  from  any  attempt  to 
collate,  explain  and  harmonize  them.  "We  will  not  attempt  it.  We 
confess  ourselves  unable  to  draw  a  distinction  between  this  case  and 
the  principle  involved  in  Osborne  v.  Mobile,  16  Wall.  479.  In  that 
ease  the  license  levy  was  upheld,  and  we  think  it  should  be  in  this." 

3  Leloup  V.  Mobile,  127  U.  S.  640,  32  L.  Ed.  311  (1888).  Three  of  the 
Justices,  Bradley,  Miller  and  Field,  had  concurred  in  Osborne  v.  Mo- 
bile. 


§    227  TAXATION    OF   INTERSTATE    COMMERCE.  223 

as  well  as  local,  and  that  the  business  of  telegraphing  is  com- 
merce between  the  States.  The  telegraph  company  was  more- 
over invested 'with  the  powers  and  privileges  conferred  by  the 
Act  of  Congress  of  July  24,  1866,  which  declared  that  the  erection 
of  telegraph  lines  should,  as  against  State  interference,  be  free 
to  all  who  accepted  the  terms  of  the  act,  and  that  a  telegraph 
company  of  one  State  should  not,  after  accepting  such  terms,  be 
excluded  by  another  from  prosecuting  its  business  within  her 
jurisdiction.!  The  decision  of  the  court  however  was  not  based 
upon  this  Act  of  Congress,  but  upon  the  broad  ground  that  the 
State  could  not  tax  the  privilege  of  transacting  interstate  com- 
merce. It  was  said  that  as  the  State  could  not  tax  interstate  com- 
merce, it  could  not  tax  the  privilege  of  conducting  that  com- 
merce. 

With  reference  to  the  case  of  Osborne  v.  Mobile,  upon  which 
the  State  court  had  relied,  the  court  said,  page  647,  after  reciting 
the  terms  of  the  ordinance  sustained  in  that  case : 

"This  was  in  Decem^r  term,  1872.  In  view  of  the  course  of 
decisions  which  have  been  made  since  that  time,  it  is  very  cer- 
tain that  such  an  ordinance  would  now  be  regarded  as  repugnant 
to  the  power  conferred  upon  Congress  to  regulate  commerce 
among  the  several  States. ' ' 

And  added,  1.  c,  p.  648 : 

''A  great  number  and  variety  of  cases  involving  the  commer- 
cial power  of  Congress  have  been  brought  to  the  attention  of  this 
court  during  the  past  fifteen  years  which  have  frequently  made 
it  necessary  to  re-examine  the  whole  subject  with  care ;  and  the 
result  has  sometimes  been  that  in  order  to  give  full  and  fair 
effect  to  the  different  clauses  of  the  Constitution,  the  court  has 
felt  constrained  to  refer  to  the  fundamental  principles  stated 
and  illustrated  with  so  much  clearness  and  force  by  Chief  Justice 
Marshall  and  other  members  of  the  court  in  former  times,  and  to 
modify  in  some  degree  certain  dicta  and  decisions  which  have 
occasionally  been  made  in  the  intervening  period.  This  is  al- 
ways done,  however,  with  great  caution,  and  an  anxious  desire  to 
place  tlie  final  conclusion  reached  upon  the  fairest  and  most  just 
construction  of  the  Constitution  in  all  its  parts." 


1  As  to  this  Act  of  Congress  see  Pensacola  Telegraph  Co.  v.  W.  U. 
Tel.  Co.,  96  U.  S.  1,  24  L.  Ed.  708   (1877). 


224  TAXATION   OF   INTERSTATE   COMMERCE §    228 

The  conclusion  was  therefore,  1.  c.,  page  648 : 

"That  no  State  has  the  right  to  lay  a  tax  on  interstate  com- 
merce in  any  form,  whether  by  way  of  duties  laid  on  the  trans- 
portation of  the  subjects  of  that  commerce,  or  on  the  receipts 
derived  from  that  transportation,  or  on  the  occupation  or  busi- 
ness of  carrying  it  on,  and  the  reason  is  that  such  taxation  is  a 
burden  on  that  commerce  and  amounts  to  a  regulation  of  it,  which 
belongs  solely  to  Congress." 

It  was  also  said  that  this  exemption  of  interstate  and  foreign 
commerce  from  State  regulation  does  not  prevent  the  State  from 
taxing  the  property  of  those  engaged  in  such  commerce  located 
in  the  State,  as  it  taxes  the  property  of  other  citizens. 

§  228.  License  Tax  on  Agents  of  Interstate  Railroads  Held 
Invalid. — The  same  principle  was  applied  to  license  taxes  im- 
posed for  maintaining  offices  in  which  to  conduct  interstate  busi- 
ness. Thus  the  agent  of  the  New  York,  Lake  Erie  &  Western 
Railroad,  which  extends  from  Chicago  to  New  York,  maintained 
an  office  in  San  Francisco  for  the  purpose  of  inducing  passen- 
gers going  from  that  point  to  New  York  to  take  the  line  of  his 
railroad  at  Chicago.  He  was  on  that  account  con\dcted  of  doing 
business  in  San  Francisco,  in  violation  of  the  ordinance  of  that 
city  requiring  the  payment  of  $25  quarterly  for  a  license.  The 
conviction  was  sustained  by  the  California  court,  but  was  re- 
versed by  the  Supreme  Court.^  It  was  argued  that  the  soliciting 
of  passengers  in  California  for  a  railroad  running  from  Chicago 
to  New  York,  if  connected  with  interstate  commerce  at  all,  was 
so  remotely  connected  with  it  that  the  license  tax  could  not  be 
regarded  as  an  interference.  But  the  court  said  that  this  dis- 
tinction was  immaterial,  for  the  business  was  interstate  and  the 
tax  involved  the  licensing  of  the  commerce  of  the  road  to  an  ex- 
tent commensurate  with  the  amount  of  business  done  by  the 
agent. 

This  ruling  was  followed  in  the  case  of  the  license  tax  im- 
posed by  the  State  of  Pennsylvania  upon  the  Norfolk  &  "Western 


iMcCall  V.   California,  136  U.   S.  104,  34  L.   Ed.   391    (1889),  Chief 
Justice  Fuller  and  Justices  Brewer  and  Gray  dissenting. 


§    230  TAXATION    OF   INTERSTATE   COMMERCE.  225 

Railroad  Company/  which  maintained  an  office  in  Philadelphia 
for  the  use  of  its  offices  and  employees,  the  road  being  a  link  in  a 
through  line  of  road  hy  which  passengers  and  freight  were  car- 
ried into  the  State  and  from  that  State  into  others.  The  tax  was 
declared  invalid,  as  the  office  was  maintained  to  meet  the  neces- 
sities of  the  company's  interstate  business,  and  the  tax  upon  it 
was  declared  to  be  upon  one  of  the  means  and  instrumentalities 
of  interstate  commerce. 

§  229.  Immaterial  that  License  Interfering  With  Com- 
merce Purports  to  be  for  Regulation  and  Not  for  Revenue. — 

The  State  cannot  interfere  with  interstate  commerce  by  exacting 
a  privilege  tax  for  conducting  that  commerce,  and  it  is  immaterial 
whether  such  license  is  required  as  a  means  of  police  regulation 
or  for  purpose  of  revenue.  Thus  an  act  of  the  State  of  Kentucky 
required  all  agents  of  foreign  express  companies,  before  carrying 
on  business  within  its  jurisdiction,  to  procure  licenses,  and  pre- 
liminary thereto  to  satisfy  the  State  Auditor  that  their  compa- 
nies had  each  an  actual  capital  of  not  less  than  a  certain  amount ; 
so  that  the  license  was  claimed  to  be  one  for  regulation,  rather 
than  for  revenue.  The  Supreme  Court  held,^  reversing  the  Court 
of  Appeals  of  Kentucky,  that  the  distinction  between  a  license  for 
regulation  and  one  for  revenue  was  not  material,  and  that  the 
State  could  enforce  such  police  regulations  with  reference  to  the 
local  business  of  the  company,  but  not  as  to  its  interstate  business. 
It  said  that  the  decisions  of  the  court  clearly  established  that 
neither  licenses  nor  indirect  taxation  of  any  kind,  nor  any  system 
of  State  taxation,  can  be  imposed  upon  interstate  any  more  than 
upon  foreign  commerce,  and  that  all  acts  of  legislation  producing 
any  such  result  are  to  that  extent  unconstitutional  and  void. 

§  230.  License  for  Privilege  of  Transacting  Local  Business 
is  Valid. — While  the  State  can  license  the  interstate  business 
of  common  carriers  neither  by  way  of  regulation  nor  by  way  of 


1  Norfolk  &  Western  R.  Co.  v.  Pennsylvania.  136  U.  S.  114,  34  L.  Ed. 
394    (1889). 

zCrutcher  v.  Kentucky,  141  U.  S.  47,  35  L.  Ed.  649  (1890),  Chief 
Justice  Puller  and  Justice  Gray  dissenting.  See  Commonwealth  t. 
Smith,  92  Ky.  38,  following  the  above  decision  and  holding  void  an- 
other express  company  license. 


226  TAXATION    OF   INTERSTATE    COMMEBCE.  §    230 

revenue,  it  can  license  both  for  regulation  and  revenue  the 
privilege  of  conducting  local  business,  that  is,  business  within 
the  State,  though  the  same  company  may  be  engaged  at  the  same 
office  in  transacting  business  beyond  the  State.  Accordingly  a 
Missouri  statute  imposing  a  tax  upon  express  companies  in  pro- 
portion to  the  gross  receipts,  but  only  on  the  receipts  for  business 
done  within  the  State,  as  distinguished  from  interstate  business, 
was  held  valid. ^  This  was  not  a  license  or  privilege  tax,  but  the 
distinction  between  business  within  the  State  and  business  beyond 
the  State  has  been  applied  in  cases  of  license  taxation. 

Thus  a  license  tax  was  imposed  by  the  city  of  Charleston  on 
all  persons  engaged  in  any  business,  trade  or  profession  in  that 
city.  The  tax  was  limited  by  the  ordinance  to  business  done  ex- 
clusively within  the  city  of  Charleston,  so  that  it  did  not  include 
that  to  or  from  any  points  without  the  city,  nor  any  done  for  the 
government  of  the  United  States,  its  officers  or  agents.^  It  was 
claimed  that  the  Postal  Telegraph  &  Cable  Company  was  not 
within  the  terms  of  this  ordinance,  because  it  did  not  do  any  bus- 
iness exclusively  within  the  city  of  Charleston ;  that  its  city  offices 
were  merely  initial  points  for  sending  out  messages,  and  that  if 
license  exactions  were  allowed  to  and  made  by  the  various  cities 
in  the  State,  great  injury  and  wrong  would  be  done  the  telegraph, 
company.  But  the  court  sustained  the  license  tax,  and  said  that, 
if  hardship  resulted,  it  was  not  within  the  power  of  the  court  to 
redress  it.  The  privileges  conferred  upon  the  company  by  the 
Act  of  Congress  were  not  inconsistent  with  the  right  on  the  part 
of  a  State  in  which  the  business  was  done  and  the  property  ac- 
quired to  tax  the  same,  within  the  limitations  of  the  Constitution. 
The  court  distinguished  this  ease  from  that  of  Leloup  v.  Port  of 
Mobile,  on  the  ground  that  the  tax  in  that  ease  affected  the 
whole  business,  including  that  which  was  interstate. 

Thus  a  franchise  tax  imposed  under  the  statutes  of  the  State 
of  New  York  upon  the  Pennsylvania  Railroad  Company  for  the 


1  Pacific  Express  Co.  v.  Seibert,  142  U.  S.  339,  35  L.  Ed.  1035  (1892), 
affirming  44  Fed.  310. 

2  Postal  Telegraph  Cable  Co.  v.  Charleston,  153  U.  S.  692,  38  L.  Ed. 
871   (1894),  Justices  Harlan,  Brown  and  Jackson  dissenting. 


§    231  TAXATION    OF    INTERSTATE    COMMERCE.  227 

carrying  by  a  cab  service  wholly  within  the  State  its  passengers  to 
and  from  its  landing  in  New  York  City,  the  charges  for  which 
were  entirely  separate  from  those  of  other  transportation,  was  not 
an  unlawful  burden  upon  interstate  commerce,  but  a  tax  upon  an 
independent  local  service.^ 

An  annual  business  tax  enacted  by  a  municipality  upon  an 
express  company,  including  wares  of  an  interstate  character  and 
business  done  for  the  government,  and  covering  solely  the  local 
business  done  at  that  point  in  receiving  packages  transported 
from  other  points  in  the  State  and  in  transporting  packages  to 
like  points,  is  not  invalid  because  such  transportation  is  over  a 
route  which  for  a  short  distance  passes  out  of  the  State. - 

§  231.  Decision  of  State  Court  that  License  Only  Applies 
to  Local  Business  Conclusive. — The  principle  was  thus  estab- 
lished that  the  State,  or  municipality  acting  under  the  authority 
of  the  State,  can  tax  a  common  carrier,  that  is,  a  railroad,  tele- 
graph or  express  company,  for  the  privilege  of  conducting  a 
local  business,  but  cannot  tax  an  interstate  business.  Not  only 
i?  the  license  held  valid,  if  it  is  expressly  imposed  upon  the 
privilege  of  conducting  the  local  business  only,  but  the  decision 
of  the  State  court  that  the  license  is  to  be  construed  as  thus  lim- 
ited in  its  application,  is  conclusive  upon  the  Supreme  Court.^ 
Thus  it  was  said  by  the  court  in  a  case  where  a  license  tax  was  im- 
posed by  the  State  of  Florida  upon  express  companies,  page 
654: 

''In  other  words  this  statute  as  construed  by  the  Supreme 
Court  of  Florida  does  not  exempt  the  express  company  from 
taxation  upon  its  business  which  is  solely  within  the  State, 
even  though  at  the  same  time  the  same  company  may  do  a  busi- 


1  New  York  ex  rel,  Pa.  R.  Co.  v.  Knight,  192  U.  S.  21,  48  L.  Ed. 
325  (1903),  affirming  171  N.  Y.  354. 

2  Ewing  V.  Leavenworth,  226  U.  S.  464,  57  L.  Ed.  303  (1913),  affirm- 
ing 80  Kan.  58.  See  also  Kansas  City,  Ft.  Scott,  Etc.,  Co.  v.  Botkin, 
240  U.  S.  227,  60  L.  Ed.  617,  affirming  95  Kan.  261. 

3  0.sborne  v.  Florida,  164  U.  S.  650,  41  L.  Ed.  586  (1896),  affirming 
33  Fla.  162,  25  L.  R.  A.  120. 


228  TAXATION    OF   INTERSTATE   COMMERCE.  §   232 

ness  which  is  interstate  in  its  character,  and  as  to  the  latter  kind 
of  business  the  statute  does  not  apply  to  or  affect  it. ' ' 

While  this  distinction  is  clear  enough  in  theory,  it  is  doubtful 
whether,  but  for  the  qualifications  hereafter  stated,  it  would  not 
afford  an*  easy  method  to  the  State  authorities,  if  so  disposed, 
of  evading  the  prohibition  against  interference  with  interstate 
commerce.  Thus  a  license  tax  of  say  $500  per  annum  for  con- 
ducting a  railroad  or  telegraph  or  express  office  is  invalid,  if  it 
is  not,  by  its  express  terms  or  by  the  construction  of  the  State 
court,  limited  to  the  privilege  of  conducting  a  local  business. 
But  if  it  is  so  limited,  it  will  be  valid.  The  common  carrier 
cannot  confine  himself  to  local  business.  He  must  carry  on  an  in- 
terstate business  as  well,  and  the  interstate  business  must  be 
transacted  with  the  same  offices  and  the  same  facilities  as  the  local 
business.^ 

§  232.  It  Must  Clearly  Appear  that  Intra-state  Business 
Alone  is  Taxed. — The  Circuit  Court  of  Appeals,  Fourth  Cir- 
cuit, has  said"  that,  in  the  imposition  of  such  a  tax,  the  inter- 
state business  must  be  distinguished  from  intra-state  business  or 
such  discrimination  must  be  made  possible,  so  that  it  may  clearly 
appear  that  the  intra-state  business  alone  is  taxed.  In  this  case 
an  ordinance  of  the  City  of  Alexandria,  Virginia,  exacted  a  li- 
cense from  every  express  company  having  an  office  in  Alexandria 
receiving  goods  and  forwarding  them  to  points  within  the  State 
of  Virginia.    The  court  said  that  this  ordinance  made  no  discrim- 


1  Thus  the  Supreme  Court  of  Nebraska,  following  Postal  Telegraph 
Cable  Co.  v.  Charleston,  held  valid  an  ordinance  imposing  an  occupa- 
tion tax  upon  railroads  having  a  depot  within  the  city,  and  exempting 
from  the  levy  all  interstate  commerce  of  such  corporation.  City  of 
York  v.  C.  B.  &  Q.  R.  Co.,  56  Neb.  572.  And  the  Supreme  Court  of 
Alabama,  City  of  Anniston  v.  Southern  Railway  Co.,  112  Ala.  557, 
held  valid  an  annual  license  tax  of  $100  for  each  main  line  of  railroad 
to  and  from  other  points  in  the  State  of  Alabama.  See  also  W.  U. 
Tel.  Co.  V.  City  of  Fremont,  43  Neb.  499,  and  26  L.  R.  A.  706;  Knox- 
ville  &  Ohio  R.  Co.  v.  Harris,  99  Tenn.  684. 

2  Webster  v.  Bell,  68  Fed.  183,  15  C.  C.  A.  360.  See  also  United 
States  Exp.  Co.  v.  Hemmingway,  39  Fed.  60. 


§    233  TAXATION    OP   INTERSTATE   COMMERCE.  229 

ination  between  business  done  without  and  within  the  State  and 
such  an  ordinance  was  declared  invalid  under  the  rule  laid  down 
in  Postal  Telegraph  Cable  Co.  v.  Charleston. 

A  license  tax  is  invalid,  even  if  on  its  face  it  purports  to 
charge  for  intra-state  express  business  only,  if  its  amount  is 
determined  by  the  length  of  the  company's  line  beyond  the  State, 
as  it  is  thus  in  effect  a  tax  on  interstate  business.^  Thus  also  a 
license  tax  on  a  telegraph  compan}^  reciting  that  it  is  in  lieu  of 
an  ad  valorem  tax  on  the  property  of  the  company  located  in 
the  State,  but  which  exceeds  the  amount  which  would  be  levied 
thereon  under  the  property  tax  law,  and  makes  the  payment  of 
either  tax  a  condition  precedent  to  the  company's  right  to  do 
busines's  in  the  city,  is  a  State  regulation  of  interstate  com- 
merce.^ 

A  gross  revenue  tax  exacted  from  a  non-resident  express  com- 
pany by  Oklahoma  laws  of  1910  which  is  in  addition  to  the 
tax  levied  and  collected  upon  an  ad  valorem  basis  upon  the 
property  and  assets  of  the  corporation  equal  to  such  proportion 
of  the  specified  percentage  of  its  gross  receipts  from  any  source 
whatever,  as  the  portion  of  its  business  done  for  it  bears  to  the 
whole  of  its  business,  could  not  be  construed  for  the  purpose  of 
saving  its  constitutionality  as  referring  only  to  the  receipts 
from  commerce  while  within  the  State.^ 

§  233.  License  Must  Not  be  Condition  for  Transacting*  In- 
terstate Business. — License  taxation  as  commonly  understood 
consists  in  the  payment  of  a  tax  for  the  privilege  of  conducting 
a  business,  which  but  for  such  license  would  be  unlawful.  A  li- 
cense, as  the  term  implies,  is  the  permission  of  the  State  to  carry 
on  the  business,  and  the  payment  of  the  charge  exacted  therefor 
is  a  condition  precedent  to  the  issuance  of  the  license.  The 
State  however,  in  the  requirement  of  a  license  for  the  privilege 
of  conducting  an  rn/ra-state  business  cannot  make  the  payment  of 
the  license  tax  a  condition  of  carrying  on  the  infer-state  business, 


1  Express  Company  v.  Allen,  39  Fed.  712. 

2  Postal  Tel.  Cable  Co.  v.  Richmond  (Va.),  99  Va.  102. 

3  Meyer  v.  Wells,  Fargo  &  Co.,  223  U.  S.  297,  .^.6  I..  VA.  4.55   (1912); 
Barrett  v.  New  York,  232  U.  S.  415,  58  L.  Ed.  483   (1914). 


230  TAXATION   OF   INTERSTATE   COMMERCE.  §    234 

but  must  leave  the  enforcement  of  this  tax  to  the  ordinary  means 
devised  for  the  collection  of  taxes. ^  This  principle  applies  to 
any  form  of  taxation  upon  the  property  employed  in  interstate 
commerce.  Thus  it  was  held  in  the  case  of  the  Western  Union 
Telegraph  Company  v.  Massachusetts  that  though  the  tax  im- 
posed was  valid,  the  State  could  not  enforce  it  by  the  issuance  of 
an  injunction  restraining  the  .corporation  from  prosecuting  its 
business  in  the  State  until  the  taxes  were  paid.^ 

§  234.  License  or  Privilege  Tax  Must  Not  Exceed  Amount 
of  Tax  on  Property. — Another  important  qualification  of  the 
State's  power  of  license  taxation  of  interstate  carriers 
is  that  the  tax  when  imposed  must  not  exceed  the 
sum  which  might  be  levied  directly  upon  their  prop- 
erty according  to  the  general  property  taxation  in  that 
State.  A  license  or  privilege  tax  which  is  graduated  ac- 
cording to  the  amount  and  value  of  the  property  within  the 
State  is  in  substance  and  effect  therefore  a  property  tax.  Thus, 
in  a  case  from  Mississippi,  a  tax  thus  imposed  was  declared^ 
to  be  substantially  a  tax  on  property  merely,  not  on  the  privilege 
of  doing  an  interstate  business.  The  substance  and  not  the 
shadow  determines  whether  the  power  has  been  validly  exer- 
cised.    The  court  said,  page  695 : 

"It  is  settled  that  where  by  way  of  duties  laid  on  the  trans- 
portation of  the  subjects  of  interstate  commerce,  or  on  the  re- 
ceipts derived  therefrom,  or  on  the  occupation  or  business  of 
carrying  it  on,  a  tax  is  levied  by  a  State  on  interstate  commerce, 
such  taxation  amounts  to  a  regulation  of  such  commerce  and 
cannot  be  sustained.  But  property  in  a  State  belonging  to  a 
corporation,  whether  foreign  or  domestic,  engaged  in  foreign 
or  interstate  commerce,  may  be  taxed,  or  a  tax  may  be  imposed 
on  the  corporation  on  account  of  its  property  within  the  State, 
and  may  take  the  form  of  a  tax  for  the  privilege  of  exercising 
its   franchises   within    the    State,    if   the    ascertainment    of    the 


1  See  Postal  Telegraph  Cable  Co.  v.  Adams,  155  U.  S.  688,  39  L.  Ed. 
311    (1895). 

2  Western  Union  Tel.  Co.  v.  Massachusetts,  125  U.  S.  530,  31  L.  Ed. 
790    (1888). 

3  Postal  Tel.  Cable  Co.  v.  Adams,  155  U.  S.  688,  supra. 


§    234  TAXATION    OF   INTERSTATE   COMMERCE.  231 

amount  is  made  dependent  in  fact  on  the  value  of  its  property 
situated  within  the  State  (the  exaction,  therefore,  not  being  sus- 
ceptible of  exceeding  the  sum  which  might  be  levied  directly 
thereon),  and  if  payment  be  not  made  a  condition  precedent  to 
the  right  to  carry  on  the  business,  but  its  enforcement  left  to  the 
ordinary  means  devised  for  the  collection  of  taxes.  The  corpor- 
ation is  thus  made  to  bear  its  proper  proportion  of  the  burdens 
of  the  government  under  whose  protection  it  conducts  its  opera- 
tions, while  interstate  commerce  is  not  in  itself  subject  to  re- 
straint or  impediment."^ 

While  the  court  said  that  a  tax  thus  imposed  was  not  open 
to  objection,  it  went  further  and  stated  that  the  license  would 
be  invalid,  if  it  exacted  more  than  the  amount  of  the  tax  levied 
according  to  the  ordinary  property  taxation.  It  said,  at  page 
696 :  • 

"Doubtless  no  State  could  add  to  the  taxation  of  property  ac- 
cording to  the  rule  of  ordinary  property  taxation,  the  burden 
of  a  license  or  other  tax  on  the  privilege  of  using,  constructing 
or  operating  an  instrumentality  of  interstate  or  international 
commerce  or  for  the  carrying  on  of  such  commerce ;  but  the 
value  of  property  results  from  the  use  to  which  it  is  put  and 
varies  with  the  profitableness  of  that  use,  and  by  whatever  name 
the  exaction  may  be  called,  if  it  amounts  to  no  more  than  the 
ordinary  tax  upon  property  or  a  just  equivalent  therefor,  ascer- 
tained by  reference  thereto,  it  is  not  open  to  attack  as  incon- 
sistent with  the  Constitution.  "2 

The  principle  thus  laid  down  by  the  court  would  apply  to 
all  license  taxation  in  any  locality,  whether  levied  directly  by 
the  State  or  by  the  municipality  acting  under  State  authority. 
The  aggregate  tax,  in  whatever  form  levied,  must  not  exceed  that 
which  would  be  levied  under  ordinary  property  taxation.     In 


1  Justices  Brewer  and  Harlan  dissented,  saying  tliat  it  was  a  tax  on 
tiie  privilege  of  doing  within  the  limits  of  the  State  the  business  of  an 
interstate  carrier  of  telegraph  messages;  that  it  was  therefore  a 
regulation  of  interstate  commerce,  and  that  this  characteristic  of  the 
tax  was  not  affected  by  the  question  whether  the  amount  was  more  or 
less  than  it  would  have  been  if  it  had  been  levied  on  an  ad  valorem 
basis. 

2  Citing  C.  C,  Etc.,  Ry.  Co.  v.  Backus,  154  U.  S.  439,  38  L.  Ed.  1041 
(1894),  injra.  Sec.  455. 


232  TAXATION    OF   INTERSTATE    COMMERCE.  §    236 

other  cases  the  fact  that  property  employed  in  a  business  is 
taxed  does  not  preclude  the  State  from  taxing  the  business 
at  the  same  time.  The  rule  laid  down  by  the  Supreme  Court 
would  seem  to  preclude  this  form  of  double  taxation  upon  inter- 
state carriers. 

§  235.    Tax  on  Interstate  Teleg"raphic  Messages  Invalid. — 

The  State  of  Texas  adopted  another  form  of  license  taxation, 
by  imposing  a  tax  of  one  cent  on  every  telegraphic  message 
of  full  rate  and  one-half  cent  for  every  half  rate  message.  The 
Supreme  Court,  reversing  the  Supreme  Court  of  Texas,i  decided 
that  the  law  imposing  this  tax  was,  as  to  interstate  messages, 
void,  but  that  it  was  valid  as  to  business  within  the  State. 
The  decision  was  placed  upon  the  ground,  not  only 
of  interference  with  interstate  commerce,  but  also  that  the  tele- 
graph company,  under  the  Act  of  Congress,  was  a  government 
agency,  and  further  that  no  tax  could  be  levied  on  messages  sent 
by  government  officers  on  the  business  of  the  United  States. 

§  236.  Privilege  Tax  on  Sleeping  Cars. — Still  another  form 
of  license  or  privilege  taxation  was  levied  in  Tennessee  and 
other  States,  upon  companies  leasing  sleeping  cars,  for  the  privi- 
lege of  operating  them.  This  privilege  tax  was  held  invalid 
as  an  interference  with  interstate  commerce,  when  applied  to 
cars  used  in  the  interstate  transportation  of  passengers.2  The 
State  may  however  tax  the  privilege  of  operating  sleeping  cars 
wholly  within  its  limits. s 

An  annual  tax  of  three  thousand  dollars  imposed  by  a  State 
statute  upon  sleeping  car  companies  which  carried  one  or  more 


1  Telegraph  Co.  v.  Texas,  105  U.  S.  460,  26  L.  Ed.  1067   (1882). 

2  Pickard  v.  Pullman  Southern  Car  Co.,  117  U.  S.  34,  29  L.  Ed.  785 
(1886),  overruling  Pullman  Southern  Car  Co.  v.  Gaines,  3  Tenn.  Ch. 
587.  The  court  in  its  opinion  in  this  case  distinguished  the  case  of 
Wiggins  Ferry  Co.  v.  East  St.  Louis,  supra,  by  saying  that  the  ferry- 
boats had  a  situs  in  the  State  for  taxation  and  that  the  exaction  of  a 
license  fee  in  respect  of  them  was  not  a  regulation  of  commerce.  See 
supra.  Sec.  213. 

«  Gibson  County  v.  Pullman  Southern  Car  Co.,  42  Fed.  572.  See 
niSC  apinion  of  Mr.  Justice  Matthews  in  Pullman  Southern  Car  Co.  T. 
Nolan,  5f2  Fed.  276. 


§    237  TAXATION    OP-  INTERSTATE   COMMERCE.  233 

local  passengers  or  ears  operated  within  the  State  is  not  void 
as  a  burden  on  interstate  commerce  where  the  company  is  free  to 
decline  the  local  business  if  it  sees  fit.i 

A  tax  for  operating  sleeping  and  palace  cars  from  one  point 
to  another  within  the  State  can  not  be  deemed  an  unconstitu- 
tional regulation  of  commerce  because  of  the  declaration  in  the 
Mississippi  Constitution  that  sleeping  cars  are  common  carriers 
and  subject  to  liability  as  such.  The  court  said  that  if  the  words 
imposed  such  an  obligation,  the  tax  would  be  invalid.  2  ^  A  tax 
of  five  hundred  dollars  per  car  on  all  sleeping  cars  in  Tennessee 
was  held  void,  but  a  tax  of  three  thousand  dollars  on  local  'busi- 
ness held  valid.3 

§  237.  Compensation  Exacted  by  City  for  Use  of  Poles  in 
Streets  Not  Regulation  of  Commerce. — A  municipality  may 
exact  payment  by  way  of  reasonable  rental  for  the  occupancy  of 
its  streets  by  the  poles  of  a  telegraph  company,  and  this  is  not 
a  license  tax  on  interstate  commerce.  Thus  an  ordinance  of  the 
city  of  St.  Louis  exacted  the  sum  of  five  dollars  per  annum  for 
each  telegraph  pole  on  the  streets  of  the  city.  This  was  declared 
invalid  in  the  United  States  Circuit  Court  as  a  regulation  of 
commerce,  but  the  Supreme  Court,  reversing  the  decision  of  the 
Circuit  Court,  sustained  the  tax,4  holding  that  it  was  not  a  privi- 
lege or  license  tax,  but  was  in  the  nature  of  a  charge  for  the 
use  of  property  belonging  to  the  city  and  could  properly  be 
called  rental.  ' '  A  tax, ' '  it  was  said, ' '  is  a  demand  of  sovereignty  j 
a  toll  is  a  demand  of  proprietorship."  It  was  said  however 
that  the  reasonableness  of  the  amount  charged  for  the  rental 
must  depend  upon  circumstances,  and  the  case  was  remanded 
for  a  new  trial  on  that  issue,  s 

It  has  since  been  decided  by  the  United  States  Circuit  Court, 


1  Allen  V.  Pullman  Car  Co.,  191  U.  S.  172,  48  L.  Ed.  134  (1903). 

2  Pullman  Co.  v.  Adams,  189  U.  S.  420,  47  L.  Ed.  877  (1903),  affirm- 
ing 78  Miss.  814. 

3  Adams  v.  Pullman  Co.,  189  U.  S.  429,  47  L.  Ed.  419   (1903). 

4  St.  Louis  V.  Western  Union  Telegraph  Co.,  148  U.  S.  92,  37  L.  Ed. 
380    (1893).  W.  U.  T.  Co.  t.  New  Hope,  187  U.  S.  419,  47  L.  Ed.  240  (1903). 

s  On  retrial  in  the  Circuit  Court,  the  charge  was  held  unreasonable 
and  excessive. 


234  TAXATION    OF    INTERSTATE   COMMERCE.  §    237 

in  a  case  from  Philadelpliia,  that  the  city  had  no  power  to  im- 
pose upon  a  telegraph  company  doing  interstate  business  a  tax 
upon  its  poles  and  wires  in  excess  of  the  reasonable  expense  to 
the  city  for  the  inspection  and  regulation  thereof,  i  But  it  was 
for  the  jury  to  determine  whether  the  amount  was  reasonable, 
and  the  city  had  a  right  to  show  that  additional  expense  was 
incurred  by  it  in  consequence  of  the  wires  suspended  in  the 
streets.  2 

An  ordinance  imposing  a  license  fee  on  poles  and  wires  of  an 
interstate  telegraph  company  was  held  not  to  be  a  valid  exercise 
of  the  police  power,  where  the  municipality  has  made  no  inspec- 
tion or  incurred  any  expense  for  that  purpose  and  the  fee  is 
twenty  times  the  amount  of  any  expense  that  might  have  been 
reasonably  and  fairly  incurred  to  make  this  inspection,  or  for 
an}'  measure  of  protection  required  to  be  taken  by  the  munici- 
pality for  the  safety  of  the  public. 3  The  reasonableness  of  the 
charge  for  the  municipal  license  for  telegraph  poles  must  be 
submitted  to  the  jury,  where  there  is  testimony  that  actual 
cost  of  maintenance,  repairs  and  supervision  by  the  company 
was  less  than  one-half  the  sum  charged  by  the  city  for  super- 
vision alone,  and  the  additional  charge  of  one  dollar  per  mile 
for  underground  wires  had  been  removed  as  an  inducement  to 
the  removal  of  all  overhead  wires.4 


1  Philadelphia  v.  Western  Union  Telegraph  Co.,  82  Fed.   797. 

2Phila.  V.  Atlantic  &  P.  Tel.  Co.,  42  C.  C.  A.  325,  3rd  Circuit,  102 
Fed.  254;  Philadelphia  v.  W.  U.  Tel.  Co.,  89  Fed.  454;  Philadelphia  v. 
Postal  Tel.  Cable  Co.,  21  N.  Y.  Supp.  556;  Philadelphia  v.  W.  U.  Tel. 
Co.,  40  Fed.  615. 

This  principle  was  applied  in  Ohio,  Bogart  v.  The  State  (Com. 
PI.),  20  Weekly  L.  Bui.  458,  where  a  vehicle  license  tax  was  sustained, 
which  required  owners  of  vehicles  to  pay  an  annual  license  fee,  and 
provided  that  the  fees  he  placed  to  the  credit  of  the  street  repairing 
department.  The  court  held  that  this  was  not  an  interference  with 
interstate  commerce  when  enforced  against  non-resident  owners,  as  it 
was  a  compensation  for  the  advantages  and  improved  facilities  af- 
forded by  the  city. 

3  Postal  Telegraph  Co.  v.  Taylor,  192  U.  S.  66,  48  L.  Ed.  342  (1904), 
reversing  202  Pa.  583. 

4  Atlantic  &  Pacific  Tel.  Co.  v.  Philadelphia,  190  U.  S.  160,  47  L.  Ed. 
995    (1903). 


§    238  TAXATION    OF    INTERSTATE    COMMERCE.  235 

A  city  ordinance  imposing  a  license  tax  on  poles  and  wires 
of  an  interstate  telegraph  company  is  not  a  valid  exercise  of 
the  police  power,  where  the  municipality  has  made  no  inspec- 
tion and  the  license  has  no  relation  to  any  possible  expenses.^ 

§  238.  Payment  Reserved  as  Bonus  in  Railroad  Charter 
Not  Regulation  of  Commerce. — A  statute  of  Maryland  granted 
to  the  Baltimore  and  Ohio  Eailroad  the  right  to  build  a  branch 
from  Baltimore  to  Washington,  and  to  charge  not  exceeding 
$2.50  and  in  proportion  for  every  shorter  distance,  providing 
also  that  the  company  should  pay  the  State  one-fifth  of  the 
whole  amount  received  from  transportation  of  passengers  every 
six  months.  It  was  claimed  that,  under  the  decision  of  Cran- 
dall  V.  Nevada,  supra,  Sec.  20,  this  was  in  effect  a  tax  upon, 
and  an  interference  with,  commerce.  The  court  held, 2  opinion 
by  Bradle}^  J.,  that  it  was  not  a  tax  upon  commerce,  but  was 
rather  a  bonus  charged  by.  the  State  in  the  charter  as  a  consid- 
eration for  the  grant,  and  was  not  repugnant  to  the  Constitu- 
tion. The  State  itself  could  have  built  the  road  and  charged 
any  rate  it  chose,  and  it  made  no  difference,  from  a  Constitu- 
tional point  of  view,  that  it  authorized  its  citizens  to  build  it 
and  reserved  for  its  own  use  a  portion  of  the  earnings.  It  was 
simply  the  exercise  by  the  State  of  absolute  control  over  its 
property  and  prerogatives.  In  answer  to  the  suggestion  that 
the  public  should  have  a  remedy  against  exorbitant  fares  and 
freight  exacted  by  the  State  lines  of  transportation,  for  the 
bonus  would  necessarily  affect  the  charge  upon  the  public  which 
the  donee  of  the  franchise  would  be  obliged  to  impose,  the  court 
said  that  the  same  difficulty  is  found  in  exorbitant  charges  by 
steamship  lines,  but  that  the  only  remedy  is  in  competition. 


1  Postal  Tel.  &  Cable  Co.  v.  Taylor,  192  U.  S.  74,  48  L.  Ed.  342. 
See  also  Western  Union  Tel.  Co.  v.  City  of  Richmond,  178  Fed.  310, 
where  held  that  a  fee  of  two  dollars  per  pole  per  year  was  in  the  na- 
ture of  a  special  charge  for  the  use  of  the  streets  and  was  reasonable 
in  amount  and  valid. 

2  Railroad  Co.  r.  Maryland,  21  Wallace  456,  22  L.  Ed.  678  (1875). 
Justice  Miller  dissented,  saying  that  in  his  opinion  the  statute  was 
void  under  the  decision  in  Crandall  v.   Nevada,  stipra.  Sec.  20. 


236  TAXATION   OF   INTERSTATE    COMMERCE.  §    240 

§  239.  Taxation  of  Rolling  Stock. — The  taxation  of  rail- 
road cars,  which  are  continually  in  transit  from  State  to  State, 
presented  a  perplexing  problem,  because  it  was  claimed  that 
they  had  no  taxable  situs  in  any  of  the  States  wherein  they  were 
employed  and  through  which  they  passed  as  instruments  of  in- 
terstate commerce.  The  taxation  of  the  privilege  of  operating 
the  cars  was  sought  to  be  enforced  for  this  reason,  but  was  ad- 
judged invalid  as  a  direct  interference  with  interstate  com- 
merce, i  It  was  claimed  that  such  property  had  no  taxable 
situs  except  at  the  terminus  of  the  line,  although  the  cars  were 
continually  in  transit  through  that  and  other  States. 

The  difficulty  was  finally  solved  by  adopting  definitely  the 
principle  of  taxing  the  * '  average  number  of  cars  in  habitual  use ' ' 
in  the  State  during  the  year. 

§  240.    Rule  of  Average  of  Habitual  Use  Adopted.  —  The 

subject  of  the  taxation  of  rolling  stock  was  first  considered  by 
the  Supreme  Court  in  the  case  of  the  Baltimore  &  Ohio  Railroad, 
where  the  judgment  of  the  lower  court  enjoining  the  sale  of 
certain  engines  and  cars  levied  upon  by  a  taxing  officer  of  the 
State  of  Virginia  was  affirmed.  2  The  court,  although  holding 
that  the  statute  of  Virginia  did  not  authorize  the  particular  tax 
sought  to  be  levied,  said,  p.  123 : 

"If  the  Baltimore  and  Ohio  Railroad  Company  is  permitted 
by  the  State  of  Virginia  to  bring  into  its  territory,  and  there 
habitually  to  use  and  employ  a  portion  of  its  movable  personal 
property,  -and  the  railroad  company  chooses  so  to  do,  it  would 
certainly  be  competent  and  legitimate  for  the  State  to  impose 
upon  such  propertj^,  thus  used  and  employed,  its  fair  share  of 
the  burdens  of  taxation  imposed  upon  other  similar  property 
used  in  the  like  way  by  its  own  citizens.  And  such  a  tax  might 
be  properly  assessed  and  collected  in  cases  like  the  present 
where  the  specific  and  individual  items  of  property  so  used  and 
employed  were  not  continuously  the  same,  but  were  constantly 
changing,  according  to  the  exigencies  of  the  business.  In  such 
cases  the  tax  might  be  fixed  by  an  appraisement  and  valuation 


iSee  Pickard  v.  Pullman  Southern  Car  Co.,  supra,  Sec.  236. 
2  Marye  v.  Baltimore  &  Ohio  R.  R.  Co.,  127  U.  S.  117,  32  L.  Ed.  94 
(1888). 


§    240  TAXATION    OF   INTERSTATE    COMMERCE.  237 

of  the  average  amount  of  the  property  thus  habitually  used, 
and  collected  by  distraint  upon  any  portion  that  might  at  any 
time  be  found.  Of  course,  the  lawfulness  of  a  tax  upon  vehicles 
of  transportation  used  by  common  carriers  might  have  to  be 
considered  in  particular  instances  with  reference  to  its  oper- 
ation as  a  regulation  of  commerce  among  the  States,  but  the 
mere  fact  that  they  were  employed  as  vehicles  of  transportation 
in  the  interchange  of  interstate  commerce  would  not  render 
their  taxation  invalid." 

The  principle  thus  recognized  by  the  court  has  been  applied 
in  a  number  of  cases,  particularly  with  reference  to  sleeping 
cars,  refrigerator  cars  and  the  like,  owned  by  independent  com- 
panies and  leased  to  railroads. 

The  State  of  Pennsylvania  imposed  a  tax  on  the  Pullman 
Palace  Car  Company,  taking  as  the  basis  of  the  assessment 
such  proportion  of  the  capital  of  the  company  as  the  number 
of  miles  of  railroad,  over  which  the  ears  passed  in  the  State  of 
Pennsylvania,  bore  to  the  whole  number  of  miles  in  that  and 
other  States  over  which  its  cars  were  run.  It  was  strongly 
contended  that  the  cars  could  be  taxed  only  in  the  State  of  Illi- 
nois, where  the  car  company  was  organized  and  had  its  prin- 
cipal place  of  business.  But  the  tax  was  sustained  both  by  the 
Supreme  Court  of  Pennsylvania^  and  by  the  Supreme  Court 
of  the  United  States.^    The  latter  court  said,  at  p.  22 : 

"No  general  principles  of  law  are  better  settled,  or  more 
fundamental,  than  that  the  legislative  power  of  eveiy  State 
extends  to  all  property  within  its  borders,  and  that  only  so  far 
as  the  comity  of  that  State  allows  can  such  property  be  af- 
fected by  the  law  of  any  other  State.  The  old  rule,  expressed 
in  the  maxim  mohilia  sequuntur  personam,  by  which  personal 
property  was  regarded  as  subject  to  the  law  of  the  owner's 
domicil,  grew  up  in  the  Middle  Ages,  when  movable  property 
consisted  chiefly  of  gold  and  jewels,  which  could  be  easily  car- 
ried by  the  owner  from  place  to  place,  or  secreted  in  spots 
known  only  to  himself.  In  modern  times,  since  the  great  in- 
crease in  the  amount  and  variety  of  personal  property,  not  im- 


n07  Ponnsylvania  156. 

£  Pullman's  Palace  Car  Co.  v.  PenJl-oir^ya»lia,  14X  U,  S.  18,  35  L.  Ed. 
613   (1881). 


238  TAXATION    OF   INTERSTATE   COMMERCE.  §    241 

mediately  connected  with  the  person  of  the  owner,  that  rule  has 
yielded  more  and  more  to  the  lex  situs,  the  law  of  the  place 
where  the  property  is  kept  and  used." 

§  241.    Supreme  Court  on  Taxable  Situs  of  Railroad  Cars. 

— In  answer  to  the  argument  that  the  rule  ought  to  be  the  same 
as  that  applicable  to  vessels,  which  are  only  taxable  at  the  home 
port,  the  court  replied  that  there  is  an  obvious  distinction  be- 
tween the  ease  of  vessels,  and  that  of  cars  which  have  no  fixed 
situs  and  traverse  the  land  only,  continuing  at  p.  24 : 

''No  doubt  commerce  by  water  was  principally  in  the  minds 
of  those  who  framed  and  adopted  the  Constitution,  although 
both  its  language  and  spirit  embrace  commerce  by  land  as  well. 
Maritime  transportation  requires  no  artificial  roadway.  Nature 
has  prepared  to  hand  that  portion  of  the  instrumentality  em- 
ployed. The  navigable  waters  of  the  earth  are  recognized  pub- 
lic highways  of  trade  and  intercourse.  No  franchise  is  needed 
to  enable  the  navigator  to  use  them.  Again,  the  vehicles  of 
commerce  by  water  being  instruments  of  intercommunication 
with  other  nations,  the  regulation  of  them  is  assumed  by  the 
national  legislature.  So  that  State  interference  with  transpor- 
tation by  water,  and  especially  by  sea,  is  at  once  clearly  marked 
and  distinctly  discernible.  But  it  is  different  with  transporta- 
tion by  land." 

The  court  said,  after  reviewing  the  cases,  that  this  was  neither 
a  license  nor  a  privilege  tax,  nor  a  tax  on  the  business  or  occu- 
pation, nor  yet  a  tax  on,  or  because  of,  the  transportation  or  the 
right  of  transit  of  persons  or  property  through  the  State  to 
other  States  or  countries.  It  was  imposed  equally  on  foreign 
and  domestic  companies.  A  tax  on  the  capital  of  a  corporation, 
on  account  of  its  property  within  the  State,  is,  in  substance  and 
•  effect,  a  tax  on  that  property.  The  court  added,  with  reference 
to  the  jurisdiction  of  the  State  in  taxation,  pp.  25,  26 : 

"The  cars  of  this  company  within  the  State  of  Pennsylvania 
are  employed  in  interstate  commerce;  but  their  being  so  em- 
ployed does  not  exempt  them  from  taxation  by  the  State;  and 
the  State  has  not  taxed  them  because  of  their  being  so  em- 
ployed, but  because  of  their  being  within  its  territory  and  juris- 
diction. The  cars  were  continuously  and  permanently  employed 
in  going  to  and  fro  upon  certain  routes  of  travel.  If  they  had 
never  passed  beyond  the  limits  of  Pennsylvania,  it  could  not  be 


§    241  TAXATION    OP    INTERSTATE    COMMERCE.  239' 

doubted  that  the  State  could  tax  them,  like  other  property 
within  its  borders,  notwithstanding  they  were  employed  in  in- 
terstate commerce.  The  fact  that,  instead  of  stopping  at  the 
State  boundary,  they  cross  that  boundary  in  going  out  and  com- 
ing back,  cannot  affect  the  power  of  the  State  to  levy  a  tax  upon 
them.  The  State,  having  the  right,  for  the  purposes  of  taxation, 
to  tax  any  personal  property  found  within  its  jurisdiction,  with- 
out regard  to  the  place  of  the  owner's  domicil,  could  tax  the 
specific  cars  which  at  a  given  moment  were  within  its  borders. 
The  route  over  which  the  cars  traveled  extending  beyond  the 
limits  of  the  State,  particular  cars  may  not  remain  within  the 
State;  but  the  company  has  at  all  times  substantially  the  same 
number  of  cars  within  the  State,  and  continuously  and  con- 
stantly uses  there  a  portion  of  its  property ;  and  it  is  distinctly 
found,  as  matter  of  fact,  that  the  company  continuously 
throughout  the  periods  for  which  these  taxes  were  levied,  car- 
ried on  business  in  Pennsylvania,  and  had  about  one  hundred 
cars  within  the  State, 

"The  mode  which  the  State  of  Pennsylvania  adopted,  to  as- 
certain the  proportion  of  the  company's  property  upon  which  it 
should  be  taxed  in  that  State,  was  by  taking  as  a  basis  of  assess- 
ment such  proportion  of  the  capital  stock  of  the  company  as  the 
number  of  miles  over  which  it  ran  cars  within  the  State  bore 
to  the  whole  number  of  miles,  in  that  and  other  States,  over 
which  its  cars  were  run.  This  was  a  just  and  etiuitable  method 
of  assessment ;  and,  if  it  were  adopted  by  all  the  States  through 
which  these  cars  ran,  the  company  would  be  assessed  upon  the 
whole  value  of  its  capital  stock,  and  no  more." 

And  the  court  concluded,  p.  29 : 

"For  these  reasons,  and  upon  these  authorities,  the  court  is 
of  opinion  that  the  tax  in  question  is  constitutional  and  valid. 
The  result  of  holding  otherwise  would  be  that,  if  all  the  States 
should  concur  in  abandoning  the  legal  fiction  that  personal 
property  has  its  situs  at  the  owner's  domicil,  and  in  adopting 
the  system  of  taxing  it  at  the  place  at  which  it  is  used  and  by 
whose  laws  it  is  protected,  property  employed  in  any  business 
requiring  continuous  and  constant  movement  fj'om  one  State 
to  another  would  escape  taxation  altogether."^ 


1  Strong  dissent  was  made  by  Justice  Bradley,  with  whom  con- 
curred Justices  Field  and  Harlan.     lie  said,  1.  c.  p.  30: 

"Certainly  property  merely  carried  through  a  State  cannot  be  taxed 
by  the  State.  Such  a  tax  would  be  a  duty — which  a  State  cannot  im- 
pose.    If  a  drove  of  cattle  is  driven  through  Pennsylvania  from  Illi- 


'240  TAXATION    OF   INTERSTATE    COMMERCE.  §    242 

§  242.  Taxation  of  Refrigerator  Cars. — This  principle  has 
been  followed  in  other  eases.  Thns  a  tax  levied  on  the  same 
basis  of  the  average  number  in  habitual  nse  in  the  State,  was 
sustained  in  the  case  of  the  ears  of  the  American  Refrigerator 
Transit  Company  in  the  State  of  Colorado.  It  was  claimed 
that  the  cars  had  no  situs  for  taxation  in  the  State,  because  the 
company  was  an  Iowa  corporation  and  had  no  office  or  place 
of  business  in  Colorado.  The  average  number  of  cars  used  in 
the  State  was  forty.     The  tax  was  affirmed  both  in  the  State 


nois  to  New  York,  for  the  purpose  of  being  sold  in  New  York,  whilst 
in  Pennsylvania  it  may  be  subject  to  the  police  regulations  of  the 
State  but  it  is  not  subject  to  taxation  there.  It  is  not  generally  sub- 
ject to  the  laws  of  the  State  as  other  property  is.  So  if  a  train  of 
cars  starts  at  Cincinnati  for  New  York  and  passes  through  Pennsyl- 
vania, it  may  be  subject  to  the  police  regulations  of  that  State  whilst 
within  it,  but  it  would  be  repugnant  to  the  Constitution  of  the  United 
States  to  tax  it.  We  have  decided  this  very  question  in  the  case  of 
State  Freight  Tax,  15  Wall,  232,  21  L.  Ed.  146  (1873).  The  point 
was  directly  raised  and  decided  that  property  on  its  passage  through 
a  State  in  the  course  of  interstate  commerce  cannot  be  taxed  by  the 
State,  because  taxation  is  incidentally  regulation,  and  a  State  can- 
not regulate  interstate  commerce.  The  same  doctrine  was  recognized 
in  Coe  v.  Errol,  116  U.  S.  517,  29  L.  Ed.  715   (1886)." 

After  reviewing  other  decisions,  he  insisted  that,  although  such 
cars  are  not  to  be  free  from  taxation,  any  more  than  ships,  yet  they 
are  not  taxable  by  the  States  in  which  they  are  only  transiently 
present  in  carrying  on  their  commercial  operations.  He  said  at  p.  33: 
•  "In  the  opinion  of  the  court  it  is  suggested  that  if  all  the  States 
should  adopt  as  equitable  a  rule  of  proportioning  the  taxes  on  the 
Pullman  company  as  that  adopted  by  Pennsylvania,  a  just  system  of 
taxation  of  the  whole  capital  stock  of  the  company  would  be  the  re- 
sult. Yes,  if —  !  But  Illinois  may  tax  the  company  on  its  whole 
capital  stock.  Where  would  be  the  equity  then?  This,  however,  is  a 
consideration  that  cannot  be  compared  with  the  question  as  to  the 
power  to  tax  at  all — as  to  the  relative  power  of  the  State  and  general 
governments  over  the  regulation  of  internal  commerce — as  to  the 
right  of  the  States  to  resume  those  powers  which  have  been  vested  in 
the  government  of  the  United  States." 

See  also  Pullman's  Car  Co.  v.  Hayward,  141  U.  S.  36,  35  L.  Ed.  621 
(1891),  sustaining  the  property  tax  upon  railroad  cars  levied  upon 
the  same  principle  of  the  average  number  in  habitual  use,  the  tax 
being  apportioned  to  the  counties  of  the  State  on  the  mileage  basis. 


§    244  TAXATION    OF   INTERSTATE    COMMERCE.  241 

court    and   in   the    Supreme    Court/    the    latter   saying,    1.    c, 
p.  81: 

"It  having  been  settled,  as  we  have  seen,  that  where  a  cor- 
poration of  one  State  brings  into  another,  to  use  and  employ 
a  portion  of  its  movable  personal  property,  it  is  legitimate  for 
the  latter  to  impose  upon  such  property,  thus  used  and  em- 
ployed, its  fair  share  of  the  burdens  of  taxation  imposed  upon 
similar  property  used  in  like  way  by  its  own  citizens,  we  think 
that  such  a  tax  may  be  properly  assessed  and  collected,  in  cases 
like  the  present,  where  the  specific  and  individual  items  of 
property  so  used  and  employed  were  not  continuously  the  same, 
but  were  constantly  changing,  according  to  the  exigencies  of 
the  business,  and  that  the  tax  may  be  fixed  by  an  appraisement 
and  valuation  of  the  average  amount  of  the  property  thus 
habitually  used  and  employed." 

§  243.  Mileage  Apportionment  in  Taxation  of  Rolling- 
Stock. — In  the  application  of  this  rule  of  average  of  habitual 
use  to  the  taxation  of  sleeping  cars  and  other  forms  of  rolling 
stock,  there  was  necessarily  involved  the  recognition  of  the  prin- 
ciple of  mileage  apportionment  as  between  the  different  States 
in  the  railway  system.  The  same  principle  has  been  applied  in 
different  State  systems  of  taxation  of  such  property.  The  total 
assessed  value  of  the  average  number  of  cars  in  habitual  use  in 
the  State  having  been  ascertained,  this  amount  is  apportioned 
to  the  different  counties  or  cities  along  the  line  of  the  railroad 
in  the  State.  This  has  been  held  a  valid  method  of  taxation, 
both  by  the  State  and  Federal  courts,  see  infra,  Sec.  259  et  scq.^ 

§  244.  State  Tax  on  Freight  Invalid.— The  taxation  of 
corporations  on  the  basis  of  their  gross  receipts,  having  the  ad- 


1  American  Refrigerator  Transit  Co.  v.  Hall,  174  U.  S.  70;  43  L.  Ed. 
899  (1899);  Union  Refrigerator  Transit  Co.  y.  Lynch,  177  U.  S.  149, 
44  L.  Ed.  708  (1900),  applying  the  same  rule  in  the  case  of  the  taxa- 
tion of  cars  of  a  Kentucky  corporation  in  Utah.  See  also  Pullman's 
Palace  Car  Co.  v.  Twombley,  29  Fed.  658,  opinion  by  Brewer,  J.,  hold- 
ing valid  the  Iowa  statute;  also  Board  of  Assessors  v.  Pullman's 
Palace  Car  Co.,  60  Fed.  37,  8  C.  C.  A.  490. 

2  For  decision  of  a  State  court  holding  that  cars  of  the  Armour 
Packing  Company  have  a  taxable  situs  only  at  the  domicil  of  the 
corporation  owning  the  cars,  see  State  ex  rcL  v.  Stephens,  146  Mo.  662. 


242  TAXATION    OF    INTERSTATE    COMMERCE.  §    245 

vantage  of  simplicity  and  efficiency  and  being  in  effect  a  cor- 
poration income  tax,  has  been  adopted  in  many  States  with 
reference  to  domestic  corporations,  particularly  when  engaged 
in  quasi  public  business.  The  application  of  this  principle  to 
interstate  corporations,  however,  encountered  the  difficulty,  that 
the  taxation  of  the  receipts  of  interstate  commerce  is  in  effect 
taxing  interstate  commerce  itself,  and  thus  placing  the  conduct 
of  it  under  State  control. 

The  difficulty  was  illustrated  in  two  cases  decided  in  1872, 
both  from  Pennsylvania,  one  known  as  the  State  Freight  Tax 
Case,  and  the  other  as  the  State  Tax  on  Railway  Gross  Receipts. 
In  the  former,^  a  tax  was  levied  by  the  State  of  Pennsylvania 
upon  the  freight  carried  by  railroads  into  or  from  or  through 
the  State,  at  the  rate  of  a  definite  sum  upon  each  ton  of  freight, 
was  declared  void  as  an  interference  with  interstate  commerce. 
The  court  said  that  commerce,  as  used  in  the  Constitution,  in- 
cludes not  only  traffic  but  intercourse  and  navigation,  and  that, 
if  the  State  could  tax  a  ton  of  freight  at  all,  it  could  tax  it  so 
heavily  as  would  make  interchange  of  commodities  between  the 
States  impossible. 

§  245.  State  Tax  on  Railway  Gross  Receipts. — In  the  other 
case,  a  tax  of  three-fourths  of  one  per  cent,  levied  by  the  State 
of  Pennsylvania  upon  the  gross  earnings  of  every  railroad  in- 
corporated under  its  laws  and  not  liable  to  an  income  tax  under 
existing  laws,  was  adjudged  valid.  In  that  case  the  tax  was  re- 
sisted by  the  Philadelphia  &  Reading  Railroad  Company,  a 
Pennsylvania  corporation  whose  road  lay  between  Philadelphia 
and  the  coal  regions  of  the  State.  This  company  claimed  that  a 
large  source  of  its  profit  was  derived  from  the  transportation  of 
coal  to  places  from  which  most  of  it  went  to  States  other  than 
Pennsylvania.  But  the  court  said^  that  this  case  was  to  be  dis- 
tinguished from  that  of  the  State  freight  tax.  It  is  not  every- 
thing that  affects  commerce  that  amounts  to  a  regulation  of  it 


1  15  Wallace  232,  supra.  Justices  Swayne  and  Davis  dissenting. 

2  15  Wallace  284,  21  L.  Ed.  164    (1873).     Justices  Miller,  Field  and 
Hunt  dissenting. 


§    245  TAXATION    OF    INTERSTATE   COMMERCE.  243 

within  the  meaning  of  the  Constitution.  The  States  have  au- 
thority to  tax  the  assets,  real  and  personal,  of  all  their  corpora- 
tions, including  carrying  companies,  precisely  as  they  may  tax 
similar  property  belonging  to  natural  persons,  and  to  the  same 
extent.     The  court  said  further,  at  p.  293: 

''"We  think  also  that  such  tax  may  be  laid  upon  a  valuation, 
or  may  be  an  excise,  and  that  in  exacting  an  excise  tax  from 
their  corporations,  the  States  are  not  obliged  to  impose  a  fixed 
sum  upon  the  franchises  or  upon  the  value  of  them,  but  they 
may  demand  a  graduated  contribution,  proportioned  either  to 
the  value  of  the  privileges  granted,  or  to  the  extent  of  their 
exercise,  or  to  the  results  of  such  exercise." 

The  court  said  that,  when  the  tax  was  laid  upon  gross  re- 
ceipts, these  receipts  had  lost  their  distinctive  character  as 
freight  by  becoming  incorporated  into  the  general  mass  of  the 
company's  property,  1  c,  p.  295: 

"There  certainly  is  a  line  which  separates  that  power  of  the 
Federal  government  to  regulate  commerce  among  the  States, 
which  is  exclusive,  from  the  authority  of  the  States  to  tax  per- 
sons' property,  business,  or  occupations,  within  their  limits. 
The  line  is  sometimes  difficult  to  define  with  distinctness.  It  is 
so  in  the  present  case ;  but  we  think  it  may  safely  be  laid  down 
that  the  gross  receipts  of  railroad  or  canal  companies,  after  they 
have  reached  the  treasury  of  the  carriers,  though  they  may  iiave 
been  derived  in  part  from  transportation  of  freight  between 
States,  have  become  subject  to  legitimate  taxation." 

It  seems  to  have  been  conceded  that  a  State  can  levy  a  tax 
upon  net  earnings,  and  the  court  said  that  it  is  difficult  to  state 
any  well-founded  distinction  between  a  State  tax  upon  net 
earnings  and  one  upon  gross  earnings,  that  net  earnings  are  a 
part  of  the  gross  receipts,  and  that  the  gross  receipts  are  a 
measure  of  approximate  value. 

Neither  of  these  cases  has  l^een  overruled ;  but  the  authority 
of  the  decision  in  the  case  of  the  State  Tax  on  Gross  Receipts 
was  for  a  time  seriously  impaired  by  decisions  of  the  court  ap- 
parently inconsistent  with  the  broad  statement  therein  of  the 
right  to  tax  gross  receipts,  on  the  ground  that  they  have  passed 


244  TAXATION    OF   INTERSTATE   COMMERCE.  §    246 

into  the  treasury   of   the   company   and   lost   their   distinctive 
character  as  freight.^ 

It  will  be  noticed  that  the  mileage  rule  of  apportionment  of 
interstate  properties  was  not  suggested  or  considered  in  the  case 
of  the  State  Tax  on  Gross  Receipts.  The  case  presented  was  that 
of  a  railroad  whose  line  was  entirely  within  the  State,  but  which 
did  an  interstate  business  through  its  connections  with  other 
lines  leading  out  of  the  State. 

§  246.  Mileage  Apportionment  in  Interstate  Railway  Tax- 
ation.— In  a  later  case,  which  seems  to  have  been  the  first  case 
before  the  Supreme  Court  involving  the  taxation  of  an  interstate 
railroad^  as  such,  the  court  sustained  the  tax  levied  by  the 
State  of  Delaware  upon  the  Philadelphia,  "Wilmington  &  Balti- 
more Railroad  Company,  a  through  line  connecting  the  cities  of 
Baltimore  and  Philadelphia,  of  which  that  part  in  Delaware 
had  been  built  by  a  Delaware  corporation,  which  had  been  con- 
solidated with  the  corporations  in  the  other  States  of  Pennsyl- 
vania and.  Maryland.  The  act  provided  that  a  tax  of  one- 
fourth  of  one  per  cent  should  be  levied  upon  the  actual  cash 
value  of  every  share  of  the  capital  stock  of  all  railroad  and 
canal  companies,  provided,  however,  that,  in  the  case  of  an  inter- 
state railroad,  the  company  should  only  be  required  to  pay  the 
tax  on  such  part  of  the  shares  of  its  capital  stock  as  should  be 
in  that  proportion  to  the  whole  number  of  shares,  which  the 
length  of  the  road  within  the  State  should  bear  to  the  whole 
length.  It  was  claimed  that  this  was  an  attempted  taxation  of 
property  beyond  the  jurisdiction  of  the  State,  and  that  there 
was  no  relation  between  the  capital  invested  and  the  number 
of  shares  of  the  company  owned  in  the  State.  But  the  court 
replied  that  the  tax  was  not  upon  the  shares,  nor  upon  the 
property  of  the  corporation,  but  a  tax  upon  the  corporation, 
measured  by  a  percentage  upon  the  cash  value  of  a  certain  pro- 
portional part  of  the  shares,  and  that,  although  the  rule  was  ar- 


1  See  Steamship  Co.  v.  Pennsylvania,  122  U.  S.  326,  30  L.  Ed.  1200 
(1887);   Fargo  v.  Michigan,  121  U.  S.  230,  30  L.  Ed.  888   (1887). 

2  Delaware  Railroad  Tax,  18  Wallace  206,  21  L.  Ed.  888  (1873). 


§    247  TAXATION    OP   INTEESTATE   COMMERCE.  245 

bitrary,  it  was  approximately  just,  and  one  which  the  legislature 
had  the  right  to  adopt.    It  said,  at  p.  231 : 

"The  State  may  impose  taxes  upon  the  corporation  as  an  en- 
tity existing  under  its  laws,  as  well  as  upon  the  capital  stock 
of  the  corporation,  or  its  separate  corporate  property.  And  the 
manner  in  which  its  value  shall  be  assessed  and  the  rate  of  taxa- 
tion, however  arbitrary  or  capricious,  are  mere  matters  of  legis- 
lative discretion." 

The  principle  of  mileage  apportionment  has  been  clearly  an- 
nounced by  the  Supreme  Court  as  a  basis  for  fixing  the  value  of 
railroad  property  within  the  State  for  the  purposes  of  taxa- 
tion.^ 

Interstate  commerce  is  not  unconstitutionally  interfered  with 
by  a  franchise  tax  imposed  upon  a  domestic  railroad  corpora- 
tion by  the  New  York  laws  because  no  deduction  is  allowed  from 
the  capital  stock,  taken  as  the  basis  of  the  tax,  on  account  of  a 
considerable  proportion  of  its  rolling  stock  which  by  the  ordin- 
ary course  of  the  railway  business  is  always  absent  from  the 
State.2 

§  247.  Taxation  of  Net  Earnings  Sustained.  —  A  tax  of 
three  per  cent  was  also  levied  under  this  act  upon  the  net  earn- 
ings of  the  company,  or  the  income  received  from  all  sources 
during  the  preceding  year,  and  this  also  was  adjusted  on  the 
mileage  rule,  such  shares  only  of  the  net  earnings  being  subject 
to  the  tax  as  were  in  the  proportion  to  the  whole  net  earnings 
which  the  length  of  the  road  within  the  State  bore  to  the  whole 
length.     As  to  this  the  court  said,  p.  231 : 

"Nothing  was  urged  in  the  argument  specially  against  the 
tax  upon  the  corporation  under  the  first  section  -of  the  act, 
which  is  determined  by  the  net  earnings  or  income  of  the  com- 
pany. Whatever  objections  could  be  presented  were  answered 
by  the  observations  already  made  upon  the  tax  under  the  other 

iC.  B.  &  Q.  R.  Co.  V.  Babcock,  204  U.  S.  585,  51  L.  Ed.  636  (1907). 
See  also  St.  Louis,  I.  M.  &  S.  R.  Co.  v.  Davis,  122  Fed.  639.  See  also 
cases  cited  in  Ch.  VIII,  infra. 

2  New  York  ex  rel.  v.  Miller,  202  U.  S.  584,  50  L.  Ed.  1155  (1906), 
affirming  177  N.  Y.  584. 


246  TAXATION    OP   INTERSTATE    COMMERCE.  §    248 

section.  A  tax  upon  a  corporation  may  be  proportioned  to  the 
income  received  as  well  as  to  the  value  of  tlie  franchise  granted 
or  the  property  possessed." 

§  248.  Tax  on  Gross  Earnings  Held  Invalid. — A  series  of 
cases  followed  which  held  State  taxes  levied  upon  gross  earn- 
ings of  transportation  and  telegraph  companies  invalid.  These 
cases  did  not  expressly  overrule  the  case  of  the  State  Tax  on 
Gross  Receipts,  supra,  See.  245,  but  seem  clearly  inconsistent 
with  the  principle  on  which  it  was  based,  that  the  receipts  from 
freight  could  be  taxed,  while  the  freight  itself  could  not  be 
taxed.     This  distinction  was  directly  denied. 

Thus,  in  1887,  an  act  of  Pennsylvania  imposing  a  tax  upon 
the  gross  receipts  of  railroad,  canal,  steamboat  and  other  trans- 
portation companies  was  held  invalid  as  to  a  steamship  com- 
pany, a  Pennsylvania  corporation,  operating  steamers  between 
the  ports  of  Philadelphia  and  Savannah  and  in  foreign  trade 
out  of  New  Orleans.^  The  court  after  holding  that  the  interstate 
commerce  carried  on  by  ships  on  the  sea  is  national  in  its  char- 
acter admitting  of  only  one  uniform  system,  said,  Justice  Brad- 
ley delivering  the  unanimous  opinion,  at  p.  336 : 

"If,  then,  the  commerce  carried  on  by  the  plaintiff  in  error 
in  this  case  could  not  be  constitutionally  taxed  by  the  State, 
could  the  fares  and  freights  received  for  transportation  in  car- 
rying on  that  commerce  be  constitutionally  taxed  ?  If  the  State 
cannot  tax  the  transportation,  may  it,  nevertheless,  tax  the 
fares  and  freights  received  therefor?  Where  is  the  difference? 
Looking  at  the  substance  of  things,  and  not  at  mere  forms,  it  is 
very  difficult  to  see  any  difference.  The  one  thing  seems  to  be 
tantamount  to  the  other.  It  would  seem  to  be  rather  metaphy- 
sics than  plain  logic  for  the  State  officials  to  say  to  the  company : 
'We  will  not  tax  you  for  the  transportation  you  perform,  but 
we  will  tax  you  for  what  you  get  for  performing  it.'  Such  a 
position  can  hardly  be  said  to  be  based  on  a  sound  method  of 
reasoning. ' ' 

The  court  commented  at  length  upon  the  cases  of  the  State 
Freight  Tax  and  the  State  Tax  on  Railway  Gross  Receipts, 
supra,  Sec.  244  et  seq.,  and  said  that  if  the  former  stood  alone 


1  Philadelphia  Steamship  Co.  v.   Pennsylvania,  122  U.  S.  326,  supra. 


§    248  TAXATION    OF   INTERSTATE    COMMERCE.  247 

it  would  control  this  case.  It  was  said  further  that  the  first 
ground  on  which  the  decision  of  the  State  Tax  on  Gross  Re^ 
ceipts  was  placed  was  not  tenable,  that  is,  that  the  receipts  from 
freight  had  been  collected  into  the  treasury  of  the  company  and 
•were  no  longer  distinguishable  as  receipts.  The  opinion  pro- 
ceeds, at  p.  342: 

"No  doubt  a  ship-owner,  like  any  other  citizen,  may  be  per- 
sonally taxed  for  the  amount  of  his  property  or  estate,  without 
regard  to  the  source  from  which  it  was  derived,  whether  from 
commerce,  or  banking,  or  any  other  employment.  But  that  is 
an  entirely  different  thing  from  laying  a  special  tax  upon  his 
receipts  in  a  particular  employment.  If  such  a  tax  is  laid,  and 
the  receipts  taxed  are  those  derived  from  transporting  goods 
and  passengers  in  the  way  of  interstate  or  foreign  commerce, 
no  matter  when  the  tax  is  exacted,  whether  at  the  time  of  realiz- 
ing the  receipts,  or  at  the  end  of  every  six  months  or  a  year,  it 
is  an  exaction  aimed  at  the  commerce  itself,  and  is  a  burden 
upon  it,  and  seriously  affects  it.  A  review  of  the  question  con- 
vinces us  that  the  first  ground  on  which  the  decision  in  State 
Tax  on  Railway  Gross  Receipts  was  placed  is  not  tenable ;  that 
it  is  not  supported  by  anything  decided  in  Brown  v.  Maryland ; 
but,  on  the  contrary,  that  the  reasoning  in  that  case  is  decidedly 
against  it." 

It  was  intimated,  however,  that  the  decision  in  the  Railway 
Gross  Receipts  Case  could  be  based  upon  the  second  ground 
stated  in  the  opinion  therein,  to-wit,  that  it  was  a  tax  on  the 
franchise  of  the  corporation.  But  that  consideration  was  in- 
applicable to  the  case  of  the  steamship  company.  The  court  de- 
clared that  the  tax  was  not  an  income  tax,  as  it  was  not  levied 
on  the  incomes  of  all  the  inhabitants  of  the  State,  but  was  a 
special  tax  levied  on  the  transportation  companies. 

At  the  previous  term,  the  court  had  held  invalid  a  tax  levied 
by  the  State  of  Michigan  upon  the  gross  receipts  of  the  Mer- 
chants Dispatch  Transportation  Company.^  The  cars  in  that 
case  were  owned  by  the  transportation  company  and  leased  to 
the  railroads,  which  operated  them.  The  company  was  a  New 
York  corporation,  and  the  tax  finally  assessed  against  it  was  for 


1  Fargo  V.   Michigan.   121   U.  S.  230,  supra. 


248  TAXATION    OF   INTERSTATE   COMMERCE.  §    248 

the  gross  receipts,  which  it  had  returned  as  the  money  received 
from  the  transportation  of  freight  from  points  without  to  points 
within  the  State,  and  from  points  within  to  points  without.  No 
tax  was  levied  upon  the  amount  received  for  transportation 
passing  entirely  through  the  State  to  and  from  withou^.  The 
court  said  there  was  nothing  in  the  statute  on  which  to  base 
this  distinction,  and  therefore  it  must  have  been  made  upon 
some  idea  of  the  authorities  of  the  State  that  the  one  was  inter- 
state commerce  and  the  other  was  not,  which  the  court  was  at  a 
loss  to  comprehend,  as  there  was  no  such  difference.  It  would 
seem  from  the  statement  of  facts  that  the  tax  was  apportioned 
according  to  the  mileage  in  the  State ;  but  this  was  not  pressed 
by  counsel  nor  considered  by  the  court.  The  opinion  was  by 
Justice  Miller,  who  had  dissented  from  the  decision  in  the  State 
Tax  on  Railway  Gross  Receipts  Case,  on  which  the  Supreme 
Court  of  Michigan  had  relied  in  sustaining  this  tax.  He  dis- 
tinguished that  ease,  first  because  the  subject  of  taxation  there 
was  a  Pennsylvania  corporation  having  the  dtus  of  its  business 
within  the  State ;  and  secondly,  upon  the  ground  that  the  assess- 
ment there  was  upon  money  in  the  treasury  of  the  company, 
while  in  the  case  at  bar  the  money  received  for  freight  probably 
never  was  within  the  State,  being  paid  to  the  company  either 
at  the  beginning  or  end  of  its  route. 

In  1888  a  tax  levied  by  Ohio  upon  the  gross  receipts  of  the 
Western  Union  Telegraph  Company  was  held  valid  as  to  the  re- 
ceipts from  business  within  the  State,  but  invalid  as  to  those 
from  interstate  business,  and  the  court  therefore  sustained  an 
injunction  against  the  collection  of  taxes  upon  the  latter.^  In 
this  case  moreover  there  seems  to  have  been  no  effort  to  appor- 
tion the  receipts  according  to  the  mileage  in  the  State,  and  the 
tax  was  directly  upon  the  receipts  in  Ohio  of  the  company's 
business,  and  not  upon  the  gross  receipts  of  all  its  business.  The 
court,  in  its  opinion,  refers  to  the  fact  that  at  the  same  term  it 
had  sustained  a  tax  levied  by  the  State  of  Massachusetts  upon 


iRatterman  v.  Western  Union  Tel.  Co.,  127  U.  S.  411,  32  L.  Ed.  229 
(1888);  Western  Union  Telegraph  Co.  v.  Alabama,  132  U.  S.  472,  33 
L.  Ed.  409    (1890). 


§    250  TAXATION    OF    INTERSTATE    COMMERCE.  249 

the  capital  stock  of  the  company,  the  ratio  allotted  being  the 
ratio  of  the  mileage  in  the  State  to  the  total  number  of  miles 
of  the  company's  lines  in  the  United  States.i 

§  249.    Tax  on  Gross  Receipts  Held  Invalid  in  State  Courts. 

— These  cases  were  considered  as  impairing  the  authority  of  the 
State  Tax  on  Gross  Receipts  Case,  and  the  State  courts  followed 
in  holding  that  method  of  taxation  unconstitutional,  as  to  that 
part  of  the  receipts  coming  from  interstate  commerce. 

Thus  the  Supreme  Court  of  Vermonta  admitted  that  the  ef- 
fect of  the  decision  in  Philadelphia  Steamship  Co.  v.  Pennsyl- 
vania, supra,  Sec.  248,  was  to  overrule  the  State  Tax  on  Gross 
Receipts  Case  and  make  the  law  of  Vermont  taxing  gross  re- 
ceipts unconstitutional  as  to  those  derived  from  interstate  com- 
merce, saying: 

"We  as  judges  of  a  State  court  are  bound  by  the  very  lan- 
guage of  the  Federal  Constitution  to  accept  the  construction  of 
any  part  of  that  Constitution  made  by  the  Supreme  Court;  and 
in  this  case  the  reasoning  of  that  court  seems  to  us  to  be  en- 
tirely unanswerable.  We  hold,  therefore,  that  our  corporation 
tax  law,  so  far  as  it  "seeks  td  tax  the  earnings  derived  from  in- 
terstate commerce,  is  unconstitutional,  as  it  interferes  with  com- 
merce, the  regulation  of  which  is  within  the  exclusive  control 
of  Congress.  "3 

§  250.  Maine  v.  Grand  Trunk  R.  R.  Co.— But,  a  few  years 
later,  in  1891,  the  right  of  a  State  to  levy  a  tax  upon  that  por- 
tion of  all  the  gross  earnings  of  an  interstate  railroad  appor- 

1  Western  Union  Tel.  Co.  v.  Massachusetts,  125  U.  S.  530,  31  L.  Ed. 
790  (1888),  infra,  Sec.  269. 

2  Vermont  &  Canada  R.  R.  Co.  v.  Vermont  Central  R.  R.  Co.,  63  Vt. 
1,  10  L.  R.  A.  565. 

3  The  court,  however,  held  that  the  lessee  of  a  railroad  could  not  be 
compelled  to  pay  to  the  lessor  the  amount  of  such  tax  thus  adjudged 
unconstitutional  which  it  had  paid  to  the  State  under  its  covenant  to 
pay  taxes  and  accordingly  withheld  from  its  rent,  although  notified 
by  the  lessor  not  to  pay  them,  as  the  taxes  when  paid  were  lawful. 
On  appeal  the  Supreme  Court  dismissed  the  case  for  the  want  of 
jurisdiction,  159  U.  S.  639,  40  L.  Ed.  284  (1895),  no  Federal  question 
being  involved  as  between  the  parties. 


250  TAXATION    OF    INTERSTATE   COMMERCE.  §    251 

tioned  to  the  total  earnings,  as  the  mileage  in  the  State  is  pro- 
portioned to  the  total  mileage,  when  levied  as  an  excise  or  fran- 
chise tax  upon  the  corporation,  was  distinctly  sustained  by  the 
Supreme  Court.i  Such  a  tax  was  levied  by  the  State  of  Maine 
upon  the  Grand  Trunk  Kailroad  Company,  a  Canada  corpora- 
tion, which  had  leased  a  railroad  in  Maine  and  operated  it  and 
used  its  franchises  under  legislative  permission.  Under  the 
statute  the  lessee  was  required  to  pay  annually  what  was  en- 
titled an  excise  tax  for  the  privilege  of  exercising  its  franchise 
in  the  State.  The  amount  of  this  tax  was  calculated  upon  the 
gross  receipts  for  the  preceding  year  on  the  mileage  basis.  The 
gross  receipts  of  the  whole  system  within  and  without  the  State 
were  divided  by  the  total  number  of  miles  operated,  and,  the 
average  gross  receipts  per  mile  having  been  thus  obtained,  this 
amount  was  multiplied  by  the  number  of  miles  in  Maine  and  the 
tax  computed  upon  the  result.  The  case  was  submitted  to  the 
court  upon  the  distinct  issue  of  the  right  of  the  State  to  levy 
such  a  tax.  The  U.  S.  Circuit  Court  had  held  the  tax  invalid 
on  the  ground  that  the  State  Tax  on  Gross  Receipts  Case  had 
been  overruled.2 

The  opinion  was  delivered  by  Justice  Field,  reversing  the 
court  below  and  holding  the  tax  valid.  He  said,  pp.  227  and 
228: 

§  251.  Tax  on  Gross  Earnings,  Apportioned  by  Mileag-e, 
Valid  as  Excise  Tax. — ''The  tax  for  the  collection  of  which 
this  action  is  brought,  is  an  excise  tax  upon  the  defendant  cor- 
poration for  the  privilege  of  exercising  its  franchises  within  the 
State  of  Maine.  It  is  so  declared  in  the  statute  which  imposes  it ; 
and  that  a  tax  of  this  character  is  within  the  power  of  a  State 
to  levy  there  can  be  no  question.  The  designation  does  not  al- 
ways indicate  merely  an  inland  imposition  or  duty  on  the  con- 
sumption of  commodities,  but  often  denotes  an  impost  for  a 
license  to  pursue  certain  callings  or  to  deal  in  special  commodi- 


1  Maine  v.  Grand  Trunk  R.  R.  Co.,  142  U.  S.  217,  35  L.  Ed.  994 
(1891). 

2  The  reported  brief  of  Mr.  Littlefield,  Attorney-General,  contains  a 
clear  analysis  of  the  cases  theretofore  decided  and  the  issue  submit- 
ted to  the  court. 


§    251  TAXATION    OP   INTERSTATE   COMMERCE.  251 

ties,  or  to  exercise  particular  franchises.  ^  It  is  used  more  fre- 
quently, in  this  country,  in  the  latter  sense  than  in  any  other. 
The  pri^dlege  of  exercising  the  franchises  of  a  corporation 
within  a  State  is  generally  one  of  value,  and  often  of  great  value, 
and  the  subject  of  earnest  contention.  It  is  natural,  therefore, 
that  the  corporation  should  be  made  to  bear  some  proportion 
of  the  burdens  of  government.  As  the  granting  of  the  privilege 
rests  entirely  in  the  discretion  of  the  State,  whether  the  cor- 
poration be  of  domestic  or  foreign  origin,  it  may  be  conferred 
upon  such  conditions,  pecuniary  or  otherwise,  as  the  State  in 
its  judgment  may  deem  most  conducive  to  its  interests  or  policy. 
It  may  require  the  payment  into  its  treasury,  each  year,  of  a 
specific  sum,  or  may  apportion  the  amount  exacted  according 
to  the  value  of  the  business  permitted,  as  disclosed  by  its  gains 
or  receipts  of  the  present  or  past  years.  The  character  of  the 
tax,  or  its  validity,  is  not  determined  by  the  mode  adopted  in 
fixing  its  amount  for  any  specific  period  or  the  times  of  its  pay- 
ment. The  whole  field  of  inquiry  into  the  extent  of  revenue 
from  sources  at  the  command  of  the  corporation,  is  open  to  the 
consideration  of  the  State  in  determining  what  may  be  justly 
exacted  for  the  privilege.  The  rule  of  apportioning  the  charge 
to  the  receipts  of  the  business  would  seem  to  be  eminently  rea- 
sonable, and  likely  to  produce  the  most  satisfactory  results,  both 
to  the  State  and  the  corporation  taxed." 

The  opinion  further  said  that  the  Circuit  Court  erred  in 
holding  that  the  tax  was  upon  the  receipts  as  such,  and  there- 
fore an  interference  with  interstate  and  foreign  commerce.  The 
resort  to  the  receipts  was  simply  to  ascertain  the  value  of  the 
business  done  by  the  company ;  and  the  effect  was  the  same  as  if 
the  reference  had  been  to  results  of  former  years.  There  was  no 
levy,  by  the  statute,  on  the  receipts  "themselves,  either  In  form 
or  fact,  as  they  constituted  simply  the  means  of  ascertaining 
the  value  of  the  privilege  conferred. 

The  court  also  said  that  the  case  of  the  Philadelphia  Steam- 
ship Co.  V.  Pennsylvania2  in  no  way  conflicted  with  that  deci- 
sion. 3 


iFor  construction  of  the  term  "excise"  in  Federal  taxation  see 
infra,  Sec.  560. 

2  Supra,  Sec.  248. 

3Four  judges  concurred  with  Justice  Field  in  this  opinion.  Chief 
Justice  Fuller,  and  Justices  Gray,  Blatchford  and  Brewer,  while  four 


252  TAXATION    OP    INTERSTATE    COMMERCE.  §    252 

§  252.  Principle  Reaffirmed. — The  principle  thus  estab- 
lished, that  the  gross  receipts  of  an  interstate  carrier  may  be 
taxed  by  the  State  when  the  tax  is  levied  as  an  excise  or  fran- 
chise tax,  and  apportioned  on  the  basis  of  the  mileage  within  the 
State  to  the  total  mileage,  has  been  distinctly  reaffirmed.^ 


judges  dissented,  Justices  Bradley,  Harlan,  Lamar  and  Brown.  The 
dissenting  opinion  by  Justice  Bradley  was  the  last  reported  opinion 
of  that  distinguished  jurist.  In  it  he  said:  "This  court  and  some  of 
the  State  courts  have  gone  a  great  length  in  sustaining  various  forms 
of  taxes  upon  corporations.  The  train  of  reasoning  upon  which  it  is 
founded  may  be  questionable.  A  corporation,  according  to  this  class  of 
decisions,  may  be  taxed  several  times  over.  It  may  be  taxed  for  its 
charter;  for  its  franchises;  for  the  privilege  of  carrying  on  its  busi- 
ness; it  may  be  taxed  on  its  capital;  and  it  may  be  taxed  on  its  prop- 
erty. Each  of  these  taxations  may  be  carried  to  the  full  amount  of 
the  property  of  the  company.  I  do  not  know  that  jealousy  of  cor- 
porate institutions  could  be  carried  much  further.  This  court  held 
that  the  taxation  of  the  capital  stock  of  the  Western  Union  Telegraph 
Company  in  Massachusetts,  graduated  according  to  the  mileage  of 
lines  in  that  State  compared  with  the  lines  in  all  the  States,  was  noth- 
ing but  a  taxation  upon  the  property  of  the  company;  yet  it  was  in 
terms  a  tax  upon  its  capital  stock,  and  might  as  well  have  been  a  tax 
upon  its  gross  receipts.  By  the  present  decision  it  is  held  that  taxa- 
tion may  be  imposed  upon  the  gross  receipts  of  the  company  for  the 
exercise  of  its  franchise  within  the  State,  if  (graduated  according  to 
the  number  of  miles  that  the  road  runs  in  the  State.  Then  it  comes 
to  this:  A  State  may  tax  a  railroad  company  upon  its  gross  receipts 
in  proportion  to  the  number  of  miles  run  within  the  State,  as  a  tax 
on  its  property;  and  may  also  lay  a  tax  upon  these  same  gross  re- 
ceipts, in  proportion  to  the  same  number  of  miles,  for  the  privilege  of 
exercising  its  franchise  in  the  State!  I  do  not  know  what  else  it 
may  not  tax  the  gross  receipts  for.  If  the  interstate  commerce  of  the 
country  is  not,  or  will  not  be,  handicapped  by  this  course  of  decision, 
I  do  not  understand  the  ordinary  principles  which  govern  human 
conduct." 

1  New  York,  Lake  Erie  and  Western  R.  R.  Co.  v.  Pennsylvania,  158 
U.  S.  431,  39  L.  Ed.  1046  (1895);  Lehigh  Valley  R.  Co.  v.  Pennsylvania. 
145  U.  S.  192,  36  L.  Ed.  672  (1892).  In  the  latter  case  the  tax  was  upon 
the  gross  receipts,  but  it  was  held  that  the  railroad  running  between 
two  points  in  Pennsylvania  and  traversing  only  a  short  distance  in 
New  Jersey  was  not  engaged  in  interstate  commerce,  because  the  in- 
cidental passage  through  another  State  in  a  continuous  carriage  from 
one  point  in  a  State  to  another  point  in  the  same  State  is  not  inter- 
state commerce. 


§    253  TAXATION    OF   INTERSTATE    COMMERCE.  253 

Thus  the  court  in  Erie  R.  R.  Co.  v.  Pennsylvania  reaffirmed 
the  case  of  Elaine  v.  Grand  Trunk  Railway  and  sustained  a  tax 
of  Pennsylvania  which  it  was  claimed  was  improperly  levied 
upon  tolls  received  by  a  New  York  railroad  company  from  other 
railroad  companies  for  the  use  hy  them  of  so  much  of  its  railroad 
tracks  as  lay  in  the  State  of  Pennsylvania.  It  is  said,  at  page  438 : 

"The  tax  complained  of  is  not  laid  on  the  transportation 
of  the  subjects  of  interstate  commerce,  or  on  receipts  derived 
therefrom,  or  on  the  occupation  or  business  of  carrying  it  on. 
It  is  a  tax  laid  upon  the  corporation  or  business  of  carrying  it 
on.  It  is  a  tax  laid  upon  the  corporation  on  account  of  its 
property  in  a  railroad,  and  which  tax  is  measured  by  a  reference 
to  the  tolls  received.  The  State  has  not  sought  to  interfere  with 
the  agreement  between  the  contracting  parties  in  the  matter  of 
establishing  the  tolls.  Their  power  to  fix  the  terms  upon  which 
the  one  company  may  grant  to  the  other  the  right  to  use  its  road 
is  not  denied  or  in  any  way  controlled. 

"It  is  argued  that  the  imposition  of  a  tax  on  tolls  might  lead 
to  increasing  them  in  an  effort  to  throw  their  burden  on  the 
carrying  company.  Such  a  result  is  merely  conjectural,  and,  at 
all  events,  too  remote  and  indirect  to  be  an  interference  with 
interstate  commerce.  The  interference  with  the  commercial 
power  must  be  direct,  and  not  the  mere  incidental  effect  of  the 
requirement  of  the  usual  proportional  contribution  to  public 
maintenance."! 

§  253.  Immaterial  Whether  Corporation  is  Domestic  or 
Foreign. — In  the  case  of  Maine  v.  Grand  Trunk  Railway  Com- 
pany, the  defendant  was  a  foreign  corporation  organized  under 
the  laws  of  Canada,  but  its  railroad  in  Maine  had  been  con- 
structed by  another  corporation  under  a  Maine  charter,  and  was 
operated  by  defendant  under  lease.  The  decision  of  the  court 
however,  was  not  based  upon  any  distinction  between  the  status 
of  a  domestic  and  that  of  a  foreign  corporation.  It  said  that  the 
g)-anting  of  the  privilege  to  operate  in  the  State  as  a  corporation, 
whether  the  corporation  be  of  domestic  or  foreign  origin,  rests 
entirely  within  the  discretion  of  the  State,     Obviously  this  ex- 


xSee  Cumberland  &  Penn.  R.  R.  Co.  v.  Maryland.  92  Md.  668,  and  52 
L.  R.  A.  764,  following  Maine  v.  Grand  Trunk  R.  R.  Co.,  and  carefully 
rervrlewing  the  decisions  of  the  Supreme  Court. 


254'  TAXATION   OF   INTERSTATE   COMMERCE.  §    254 

pression  was  used  in  the  sense,  not  that  the  State  can  prohibit 
the  corporation  engaged  in  interstate  commerce  from  operating 
in  the  State,  but  that,  whether  the  corporation  be  domestic  or 
foreign,  the  State  has  the  right  to  tax  the  corporate  franchise 
upon  the  basis  of  an  apportionment  to  the  receipts  of  the  busi- 
ness. 

The  rule  as  laid  down  therefore  in  Maine  v.  Grand  Trunk 
Eailroad  Company,  supra,  Sec.  250,  would  seem  to  be  equally 
applicable  to  foreign  and  domestic  corporations.  The  differ- 
ence between  foreign  and  domestic  corporations  was  discussed 
in  Fargo  v.  Michigan,  supra,  Sec.  248,  as  constituting  the  dis- 
tinction between  that  case,  which  involved  a  foreign  corpora- 
tion, and  the  case  of  the  State  Tax  on  Gross  Eeceipts,  in  which 
the  corporation  was  domestic.^ 

§  254.  A  Tax  on  Gross  Earnings  When  an  Interference 
With  Interstate  Commerce. — A  tax  levied  by  Texas  upon  rail- 
road companies  when  the  lines  were  wholly  within  the  State, 
equal  to  one  per  centum  of  their  gross  receipts  where,  in  some 
parts,  much  the  larger  parts  of  these  gross  receipts  is  derived 
from  the  carriage  of  passengers  or  freight  coming  through  or 
destined  to  points  without  the  State,  was  adjudged  an  unlawful 
interference  with  interstate   commeree.2 

It  seems  from  the  opinion  in  this  case  that  the  tax  was  in  addi- 
tion to  a  tax  on  the  property  of  the  railroad,  that  is,  upon  the 
valuation  of  the  property  taken  as  a  going  concern;  so  that  it  was 
in  effect  double  taxation. 

Under  the  same  reasoning  the  gross  earnings  tax  levied  by 
Oklahoma  was  adjudged  invalid.     In  this  case  also  the  tax  was 


1  In  Tide  Water  Pipe  Co.  v.  Assessors,  57  N.  J.  L.  516,  the  rule  was 
applied  in  sustaining  a  tax  upon  part  of  the  gross  receipts  of  a  foreign 
pipe  line  company  proportioned  to  the  mileage  in  the  State,  the  tax 
being  levied  as  a  franchise  tax  for  the  privilege  of  doing  business  in 
the  State. 

2  Galveston,  Harrisburg  &  San  Antonio  Ry.  Co.  v.  Texas,  210  U.  S. 
217,  52  L.  Ed.  1031,  reversing  97  S.  W.  71  (1908),  Chief  Justice  Fuller 
and  Justices  Harlan,  White  and  McKenna  dissenting. 


§    254  TAXATION    OF   INTERSTATE    COMMERCE.  255 

in  addition  to  the  taxes  levied  and  collected  upon  an  ad  valorem 
basis  on  the  property — that  is  three  per  centum  of  the  gross  re- 
ceipts paid  by  express  companies,  i 

The  court  said  that  there  was  no  warrant  for  calling  this  tax 
a  property  tax,  and  that  it  was  essentially  the  same  as  the  tax 
held  bad  in  the  Texas  case.  The  tax  was  not  an  attempt  to  reach 
the  value  of  the  property  of  the  company,  but  was  in  addition  to 
an  ad  valorem  tax  upon  the  property,  and  therefore  an  inter- 
ference with  interstate  commerce. 

At  the  same  term  at  which  the  Oklahoma  ease  was  decided,  the 
court  sustained  the  validity  of  the  Minnesota  tax  upon  gross 
earnings.2 

In  this  ease,  the  court,  adopting  the  construction  of  the  Act 
made  by  the  Supreme  Court  of  the  State,  found  that  this  tax  of 
six  per  cent  upon  the  gross  receipts,  was  in  lieu  of  all  taxes  upon 
the  property  of  the  company ;  in  other  words,  was  the  only  mode 
prescribed  by  the  law  for  exercising  the  recognized  authority  of 
the  State  to  tax  the  property  of  the  express  companies  as  going 
concerns  within  its  jurisdiction. 

The  court  said  it  differed  therein  from  the  taxes  condemned  in 
the  Texas  and  Oklahoma  cases,  which  were  in  addition  to  all 
other  State  taxation,  reaching  the  property  of  the  companies. 

A  tax  in  Ohio  of  four  per  cent  upon  gross  earnings,  excluding 
all  interstate  earnings  from  the  computation,  was  sustained  as 
an  excise  tax  for  the  privilege  of  conducting  a  corporate  busi- 
ness in  the  State  in  addition  to  an  ad  valorem  tax  on  property.  3 

These  cases  further  illustrate  the  principle  already  consid- 
ered, supra,  Sec.  199,  involving  the  relation  to  interstate  com- 
merce of  the  right  of  the  State  to  levy  a  tax,  even  supplemental 
to  a  general  property  tax,  when  not  unreasonable  in  amount, 


1  Meyer  v.  Wells  Fargo  &  Co.,  223  U.  S.  298,  56  L.  Ed.  445   (1912). 

2  U.  S.  Express  Co.  v.  Minnesota,  223  U.  S.  235,  56  L.  Ed.  459  (1912), 
affirming  114  Minn.  346.  See  also  "Wisconsin  and  Michigan  Ry.  Co.  v. 
Powers,  191  U.  S.  379,  48  L.  Ed.  229   (1903). 

a  Ohio  Tax  Cases,  232  U.  S.  576,  58  L.  Ed.  737  (1914),  affirming  203 
Fed.   537. 


256  TAXATION    OF   INTERSTATE    COMMERCE.  §    256 

for  the  privilege  of  conducting  a  corporate  business  in  the  State 
whether  by  a  domestic  or  foreign  corporation. 

Such  a  corporation  tax,  while  not  leviable  upon  gross  earn- 
ings as  such,  maj^  be  based  upon  the  value  of  the  corporation's 
property  or  stock  as  determined  by  its  gross  earnings  within  the 
State,  when  such  a  tax  is  levied  in  lieu  of  other  taxation  as  in  the 
Minnesota  case,  it  is  clearly  valid;  when  rate  is  not  unreasona- 
ble and  where  supplemental  to  a  general  property  tax  as  in  other 
States,  it  must  be  reasonable  in  amount  so  as  not  to  constitute  an 
interference  with  interstate  commerce  in  a  case  of  interstate  car- 
riers, and  what  constitutes  reasonableness  must  of  course  be 
determined  upon  the  facts  of  the  ease. 

§  255.    Tax  Not  Upon  Receipts  as  Such,  but   Excise    Tax 

Apportioned  to  Receipts. — The  decisions,  supra,  Sec.  248,  hold- 
ing that  a  tax  cannot  be  levied  uj^on  gross  receipts  as  such 
have  not  been  overruled  in  terms  and  it  would  seem  that,  though 
the  distinction  seems  one  more  in  name  than  in  substance,  the 
tax  must  be  levied  as  an  excise  tax  apportioned  to  receipts  and 
not  directly  upon  receipts. 

The  question  does  not  seem  to  have  been  raised  or  considered, 
in  relation  to  a  tax  upon  earnings,  whether  the  railroad  company 
would  be  allowed  to  show  in  any  particular  case  that  the  opera- 
tion of  the  mileage  rule  of  apportionment  would  work  injustice 
by  enabling  the  State  to  tax  an  undue  proportion  of  earnings. 
Such  a  case  might  well  occur  where  the  portion  of  a  company's 
line  in  one  State  traversing  a  very  populous  district  would  be  far 
more  productive  of  earnings  than  the  same  mileage  in  another 
State.  As  will  be  seen  hereafter,  this  consideration  has  been 
recognized  by  the  courts  with  reference  to  the  mileage  rule  of 
apportionment  in  property  valuation. 

§  256.  State  Tax  on  Net  Receipts. — The  same  considera- 
tions that  are  applicable  to  a  tax  upon  gross  receipts  apply  to 
one  levied  upon  net  receipts.  The  latter,  being  the  proceeds  from 
the  treasury  of  the  corporation  after  paying  all  expenses  of 
management  and  operation,  are  clearly  disting-uishable  from 
transportation  receipts,  even  if  gross  receipts  are  not,  and  this 


§    257  TAXATION    OF   INTERSTATE   COMMERCE.  257 

seems  to  have  been  conceded  in  the  cases  wherein  that  distinction 
was  discussed.^  Either  gross  receipts  or  net  receipts  may  there- 
fore in  the  discretion  of  the  State  be  taken  as  the  basis  for 
calculating  the  value  of  the  privilege  granted  the  corporation 
under  its  statutes,  when  the  State  seeks  to  determine  the  amount 
of  an  excise  tax  to  be  paid  therefor  by  the  corporation,  whether 
domestic  or  foreign.  This  privilege,  it  should  be  remembered, 
is  not  that  of  transporting  interstate  commerce  as  such,  but  that 
of  operating  as  a  corporation  under  the  laws  of  the  State. 

§  257.  Valuation  of  Property  by  Capitalization  of  Re- 
ceipts.— The  right  to  tax  receipts,  whether  gross  or  net,  must 
be  distinguished  from  using  the  receipts  or  income  of  the  cor- 
poration by  capitalizing  the  same  as  a  means  of  determining  tlie 
valuation  of  the  property  tax.  It  is  the  same  distinction  that 
there  is  between  levying  a  tax  upon  the  rental  and  upon  the 
value  of  the  property  from  which  the  rental  is  paid,  determining 
the  valuation  of  the  property  by  capitalizing  the  rental.^ 


1  See  opinion  in  State  Tax  on  Railway  Gross  Recepits,  supra,  Sec. 
245;  also  Delaware  Railroad  Tax,  supra,  Sec.  246. 

2  See  infra,  Sec.  547. 


CHAPTER    VIII. 

VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION. 

§  258.  Right  of  property  taxation  conceded. 

259.  Unit  rule. 

260.  Illinois    railroad    cases. 

261.  Supreme  Court  on  situs  of  railroad  property. 

262.  Supreme  Court  on  apportionment. 

263.  Application  of  unit  rule  to  interstate  railroads. 

264.  Supreme  Court   on   mileage   apportionment   in   interstate  rail- 

roads. 

265.  Exceptional  circumstances  may  make  mileage  rule  inapplicable. 

266.  Rulings  on  testimony  not  reviewed  in  Supreme  Court  unless 

bearing  on  Federal  question. 

267.  Entire  property   may   be   considered   in  valuation   of  portioH 

within  State. 

268.  Value  of  property  in  use  may  be  considered  in  valuation. 

269.  Unit  and  mileage  rule  as  applied  to  taxation  of  telegraph  com- 

panies. 

270.  Value  of  property  outside  State  to  be  considered  in  valuation 

under  mileage  apportionment. 

271.  Unit  rule  applied   to   express  companies. 

272.  Ohio  express  company  cases. 

273.  Special  circumstances  requiring  deduction  must  be  shown. 

274.  Rehearing  of  express  company  cases  denied. 

275.  The  enforcement  of  mileage  apportionment. 

276.  Kentucky  express  company  case. 

277.  Power  of  State  in  valuing  interstate  properties  as  defined  by 

Supreme  Court. 

278.  Evidence  of  inapplicability  of  mileage  rule  admissible. 

279.  Stock  market  quotations  as  evidence  of  value. 

280.  Presumption    that   all    evidence    submitted    was   considered   in 

valuation. 

§  258.  Right  of  Property  Taxation  Conceded. — The  diffi- 
culty in  adjusting  a  tax  rate  on  earnings  so  as  to  secure  equality 
of  taxation  under  a  system  of  general  property  taxation  has 
led  in  many  States  to  an  adoption  of  the  system  of  taxing  inter- 

(258) 


§  259  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  259 

state  properties  by  an  ad  valorem  property  valuation.^  It  has 
been  uniformly  declared  that  while  the  States  cannot  interfere 
by  taxation  or  otherwise  with  the  conduct  of  interstate  com- 
merce or  tax  the  privilege  as  such  of  conducting  such  commerce, 
they  can  tax  the  property  employed  therein  in  the  State  on  the 
same  basis  that  they  tax  other  property.  No  question  can  arise 
therefore  as  to  the  power  of  the  State  to  tax  the  tangible  property 
in  its  jurisdiction  of  a  railroad,  telegraph  or  other  company 
engaged  in  interstate  commerce.  Thus  the  roadbeds  and  station 
houses  of  a  railroad,  the  telegraph  poles,  wires  and  offices  of  a 
telegraph  company,  the  express  wagons  and  delivery  offices  of 
an  express  company  may  all  be  assessed  like  other  property  of 
the  same  class  and  subject  to  the  same  taxation. 

The  difficulty  however,  has  been  found  in  determining  what 
portion  of  the  intangible  property  of  such  interstate  corporation 
can  be  located  within  the  State  so  as  to  be  subject  to  its  taxing 
power. 

§  259.  Unit  Rule. — ^Before  the  question  was  presented  to 
the  Supreme  Court  in  relation  to  the  taxation  of  interstate 
properties,  it  had  arisen  in  some  of  the  States  in  reference  to  the 
taxation  of  such  properties  within  the  State.  There  was  estab- 
lished in  some  of  the  States,  with  reference  to  the  valuation  of 
intrastate  railroads,  the  so-called  unit  rule  or  rule  of  entirety, 
to-wit,  the  valuation  of  a  railroad  in  a  State  for  taxation  as  an 
entirety  and  the  apportionment  of  the  entire  value  thus  ascer- 
tained to  the  different  counties  and  municipalities  in  the  State 
traversed  by  the  railroad,  according  to  the  proportionate  mile- 
age therein.  This  so-called  unit  rule  is  in  fact  therefore  provided 
for  the  valuation  of  such  properties  by  the  central  power  of 
the  entire  State,  in  place  of  local  valuation  of  that  part  of  the 
railroad  or  telegraph  system  in  each  county  by  the  officials 
tliereof.  This  system  was  established  about  the  same  time  in 
both  Missouri  and  Illinois  and  was  sustained  by  the  State  courts 


1  In  Michigan,  by  constitutional  amendment,  the  property  taxation 
of  railroads  was  adopted  in  place  of  taxation  upon  gross  earnings. 
Other  States,  as  Minnesota  fsee  infra,  appendix),  have  recently  adopt- 
ed the  gross  earnings  tax  upon  railroads. 


260  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  260 

of  both  States.  The  system  of  unit  valuation,  particularly  the 
mileage  apportionment,  was  strongly  opposed  on  the  ground 
that  it  discriminated  against  such  localities  as  large  cities,  where 
terminal  systems  were  of  great  value  as  compared  with  the  same 
mileage  of  roadbed  in  a  thinly  populated  county,  but  it  was 
held  that  it  was  competent  for  the  legislature  to  adopt  that 
method  of  apportionment,  both  as  to  the  roadbed  and  rolling 
stock  of  a  railroad.^ 

§  260.  Illinois  Railroad  Cases. — The  Illinois  system  of  unit 
valuation  and  mileage  apportionment  within  the  State,  there 
being  apparently  no  question  as  to  the  valuation  of  interstate 
properties,  was  considered  by  the  Supreme  Court  on  appeal 
from  the  United  States  Circuit  Court  in  what  are  kno\^-n  as. 
the  State  Eailroad  Tax  Cases,  in  1875.^  It  seems  that  when  the 
opinion  was  delivered,  the  points  raised  in  the  case  had  already 
been  decided  in  favor  of  the  State  by  the  Supreme  Court  of  Ill- 
inois, and  it  was  said  in  the  opinion  that,  as  the  whole  matter 
concerned  the  validity  of  State  law,  which  was  not  seriously 
questioned  on  the  ground  of  any  conflict  with  the  Constitution  of 
the  United  States,  the  decision  of  the  State  court  was  to  be  ac- 
cepted as  the  rule  of  decision.s  The  court  however,  discussed 
the  system  enforced  by  the  State  Board  of  Equalization,  charged 
with  the  duty  of  valuing  the  railroad  propertj^,  and  the  judg- 
ment of  the  Circuit  Court  enjoining  the  collection  of  the 
tax  was  reversed. 

It  seems  that,  according  to  the  Illinois  rule,  the  local  tangi- 
ble property  of  the  companies,  other  than  their  road-bed  and 
rolling  stock,  was  assessed  in  the  county  or  city  where  located, 
like  other  property,  by  the  local  authorities;  while  the  railroad 
track,  rolling  stock  and  other  property  not  local  and  the  fran- 
chises of  the  company  were  treated  as  a  unit  for  taxation,  and 
the  valuation  thereof,  when  ascertained,  was  distributed  among 


1  See  State  ex  rel.  v.  Severance,  55  Mo.  378;  Porter  v.  Railroad  Co., 
76  111.  561.  See  also  Kentucky  R.  R.  Case,  115  U.  S.  331;  29  L.  Ed. 
416    (1886). 

2  92  U.  S.  575,  23  L.  Ed.  663  (1876).       • 

3  92  U.  S.  617,  23  L.  Ed.  674  (1876). 


(  260  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  261 

the  counties  through  which  the  road  passed,  according  to  the 
mileage  apportionment.  The  board  adopted  rules  of  valuation 
as  follows,  1.  c.  page  587 : 

*' First.  The  market  or  fair  cash  value  of  the  shares  of  cap- 
ital stock,  and  the  market  or  fair  cash  value  of  the  debt  (ex- 
cluding from  such  debt  the  indebtedness  for  current  expenses), 
shall  be  combined  or  added  together ;  and  the  aggregate  amount 
so  ascertained  shall  be  taken  and  held  to  be  the  fair  cash 
value  of  the  capital  stock,  including  the  franchise,  respec- 
tively, of  such  companies  and  associations. 

"Second.  From  the  aggregate  amount  ascertained  as  afore- 
said, there  shall  be  deducted  the  aggregate  amount  of  the 
equalized  or  assessed  valuation  of  all  the  tangible  property, 
respectively,  of  such  companies  and  associations  (such  equal- 
ized or  assessed  valuation  being  taken,  in  each  case,  as  the 
same  may  be  determined  by  the  equalization  or  assessment  of 
property  by  this  board)  ;  and  the  amount  remaining  in  each 
case,  if  any,  shall  be  taken  and  held  to  be  the  amount  and  fair 
cash  value  of  the  capital  stock,  including  the  franchise,  which 
this  board  is  required  by  law  to  assess,  respectively,  against 
companies  and  associations  now  or  hereafter  created  under 
the  laws  of  this  State." 

The  court  said,  opinion  by  Justice  Miller,  as  to  this  method  of 
valuation,  that  the  value  of  railroad  bonds  in  the  market  is  one 
of  the  truest  criteria,  as  far  as  it  goes,  of  the  value  of  the  road 
as  a  security  for  the  payment  of  those  bonds.  Justice  Miller 
proceeded,  1.  c,  p.  605 : 

"It  is  therefore  obvious,  that,  when  you  have  ascertained 
the  current  cash  value  of  the  whole  funded  debt,  and  the  cur- 
rent cash  value  of  the  entire  number  of  shares,  you  have,  by 
the  action  of  those  who  above  all  others  can  best  estimate  it, 
ascertained  the  true  value  of  the  road,  all  its  property,  its 
capital  stock,  and  its  franchises ;  for  these  are  all  represented 
by  the  value  of  its  bonded  debt  and  of  the  shares  of  its  cap- 
ital stock."! 


1  But  held  in  Pullman's  Palace  Car  Co.  v.  Transportation  Co.,  171 
U.  S.  138,  43  L.  Ed.  108  (1898),  that  the  market  value  of  stock  of  a 
manufacturing  company  is  not  a  proper  measure  of  the  value  of  the 
property  in  accounting  for  the  value  thereof,  as  other  considerations 
speculative  and   otherwise,  not   affecting   the  value   of  the   property, 


262  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  262 

He  added  that  this  would  be  perhaps  the  fairest  basis  of 
taxation  for  the  State  at  large,  if  all  railroads  were  solvent  and 
paid  the  interest  promptly  on  their  funded  debt,  but  that  this 
was  not  the  case.  The  system  adopted  by  the  statute  of  Illinois 
and  the  rule  of  the  board  preserved  the  principle  of  taxing  all 
the  tangible  property  at  its  value,  and  then  taxing  the  capital 
stock  and  franchise  at  their  value  if  there  was  any,  after  deduct- 
ing the  value  of  the  tangible  property. 

§  261.    Supreme  Court  on  Situs  of  Railroad  Property. — In 

answer  to  the  objection  that  the  personal  property  had  a  situs 
at  the  principal  place  of  business  of  the  corporation  and  should 
be  taxed  there,  the  court  said,  p.  607 : 

"This  objection  is  based  upon  the  general  rule  of 'law  that 
personal  property,  as  to  its  situs,  follows  the  domicil  of  its 
owner.  It  may  be  doubted  very  reasonably  whether  such  a 
rule  can  be  applied  to  a  railroad  corporation  as  between  the 
different  localities  embraced  by  its  line  of  road.  But,  after 
all,  the  rule  is  merely  the  law  of  the  State  which  recognizes 
it ;  and  when  it  is  called  into  operation  as  to  property  located 
in  one  State,  and  owned  by  a  resident  of  another,  it  is  a  rule 
of  comity  in  the  former  State  rather  than  an  absolute  prin- 
ciple in  all  cases.  Green  v.  Van  Buskirk,  5  Wall.  312.  Like 
all  other  laws  of  a  State,  it  is,  therefore,  subject  to  legislative 
repeal,  modification,  or  limitation,  and  when  the  legislature  of 
Illinois  declared  that  it  should  not  prevail  in  assessing  per- 
sonal property  of  railroad  companies  for  taxation,  it  simply 
exercised  an  ordinary  function  of  legislation." 

Objection  was  made  to  the  assessment  of  the  value  as  a  unit 
and  the  distribution  according  to  mileage,  and  it  was  said  by  the 
court : 

§  262.  Supreme  Court  on  Apportionment.  —  "This,  it  is 
said,  works  injustice  both  to  the  countries  and  to 
the  companies.     To  the  counties  and  cities,  by  depriving  them 


may  enter  into  the  market  value  of  the  shares.  See  also  Railroad  and 
Telephone  Companies  v.  State  Board  of  Equalizers  of  Tennessee,  85 
Fed.  302,  where  it  was  said  that  notwithstanding  anything  that  may 
be  said  in  the  judicial  decisions  and  legislative  enactments,  "no  more 
uncertain  or  delusive  element  in  the  attempt  to  fix  values  was  ever 
resorted  to  than  this  stock  and  bond  basis." 


§  263  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  263 

of  the  benefit  of  this  value  as  a  basis  of  local  taxation;  to  the 
companj',  by  subjecting  its  track  and  franchises,  on  the  basis 
of  this  general  value,  to  the  taxation  of  the  counties  and 
towns,  varying,  as  they  do,  in  rate,  without  the  benefit  of  the 
rule  of  assessment  which  prevails  in  those  counties  in  the  val- 
uation of  other  and  similar  property.  But,  as  we  have  already 
said,  a  railroad  must  be  regarded  for  many,  indeed  for  most 
purposes,  as  a  unit.  The  track  of  the  road  is  but  one  track 
from  one  end  of  it  to  the  other,  and,  except  in  its  use  as  one 
track,  is  of  little  value.  In  this  track  as  a  whole  each  county 
through  which  it  passes  has  an  interest  much  more  important 
than  it  has  in  the  limited  part  of  it  lying  within  its  boundary. 
Destroy  by  any  means  a  few  miles  of  this  track  within  an  in- 
terior county,  so  as  to  cut  off  the  connection  between  the  two 
parts  thus  separated,  and,  if  it  could  not  be  repaired  or  re- 
placed, its  effect  upon  the  value  of  the  remainder  of  the  road 
is  out  of  all  proportion  to  the  mere  local  value  of  the  part  of 
it  destroyed.  A  similar  effect  on  the  value  of  the  interior  of 
the  road  would  follow  the  destruction  of  that  end  of  the  road 
lying  in  Chicago,  or  some  other  place  where  its  largest  traffic 
centers.  It  may  well  be  doubted  whether  any  better  mode  of 
determining  the  value  of  that  portion  of  the  track  within  any 
one  county  has  been  devised,  than  to  ascertain  the  value  of  the 
whole  road,  and  apportion  the  value  within  the  county  by  its 
relative  length  to  the  whole." 

§  263.    Application  of  Unit  Rule  to  Interstate  Railroads. — 

About  ten  years  later,  in  the  Kentucky  Railroad  Tax  Cases,^ 
the  Kentucky  statute  for  the  valuation  of  railroad  property  by  a 
State  board  under  the  mileage  rule  of  apportionment  of  inter- 
state property  was  sustained  as  not  violating  the  Fourteenth 
Amendment.  But  apparently  the  question  was  not  raised, 
whether  the  State 's  valuation  of  property  outside  of  its  jurisdic- 
tion constituted  interference  with  interstate  commerce. 

The  application  of  these  principles  to  the  valuation  by  a  State 
board  of  interstate  railroads  was  presented  to  the  court  nearly 
twenty  years  after  the  decision  of  the  State  Railroad  Tax  Cases 
ill  the  Indiana  Railroad   Cases,^    where   the  subject  was   very 


U15  U.  S.  321,  29  L.  Ed.  414   (1886). 

2  Pittsburg,  Etc.,  R.  R.  Co.  v.  Backus,  154  U.  S.  421.  38  L.  Ed.  1031 
(1894).  and  C.  C.  C.  &  St.  Louis  R.  R.  Co.  v.  Backus,  154  U.  S.  439, 
38  L.  Ed.  1041    (1894). 


264  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  265 

fully  considered.  The  Indiana  statute  of  1891  provided  for 
the  assessment  of  railroad  property  by  a  State  board,  which 
should  act  upon  the  reports  of  the  railroad  companies  showing 
the  length  of  track  in  each  county,  the  total  amount  of  rolling 
stock,  the  capital  stock,  market  value,  and  so  on. 

The  court  said  that  it  was  concluded  by  the  decision  of  the 
Supreme  Court  of  Indiana,  that  the  method  of  assessment  was 
authorized  by  the  constitution  of  that  State,  and  the  validity  of 
the  statute  under  the  Federal  Constitution  was  really  estab- 
lished by  its  own  decisions  in  the  State  Railroad  Tax  Cases  and 
Kentucky  Railroad  Tax  Cases,  supra.  It  was  strongly  contended 
that  the  statute  permitted  and  required  the  assessment  and  val- 
uation of  property  outside  of  the  State,  and  this  argument  was 
based  upon  the  requirement  that  a  statement  of  the  amount  of 
the  capital  stock  and  the  indebtedness  of  the  railroad  should 
be  returned  to  the  State  Auditor.  But  the  court  held  that  the 
board  had  a  right  to  this  information  for  determining  the  value 
of  the  property  within  the  State,  saying,  page  430: 

§  264.  Supreme  Court  on  Mileage  Apportionment  in  Inter- 
state Railroads. — "When  a  road  runs  through  two  States,  it 
is,  as  seen,  helpful  in  determining  the  value  of  that  part  within  one 
State  to  know  the  value  of  the  road  as  a  whole.  It  is  not  stated  in 
this  statute,  that  when  the  value  of  a  road  running  in  two  States  is 
ascertained,  the  value  of  that  in  the  State  of  Indiana  shall  be 
determined  absolutely  by  dividing  the  gross  value  upon  a 
mileage  basis,  but  only  that  the  total  amount  of  stock  and  in- 
debtedness shall  be  presented  for  consideration  by  the  State 
board.  Nevertheless,  it  is  ordinarily  true  that  when  a  rail- 
road consists  of  a  single  continuous  line,  the  value  of  one  part 
is  fairly  estimated  by  taking  that  part  of  the  value  of  the  en- 
tire road,  which  is  measured  by  the  proportion  of  the  length  of 
the  particular  part  to  that  of  the  whole  road.  This  mode  of 
division  has  been  recognized  by  this  court  several  times  as 
eminently  fair." 

§  265.  Exceptional  Circumstances  May  Make  Mileage  Rule 
Inapplicable. — The  same  difficulty  which  was  suggested  in 
relation  to  the  mileage  rule  of  apportionment  within  a  State 
applies  in  a  greater  degree  to  that  rule,  as  applied  to  an  inter- 
state road.     It  was  admitted  by  the  Supreme  Court  in  these 


§  266  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  265 

Indiana  cases  that  exceptional  circumstances  may  exisx,  and  it  is 
right  that  an  assessing  board  should  consider  them;  but  it  will 
be  presumed  that,  if  evidence  of  such  circumstances  was  of- 
fered, it  was  taken  into  account,  and  that  the  board  gave  due 
weight  to  it  before  finally  fixing  the  assessed  valuation  of  the 
property  within  the  State.  Thus  it  was  said  in  one  of  the  cases, 
at  page  431 : 

"It  is  true,  there  may  be  exceptional  cases,  and  the  testi- 
mony offered  on  the  trial  of  this  case  in  the  Circuit  Court 
tends  to  show  that  the  plaintiff's  road  is  one  of  such  excep- 
tional cases,  as  for  instance,  where  the  terminal  facilities  in 
some  large  city  are  of  enormous  value,  and  so  give  to  a  mile 
or  two  in  such  city  a  value  out  of  all  proportion  to  any  similar 
distance  elsewhere  along  the  line  of  the  road,  or  where  in  cer- 
tain localities  the  company  is  engaged  in  a  particular  kind  of 
business  requiring  for  sole  use  in  such  localities  an  extra 
amount  of  rolling  stock.  If  testimony  to  this  effect  was  pre- 
sented by  the  company  to  the  State  board,  it  must  be  assumed, 
in  the  absence  of  anything  to  the  contrary  that  such  board,  in 
inaking  the  assessment  of  track  and  rolling  stock  within  the 
State,  took  into  account  the  peculiar  and  large  value  of  such 
facilities  and  such  extra  rolling  stock.  But  whether  in  any 
particular  case  such  matters  are  taken  into  consideration  by 
the  assessing  board  does  not  make  against  the  validity  of  the 
laAv,  because  it  does  not  require  that  the  valuation  of  the  prop- 
erty within  the  State  shall  be  absolutely  determined  upon  a 
mileage  basis. 

"Our  conclusion,  therefore,  is  that  this  act  is  not  obnoxious 
to  any  of  the  constitutional  objections  made  to  it. ' ' 

In  this  case  the  court  sustained  the  assessment,  although 
admitting  that  "a  shadow  had  been  cast  upon  the  action  of 
the  board,"  in  that  the  valuation  had  been  increased  from 
$8,538,053.00  in  1890  to  $22,666,470.00  in  1891. 

§  266.  Rulings  on  Testimony  Not  Reviewed  in  Supreme 
Court  Unless  Bearing  on  Federal  Question.  —  In  another  of 
the  Indiana  Railrojul  Tax  Casos  ;i  special  effort  was  made  to  show 
that  the  State  Board  had  included  in  its  assessment  the  value  of 
property  outside  of  the  State,  and  that  the  valuation  placed 
upon  the  property  in  the  State  was  largely  upon  interstate  busi- 
ness done  by  the  plaintiff,  thus,  it  was  claimed,  placing  a  direct 


266  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  267 

burden  upon  interstate  commerce.  It  appeared  that  the  trial 
court  had  ruled  out  the  testimony  offered  as  to  the  elements  the 
members  of  the  board  considered  in  making  their  valuation,  but 
there  was  evidence  that  no  franchise  belonging  to  the  plaintiff 
was  estimated  in  making  the  assessment.  The  Supreme  Court, 
Justice  Brewer  delivering  the  opinion,  said,  at  page  443,  that  it 
is  not  within  the  province  of  the  court  to  review  any  question 
as  to  the  admission  or  rejection  of  testimony,  which  does  not 
bear  directly  upon  some  matter  of  a  Federal  nature,  and  that, 
under  the  record,  the  inquiry  was  narrowed  to  these  two  mat- 
ters, saying: 

§  267.  Entire  Property  May  be  Considered  in  Valuation  of 
Portion  Within  State. — "First,  if  an  assessing  board,  seeking  to 
assess  for  purposes  of  taxation  a  part  of  a  road  witliin  a  State,  the 
other  part  of  which  is  in  an  adjoining  State,  ascertains  the  value  of 
the  whole  line  as  a  single  property  and  then  determines  the 
value  of  that  within  the  State,  upon  the  mileage  basis,  is  that 
a  valuation  of  property  outside  of  the  State,  and  must  the 
assessing  board,  in  order  to  keep  wdthin  the  limits  of  State 
jurisdiction,  treat  the  part  of  the  road  within  the  State  as  an 
independent  line,  disconnected  from  the  part  without,  and 
place  upon  that  property  only  the  value  w^hich  can  be  given  to 
it,  if  operated  separately  from  the  balance  of  the  road?  Sec- 
ond. Where  an  assessing  board  is  charged  with  the  duty  of 
valuing  a  certain  number  of  lines  of  railroad  within  a  State, 
forming  part  of  a  line  of  road  running  into  another  State,  and 
assesses  those  miles  of  road  at  their  actual  cash  value  deter- 
mined on  a  mileage  basis,  is  this  placing  a  burden  upon  inter- 
state commerce,  beyond  the  power  of  the  State,  simply  because 
the  value  of  that  railroad  as  a  whole  is  created  partly — and 
perhaps  largely — by  the  interstate  commerce  which  it  is  do- 
ing?" 

"With  regard  to  the  first  question,  it  is  assumed  that  no  spe- 
cial circumstances  exist  to  distinguish  betAveen  the  conditions 
in  the  two  States,  such  as  terminal  facilities  of  enormous  value 
in  one  and  not  in  the  other.  With  this  assumption  the  first 
question  must  be  answered  in  the  negative.  The  true  value  of 
a  line  of  railroad  is  something  more  than  an  aggregation  of 
the  values  of  separate  parts  of  it,  operated  separately.  It  is 
the  aggregate  of  those  values  plus  that  arising  from  a  con- 
nected operation  of  the  whole,  and  each  part  of  the  road  con- 
tributes not  merely  the  value  arising  from  its  independent 


§  268  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION,  267 

operation,  but  its  mileage  proportion  of  that  flowing  from  a 
continuous  and  connected  operation  of  the  whole." 

The  court  illustrated  this  increase  of  value  from  combina- 
tion by  showing  the  effect  of  the  New  York  Central  Consolida- 
tion, where  it  was  observed  that  the  value  of  the  property  imme- 
diately upon  the  consolidation  was  recognized  in  the  market  as 
largely  in  excess  of  the  value  of  the  separate  properties.  It  was 
unnecessary  to  inquire  into  the  cause  of  this  increase  in  value.  It 
was  enough  to  notice  the  fact.  The  State  was  entitled  to  tax  its 
proportionate  share  of  the  value  flowing  from  the  operation  of 
the  entire  mileage  as  a  single  continuous  road.  The  opinion  con- 
tinued : 

**The  question  is,  how  can  equity  be  secured  between  the 
States,  and  to  that  a  division  of  the  value  of  the  entire  prop- 
erty upon  the  mileage  basis  is  the  legitimate  ansAver.  Taking 
a  mileage  share  of  that  in  Indiana  is  not  taxing  property  out- 
dde  of  the  State." 

"The  second  question  must  also  be  answ^ered  in  the  nega- 
tive. It  has  been  again  and  again  said  by  this  court  that  while 
no  State  could  impose  any  tax  or  burden  upon  the  privilege  of 
doing  the  business  of  interstate  commerce,  yet  it  had  the  un- 
questioned right  to  place  a  property  tax  on  the  instrumentali- 
ties engaged  in  such  commerce." 

§  268.  Value  of  Property  in  Use  May  be  Considered  in  Val- 
uation.— As  to  the  basis  of  propertv  taxation,  it  was  said,  page 
445: 

"The  rule  of  property  taxation  is  that  the  value  of  the  prop- 
erty is  the  basis  of  taxation.  It  does  not  mean  a  tax  upon  the 
earnings  which  the  property  makes,  nor  for  the  privilege  of 
using  the  property,  but  rests  solely  upon  the  value.  But  the 
value  of  property  results  from  the  use  to  which  it  is  put  and 
varies  with  the  profitableness  of  that  use,  present  and  pros- 
pective, actual  and  anticipated.  There  is  no  pecuniary  value 
outside  of  that  wliieh  results  from  such  use.  The  amount  and 
profitable  character  of  such  use  determines  the  value,  and  if 
property  is  taxed  at  its  actual  cash  value,  it  is  taxed  upon 
something  which  is  created  by  the  uses  to  wliich  it  is  put.  In 
the  nature  of  things  it  is  practically  impossible— at  least  in 
respect  to  railroad  property— to  divide  its  value,  and  deter- 


268  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  269 

mine  how  much  is  caused  l3y  one  use  to  which  it  is  put  and 
how  much  by  another.  Take  the  case  before  us;  it  is  impos- 
sible to  disintegrate  the  value  of  that  portion  of  the  road 
within  Indiana,  and  determine  how  much  of  that  value  springs 
from  its  use  in  doing  interstate  business,  and  how  much  from 
its  use  in  doing  business  wholly  within  the  State.  An  attempt 
to  do  so  would  be  entering  upon  a  mere  field  of  uncertainty 
and  speculation.  And  because  of  this  fact  it  is  something 
which  an  assessing  board  is  not  required  to  attempt." 

The  court  added : — 

"It  is  enough  for  the  State  that  it  finds  within  its  borders 
property  which  is  of  a  certain  value.  What  has  caused  that 
value  is  immaterial.  It  is  protected  by  State  laws,  and  the 
rule  of  all  property  taxation  is  the  rule  of  value,  and  by  that 
rule  property  engaged  in  interstate  commerce  is  controlled 
the  same  as  property  engaged  in  commerce  within  the  State. '  '^ 

§  269.  Unit  and  Mileage  Rule  as  Applied  to  Taxation  of 
Telegraph  Companies. — In  two  successive  cases  from  Massa- 
chusetts and  one  from  Indiana. 2  the  Supreme  Court  sustained 
the  taxation  of  the  "Western  Union  Telegraph  Company  under 
the  mileage  rule  of  apportionment,  that  is,  by  taking  as  a  basis 
of  assessment  such  portion  of  the  total  capital  stock  of  the  com- 
pany, as  equaled  the  ratio  of  the  company's  mileage  within  the 
State  to  its  total  mileage.  It  was  strongly  contended  that  tele- 
graph companies  are  government  agencies  and  so  not  taxable  by 


1  Justice  Harlan,  with,  whom  concurred  Justice  Brown,  dissented 
in  these  cases,  saying  that  the  statute  as  construed  by  the  Supreme 
Court  of  the  State  imposed  illegal  burdens  upon  interstate  com- 
merce, under  the  guise  of  valuation  for  purposes  of  taxation  of  prop- 
erty within  the  State.  The  board  had  no  authority  to  impart  to  the 
railroad  track  and  rolling  stock  within  the  State  any  part  of  the 
value  of  the  company's  various  interests  and  property  without  the 
State. 

2"W.  U.  Telegraph  Co.  v.  Massachusetts,  125  U.  S.  530,  31  L.  Ed.  790 
(1886);  Massachusetts  v.  W.  U.  Tel.  Co.,  141  U.  S.  40,  35  L.  Ed.  628 
(1891);  W.  U.  Telegraph  Co.  v.  Taggart,  163  U.  S.  1,  41  L.  Ed.  49 
(1896).  The  principles  of  these  cases  were  followed  and  applied  in 
State  ex  rel.  v.  "Western  Union  Tel.  Co.,  165  Mo.  502,  where  the  propor- 
tion of  the  franchise  exercised  in  the  State  was  held  taxable  by  adding 
the  proportional  part  of  the  value  of  the  franchise  to  the  value  of  the 
property  located  in  the  State. 


§  270  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  269 

State  authority,  and  that  therefore  such  portion  of  the  "Western 
Union  lines  as  was  located  on  roads  declared  post  roads  by  Con- 
gress was  exempt.  But  the  court  said  in  the  case  first  cited, 
page  549,  that,  if  this  principle  were  sound,  every  railroad  in  the 
country  would  be  exempt  from  taxation  because  they  had  all 
been  declared  to  be  post  roads,  and  the  same  reasoning  would 
apply  to  every  bridge  and  navigable  stream  throughout  the  land. 
It  was  held  therefore  that  the  Act  of  Congress,  supra,  Sec.  227, 
granted  to  the  telegraph  company  no  right  of  exemption  from 
taxation  of  its  property  located  in  the  State,  and  that  this 
method  of  mileage  apportionment  was  a  reasonable  and  just 
method  of  determining  the  value  of  its  line  within  the  State. 

§  270.  Value  of  Property  Outside  State  to  be  Considered 
in  Valuation  Under  Mileage  Apportionment. — It  was  strongly 
contended  in  the  case  last  cited  from  Massachusetts  and  also  in 
the  case  from  Indiana,  that  the  company  was  entitled  to  a  deduc- 
tion from  the  valuation  as  fixed,  on  account  of  property  located 
in  other  States  and  taxable  under  the  laws  of  such  States  and 
also  on  account  of  property  exempt  from  taxation. 

In  W.  U.  Tel.  Co.  v.  Taggart,  the  court,  referring  to  the  prior 
decision  in  regard  to  the  same  company,  said  at  page  18 : 

"Those  decisions  clearly  establish  that  a  statute  of  a  State, 
requiring  a  telegraph  company  to  pay  a  tax  upon  its  property 
within  the  State,  valued  at  such  a  proportion  of  the  whole 
value  of  its  capital  stock  as  the  length  of  its  lines  within  the 
State  bears  to  the  length  of  all  its  lines  everywhere,  deducting 
a  sum  equal  to  the  value  of  its  real  estate  and  machinery  sub- 
ject to  local  taxation  within  the  State,  is  constitutional  and 
valid,  notwithstanding  that  nothing  is  in  terms  directed  to  be 
deducted  from  the  valuation,  either  for  the  value  of  its  fran- 
chises from  the  United  States,  or  for  the  value  of  its  real  es- 
tate and  machinery  situated  and  taxed  in  other  States;  unless 
there  is  something  more,  showing  that  the  system  of  taxation 
adopted  is  oppressive  and  unconstitutional." 

The  law  of  Indiana  provided  that  the  company  should  return 
a  statement  of  its  whole  capital  stock,  the  par  value  of  its  shares 
and  their  market  value,  or  if  they  had  no  market  value, 
their    actual    value,    its    real    estate    and    other  property  in 


270  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION,  §  270 

the  State  subject  to  local  taxation,  its  real  estate  outside 
of  the  State  and  not  directly  used  in  •  the  conduct 
of  its  business  and  the  sums  at  which  such  real  estate  was  as- 
sesses for  local  taxation,  the  mortgages  upon  the  whole  or  any 
part  of  its  line,  and  the  whole  length  of  its  line  and  the  length 
within  the  State  and  each  county  and  township  of  the  State. 
From  these  statements  and  such  other  information  as  it  might 
have  or  obtain,  the  board  of  tax  commissioners  was  directed 
to  value  and  assess  the  property  by  ascertaining  the  true  cash 
value  of  its  entire  property,  for  that  purpose  taking  the  aggre- 
gate value  of  its  shares,  if  they  had  a  market  value,  or,  if  they 
had  none,  the  actual  value  thereof.  Then,  for  the  purpose  of 
ascertaining  the  true  cash  value  of  the  property  within  the  State, 
after  deducting  property  taxable  locally,  the  proportion  of  the 
whole  aggregate  value  of  the  property  was  computed  on  a  mileage 
basis.  This  act  had  been  construed  by  the  Supreme  Court  of  the 
State^  as  simply  providing  for  the  valuation  of  the  property"  in 
the  State,  and  that,  if  it  was  shown  that  for  any  reason  the 
larger  proportional  values  existed  outside  the  State,  then  deduc- 
tions should  be  made  therefor. 

Demurrer  was  sustained  to  the  bill  of  complaint  of  the  tele- 
graph company,  and  this  ruling  was  affirmed  by  the  Supreme 
Court  of  the  State,  and,  on  writ  of  error,  by  the  Supreme  Court 
of  the  United  States.  The  latter  court  said  that  it  would  be  pre- 
sumed, in  the  absence  of  evidence  to  the  contrary,  that  the  State 
board  had  deducted  from  the  total  valuation  of  all  the  inter- 
state property  such  value,  if  any,  of  extra-state  property  as 
would  leave  the  remaining  property  within  and  without  the 
State,  as  near  as  might  be  of  equal  proportional  value.  It  was 
claimed  in  the  bill  of  complaint  that  the  price  obtained  for  a 
few  of  the  shares  in  the  New  York  Stock  Exchange  did  not  fairly 
represent  the  actual  value  of  plaintiff's  property;  and  that  any 
price  at  which  any  shares  might  be  sold  by  holders  thereof, 
whether  calculated  upon  any  market  value  or  upon  actual  value, 
included  a  consideration  of  the  plaintiff's  franchises,  contracts, 
past  and  probable  future  earnings,  the  skill  and  enterprise  of  its 


1141    Ind.    281. 


§  271  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  271 

managers  and  real  estate  of  great  value  in  Indiana  or  elsewhere, 
all  of  which  were  blended  so  as  to  render  it  impossible  to  sepa- 
rate and  disintegrate  the  portions  of  value  applicable  to  each 
and  any  of  said  elements  of  value  in  its  shares.  The  court  said, 
at  page  30,  that  this  was  hardly  more  than  an  argument  to  show 
the  difficulty  of  ascertaining  the  actual  cash  value  of  plaintiff's 
property  in  the  State  of  Indiana.  "It  certainly  has  no  ten- 
dency to  show  that  the  tax  commissioners  did  not,  as  they  were 
required  to  do  by  the  statute  as  since  construed  by  the  Supreme 
Court  of  the  State,  assess  the  plaintiff's  property  in  Indiana  at 
,its  true  cash  value  according  to  their  best  knowledge  and  judg- 
ment, and  after  making  all  proper  deductions,  on  account  of 
larger  proportional  values  of  its  property  and  business  outside 
the  State,  or  for  any  other  reason." 

§  271.    Unit  Rule  Applied  to  Express    Companies.  —  The 

most  signal  and  closely  contested  applications  of  the  unit  rule 
with  mileage  apportionment  were  in  the  taxation  of  the  Adams 
Express  Company,  under  the  so-called  Nichols  Law  of  Ohio 
and  under  a  similar  law  of  Kentucky. 

The  Nichols  Law  required  every  telegraph,  telephone  and  ex- 
press company  doing  business  in  Ohio  to  file  a  return  to  the 
State  board,  setting  forth,  among  other  things,  the  number  of 
shares  of  its  capital  stock,  the  par  and  market  value  thereof, 
and,  when  the  shares  had  no  market  value,  their  actual  value  at 
the  date  of  the  return ;  also  a  statement  in  detail  of  the  entire 
real  and  personal  property  of  the  company,  where  it  was  located 
and  its  value.  Express  companies  were  also  required  to  include 
a  statement  of  their  entire  gross  receipts  for  the  year,  from 
whatever  source  derived,  of  business  wherever  done  and  of  that 
done  in  the  State  of  Ohio,  giving  the  receipts  of  each  office 
in  the  State,  and  the  whole  length  of  rail  and  water  routes  over 
which  the  company  did  business  within  and  without  the  State. 
The  board  was  required  to  meet  in  June  and  assess  the  value  of 
the  property  of  the  companies  in  Ohio  under  the  following  rule  :* 

1  Adams  Express  Co.  v.  Ohio,  165  U.  S.  194,  41  L.  Ed.  683  (1897) 


272  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  272 

"In  determining  the  value  of  tlie  property  of  said  companies 
in  this  State,  to  be  taxed  within  the  State  and  assessed  as 
herein  provided,  said  board  shall  be  guided  by  the  value  of 
said  property  as  determined  by  the  value  of  the  entire  capital 
stock  of  said  companies,  and  such  other  evidence  and  rules  as 
will  enable  said  board  to  arrive  at  the  true  value  in  money  of 
the  entire  property  of  said  companies  within  the  State  of 
Ohio,  in  the  proportion  which  the  same  bears  to  the  entire 
property  of  said  companies,  as  determined  by  the  value  of  the 
capital  stock  thereof,  and  the  other  evidence  and  rules  as 
aforesaid. ' ' 

§  272.  Ohio  Express  Company  Cases. — In  the  case  of  ex- 
press companies,  the  apportionment  was  to  be  made  among  the 
several  counties  in  which  they  did  business,  in  the  porportion 
that  the  gross  receipts  in  each  county  bore  to  the  gross  receipts 
in  the  State.  The  amount  thus  apportioned  was  to  be  certified 
to  the  county  auditor  and  there  taxed  at  the  same  rate  as  other 
personal  property.  Provision  was  made  for  hearing  and  for 
the  correction  of  erroneous  and  excessive  valuations.  Assess- 
ments were  made  upon  the  property  of  the  express  companies 
in  Ohio  as  follows: 

Adams   Express   Company $533,095.80 

American  Express   Company 499,373.60 

United  States  Express  Company 488,264.70 

Bills  were  filed  to  enjoin  the  collection  of  these  taxes,  on 
the  ground  that  the  companies  had  no  property  in  the  State 
of  Ohio  except  certain  horses,  wagons,  harness  and  the  like,  and 
that  the  value  of  their  capital  stock  or  shares  and  of  express 
companies  generally  was  determined,  not  so  much  by  the  value  of 
their  property  and  appliances,  as  by  the  skill,  diligence,  fidelity 
and  success  with  which  they  conducted  their  business.  They 
claimed  that  they  owned  property  of  great  value  which  was  not 
situated  in  the  State  of  Ohio  and  that  their  business  connections, 
reputation  and  good-will  had  entered  largely  into  the  value  of 
their  capital  stock  and  shares ;  that  the  market  price  was  specu- 
lative and  variable,  dependent  upon  financial  conditions  not 
connected  with  the  business  of  the  company  or  its  property ;  and 
that  the  method  of  taxation  was  violative  of  the  Constitution, 


§  272  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  273 

was   an   illegal   burden   upon   interstate   commerce   and  was  a 
denial  of  the  equal  protection  of  the  laws. 

The  express  companies  returned  the  value  of  their  property 
in  and  out  of  the  State,  the  whole  gross  receipts  in  the  State 
and  the  length  of  their  lines  in  and  out  of  the  State,  but  made 
no  return  of  their  entire  gross  receipts  of  business  wherever 
done,  nor  of  the  terms  of  their  contracts  or  arrangements  for 
transportation.  The  court  held,  opinion  of  Chief  Justice  Fuller, 
that  the  act  was  not  open  to  the  objections  claimed,  under  the 
Federal  Constitution,  saying  at  page  220: 

"As  to  railroad,  telegraph  and  sleeping  car  companies  en- 
gaged in  interstate  commerce,  it  has  often  been  held  by  this 
court  that  their  property,  in  the  several  States  through  which 
their  lines  of  business  extended,  might  be  valued  as  a  unit  for 
the  purposes  of  taxation,  taking  into  consideration  the  uses  to 
which  it  was  put  and  all  the  elements  making  up  aggregate 
value,  and  that  a  proportion  of  the  whole  fairly  and  properly 
ascertained  might  be  taxed  by  the  particular  State  without 
violating  any  Federal  restriction." 

The  court  conceded  that  there  was  a  difference  between  the 
property  of  railroad  and  telegraph  companies  and  that  of  ex- 
press companies,  but  maintained  that  there  was  the  same  unity 
in  the  use  of  the  entire  property  for  a  specific  purpose,  and  the 
same  elements  of  value  arising  from  such  use.  It  said,  at  pp. 
221  and  222: 

"No  more  reason  is  perceived  for  limiting  the  valuation  of 
the  property  of  express  companies  to  horses,  wagons  and  fur- 
niture, than  that  of  a  railroad,  telegraph  and  sleeping  car  com- 
panies, to  roadbed,  rails  and  ties;  poles  and  wires;  or  cars. 
The  unit  is  a  unit  of  use  and  management,  and  the  horses, 
wagons,  safes,  pouches  and  furniture ;  the  contracts  for  trans- 
portation facilities ;  the  capital  necessary  to  carry  on  the  busi- 
ness, whether  represented  in  tangible  or  intangible  property, 
in  Ohio,  possessed  a  value  in  combination  and  from  use  in  con- 
nection with  the  property  and  capital  elsewhere,  which  could 
as  rightfully  be  recognized  in  the  assessment  for  taxation  in 
the  instance  of  these  companies  as  the  others." 

The  court  said  it  was  this  unity  of  use  which  enabled  $23,400 
of  horses,  wagons,  safes  and  so  on,  in  the   State  to  produce 


274    VALUATION   OF   INTERSTATE   PROPERTIES   FOR   TAXATION.     §    273 

$275,446  in  a  single  year.  It  declared  that  the  language  of 
Justice  Lamar  in  the  case  of  Pacific  Express  Co.  v.  Seibert/  that 
express  companies  have  no  tangible  property  of  any  consequence 
subject  to  taxation,  was  used  with  reference  to  the  legislation 
of  the  State  of  Missouri,  and  had  no  application  to  the  scheme 
of  taxation  now  under  consideration.  The  property  taxed  in  this 
case  had  its  actual  situs  in  the  State,  and  was  therefore  subject 
to  the  State's  jurisdiction,  aiid  the  distribution  among  the  several 
counties  was  a  matter  of  regulation  for  the  State  legislature. 
There  was  no  attempt  to  tax  property  having  a  sitits  outside  the 
State,  but  only  to  place  a  just  value  on  that  within.  The  court 
added,  at  page  227 : 

§  273.  Special  Circumstances  Requiring  Deduction  Must 
be  Shown. — ''Special  circumstances  might  exist,  as  indicated  in 
Pittsburgh,  Cincinnati,  etc.,  Railway  v.  Backus,  154  U.  S.  421,  443, 
which  would  require  the  value  of  a  portion  of  the  property  of 
an  express  company  to  be  deducted  from  the  value  of  its  plant 
as  expressed  by  the  sum  total  of  its  stock  and  bonds  before 
any  valuation  by  mileage  could  be  properly  arrived  at,  but 
the  difficulty  in  the  cases  at  bar  is  that  there  is  no  showing  of 
any  such  separate  and  distinct  property  which  should  be  de- 
ducted, and  its  existence  is  not  to  be  assumed.  It  is  for  the 
companies  to  present  any  special  circumstances  which  may  ex- 
ist, and,  failing  their  doing  so,  the  presumption  is  that  all  their 
property  is  directly  devoted  to  their  business,  which  being  so, 
a  fair  distribution  of  its  aggregate  value  would  be  upon  the 
mileage  basis. 

"The  States  through  which  the  companies  operate  ought 
not  to  be  compelled  to  content  themselves  with  a  valuation  of 
separate  pieces  of  property  disconnected  from  the  plant  as  an 
entirety,  to  the  proportionate  part  of  which  they  extend  pro- 
tection, and  to  the  dividends  of  whose  owners  their  citizens 
contribute." 

The  classification  of  express  with  railroad  and  telegraph  com- 
panies as  subject  to  the  unit  rule  does  not  deny  them  the  equal 
protection     of    the    laws,     and    there    was    nothing    in     the 


1142  U.  S.  339,  1.  c.  p.  354,  35  L.  Ed.  1035  (1892),  affirming  44  Fed. 
310. 


§  274  VALUATION  OP  INTERSTATE  PROPERTIES  FOR  TAXATION.  275 

procedure  here  used  which  was  obnoxious  to  the  constitutional 
provision.^ 

§   274.     Rehearing  of  Express  Company  Cases  Denied. — A 

motion  for  rehearing  was  filed  in  this  case,  with  exhaustive 
"briefs.  The  rehearing  was  claimed  on  different  grounds,  includ- 
ing the  extreme  importance  and  far-reaching  effect  of  the  decision, 
the  entire  noveltj^  of  the  questions  discussed  and  the  points  neces- 
sarily determined  ^y  the  judgment.  It  was  urged  that  the  opin- 
ion was  inconsistent  with  the  opinion  in  the  railway  case,2  and  the 
Indiana  telegraph  case.s  The  doctrine  of  unity  in  use  applied  to 
railroad  and  telegraph  companies,  counsel  also  argued,  has  no  ap- 
plication to  the  horses  and  wagons  and  other  property  employed 
by  an  express  company,  as  there  is  no  physical  unity,  and  the  doc- 
trine of  unity  in  use  of  property  which  has  no  connection  except 
in  the  fact  of  its  employment  is  no  basis  for  taxation.4 


1  Justices  Gray,  Brewer,  Shiras  and  Peckham  concurred  with  the 
Chief  Justice;  but  strong  dissent  was  made  by  Justices  White,  Field, 
Harlan  and  Brown.  The  opinion  filed  by  Justice  White  on  behalf  of 
those  dissenting  insisted  that  there  was  no  power  in  the  State  to  tax 
property  outside  of  its  jurisdiction,  which  in  effect  it  had  done  in  this 
case  under  the  theory  of  a  homogeneous  unit;  and  that  the  mere  fact 
that  the  same  owner  had  property  in  different  States  which  contribute 
to  his  earnings  does  not  create  such  a  unity  for  the  purposes  of  tax- 
ation as  to  make  the  property  located  in  one  State  taxable  in  another. 
It  was  asked,  why  could  not  the  same  rule  be  applied  to  a  corporation 
or  partnership  engaged  in  the  dry  goods  business,  or  any  other  busi- 
ness having  branches  in  different  States,  on  the  theory  that  there  was 
a  unity  of  earnings  between  the  agencies  in  all  the  establishments? 
This  would  warrant  any  State,  in  which  one  of  the  branches  was  es- 
tablished, in  taxing  the  whole  on  the  theory  of  unity. 

For  opinion  of  the  Circuit  Court,  see  Ohio  v.  Jones,  51  Ohio  492. 

Judge  Taft,  then  U.  S.  Circuit  Judge,  had  held  the  law  invalid  under 
the  Constitution  of  Ohio,  Adams  Ex.  Co.  v.  Poe,  61  Fed.  470,  but  sub- 
sequent to  the  ruling  of  the  State  court  held  it  valid,  W.  U.  Tel.  Co. 
v.  Poe,  64  Fed.  9,  and  the  judgment  was  aflBrmed  in  the  U.  S.  Circuit 
Court  of  Appeals,  Sanford  v.  Poe,  37  U.  S.  App.  378,  and  69  Fed.  546. 

2  C.  C.  C.  and  St.  L.  Railway  Co.  v.  Backus,  154  U.  S.  439,  supra. 
8  Western  U.  Tel.  Co.  v.  Taggart,  163  U.  S.  1,  supra. 

4  See  brief  by  James  C.  Carter  of  New  York,  and  Lawrence  Max- 
well, Jr.,  In  report  of  case,  166  U.  S.  217,  41  L.  Ed.  965  (1897). 


276  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  275 

The  petition  was  denied  in  a  vigorous  opinion  by  Justice 
Brewer,  who  said  that  the  contention  that  the  property  was  be- 
yond the  limits  of  the  State  ignored  the  existence  of  intangible 
property  in  which  a  large  part  of  modern  wealth  consisted. 
He  said  if  the  State  comprehends  all  property  in  its  scheme  of 
taxation,  then  the  good  will  of  the  organized  and  established  in- 
dustries must  be  recognized  as  a  thing  of  value.  Whatever  the 
property  was  worth  to  its  stockholders  for  purposes  of  income,  it 
was  worth  in  determining  its  value  for  taxation. 

As  to  the  situs  of  the  intangible  property,  the  court  said  that 
the  situs  of  this  intangible  property  was  not  where  the  home  office 
was,  but  it  was  distributed  where  the  tangible  property  was 
located  and  its  work  done.  He  said  the  maxim  mohilia  sequntur 
was  never  for  universal  application  and  seldom  interfered  with 
the  right  of  taxation.  It  was  conceded  that  injustice  to  corpora- 
tions would  result  by  the  conflicting  action  of  different  States,  and 
the  courts  might  be  called  upon  to  relieve  against  such  abuses,  and 
yet  all  such  possibilities  did  not  equal  the  wrong  which  sustaining 
the  contention  of  the  appellants  would  at  once  do,  the  court  con- 
cluding as  follows : 

"The  injustice  of  this  speaks  for  itself.  In  conclusion,  let 
us  say  that  this  is  eminently  a  practical  age ;  that  courts  must 
recognize  things  as  they  are,  and  as  possessing  a  va,lue  which 
is  accorded  to  them  in  the  markets  of  the  world,  and  that  no 
finespun  theories  about  situs  should  interfere  to  enable  these 
large  corporations,  whose  business  is  carried  on  through  many 
States,  to  escape  from  bearing  in  each  State, such  burden  of 
taxation,  as  a  fair  distribution  of  the  actual  value  of  their  prop- 
erty among  those  States  requires." 

§  275.    The  Enforcement  of  Mileage  Apportionment. — The 

ruling  of  the  Supreme  Court  in  the  express  company  cases  has 
definitely  established  the  principle  of  mileage  apportionment  in 
the  assessment  of  interstate  railroads  for  taxation.  In  a  case 
from  Kentucky  where  an  express  company  had  accumulated  a 
surplus  of  more  than  twelve  million  dollars  and  Had  separated 
such  amount  from  its  business  and  invested  it  in  securities  which 
had  been  transferred  to  a  trust  company  in  New  York,  and  then 
issued  to  its  stockholders  as  a  distributive  share  thereof  bonds 


§  276  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  277 

of  the  express  company  payable  out  of  the  securities  so  deposited 
as  a  special  dividend,  the  express  company  retaining  such  prop- 
erty rights  in  the  securities,  by  which  in  certain  contingencies 
creditors  might  reach  them,  it  was  held  that  such  bonds  and 
stocks  so  transferred  to  the  trust  company  constituted  an  outside 
investment  of  surplus  earnings,  which  could  not  be  included  in 
the  assessment  of  the  value  of  the  express  company's  intangible 
property  taxable  in  Kentucky.^ 

In  computing  the  mileage  of  an  interstate  railroad  company 
for  the  purpose  of  assessment  of  its  franchises  under  the  Ken- 
tucky statute,  which  required  an  ap.portionment  of  the  mileage 
as  a  factor  in  determining  the  capital  stock  therein,  the  length  of 
all  the  lines  of  that  railroad  owned,  leased  or  controlled  or 
operated  by  the  company  in  the  State,  or  elsewhere,  was  to  be 
taken  into  consideration.^  The  market  value  of  bonds,  stocks 
and  gross  earnings  and  net  earnings  have  been  held  better  evi- 
dence of  value  of  railroad  property  for  taxation  in  the  State 
than  the  cost  of  the  reproduction  of  the  tangible  property.  The 
presumption  is  that  the  property  of  a  railroad  company 
is  held  for  railroad  uses,  and  that  this  value  is  dis- 
tributed throughout  its  mileage.  Franchises,  contracts,  privi- 
leges and  good  will  of  the  railroad  company  presumptively  en- 
hance the  value  of  any  part  of  its  tangible  corporate  plant.  ^ 

§  276.  Kentucky  Express  Company  Case.  —  The  case  of 
Adams  Express  Co.  v.  Kentucky,^  involved  the  Kentucky  statute 
imposing  a  tax  upon  every  corporation  having  or  exercising 
any  exclusive  privilege  or  franchise  not  allowed  by  law  to 
natural  persons,  or  performing  any  public  service.    The  statute 


1  Coulter  V.  Wear,  C.  C.  A.  6th  Circuit   (1904),  127  Fed.  897. 
2L.  &  N.  R.  Co.  v.  Bosworth,  230  Fed.  191. 

3  A.  T.  &  S.  F.  R.  Co.  v.  Sullivan,  173  Fed.  456.  See  also  as  to  the 
application  of  this  principle  of  mileage  apportionment  of  different 
interstate  properties,  Pullman  Co.  v.  Traft,  186  Fed.  126  (1911); 
Western  Union  Tel.  Co.  v.  Wright,  185  Fed.  250  (1911);  Michigan 
Telegraph  Tax  Cases,  185  Fed.  634  (1911);  Great  Northern  R.  Co.  T. 
Oconogan  County,  223  Fed.  198. 

4  166  U.  S.  171,  41  L.  Ed.  960  (1897). 


278  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  277 

provided  that,  in  addition  to  other  taxes  imposed  by  law,  every 
such  corporation  should  pay  an  annual  tax  on  its  franchise  to 
the  State,  and  a  local  tax  thereon  to  the  county.  The  court 
sustained  the  tax  thereby  levied  upon  the  express  company, 
saying  in  an  opinion  by  Chief  Justice  Puller,  that,  taking  the 
whole  act  together,  the  word  "franchise"  in  the  statute  was  not 
employed  in  a  technical  sense,  but  that  the  legislative  intention 
was  plain  that  the  entire  property,  tangible  and  intangible,  of 
all  foreign  and  domestic  corporations  and  all  foreign  and  domes- 
tic companies  possessing  no  franchise  should  be  valued  as  an 
entirety,  the  value  of  the  tangible  property  thus  ascertained 
be  taxed  under  these  provisions.  The  reasoning  of  the  Ohio 
case  applied  here.^ 

§  277.  Power  of  State  in  Valuing  Interstate  Properties  as 
Defined  by  Supreme  Court. — The  unit  rule  of  valuation,  that  is 
the  valuation  of  the  portion  in  the  State  of  the  entire  property, 
tangible  and  intangible,  in  and  out  of  the  State,  as  an  entirety, 
being  the  value  in  use  as  distinct  from  the  value  of  separate 
detached  parcels  located  in  the  State,  has  thus  been  sustained 
by  the  United  States  Supreme  Court  in  relation  to  railroad,  tele- 
graph and  express  companies.     But  the  value  of  property  out- 


iThe  same  four  judges  dissented  in  this  case  as  in  the  Ohio  case, 
Justice  "White  on  their  behalf  saying  that  this  differed  from  the  Ohio 
case,  in  that  there  the  statute  purported  only  to  tax  the  tangible  prop- 
erty within  the  State,  but  empowered  the  assessing  board  to  consider 
its  value  as  augmented  by  the  use  to  which  such  property  might  be 
put.  "In  other  words,  the  Ohio  law,  as  construed  by  the  Supreme 
Court  of  that  State,  taxed  only  tangible  property  within  the  State 
enhanced  in  value  by  intangible  elements  outside  the  State.  "We  con- 
sidered, in  dissenting  in  the  Ohio  case,  that  this  was  a  mere  disguise, 
a  distinction  without  a  difference,  but  the  court  held  otherwise.  In 
this  case,  by  the  law  in  question,  the  mask  is  thrown  off,  and  what 
we  conceive  to  be  logically  the  thin  disguise  under  which  the  courts 
of  Ohio  supported  its  statute  is  not  asserted  to  exist,  but  the  Kentucky 
statute,  in  unambiguous  and  unmistakable  language,  imposes  the  im- 
perative duty  upon  the  assessing  board  to  assess  property  both  in  and 
out  of  the  State.  That  is  to  say,  it  leaves  nothing  to  implication  or  to 
evasion,  but  declares  in  plain  English  that  property  in  and  out  of  the 
State  shall  be  assessed." 


§  278  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION,  279 

side  of  the  State,  which  is  necessarily  involved  in  valuing  inter- 
state property  as  an  entirety,  is  only  allowed  to  be  considered  as 
a  means  of  arriving  at  the  value  of  the  property  which  is  within 
the  State,  that  is,  the  State's  proportionate  part  of  the  value  of 
the  entire  property.  In  the  absence  of  evidence  to  show  that 
such  apportionment  is  unjust,  the  State  may  determine  what 
part  of  the  entire  property  is  located  within  the  State  by  the 
mileage  rule  of  apportionment.  That  rule  therefore  has  not 
been  sustained  as  an  absolute  rule  in  the  case  of  interstate 
properties,  although  it  seems  to  have  been  in  the  case  of  intra-- 
state  properties,  that  is,  such  a  method  of  intra-state  apportion- 
ment violates  no  Federal  law.^  Thus  the  court  "in  the  Indiana 
railroad  ease^  said  that  the  Indiana  statute  did  not  require  that 
the  value  of  the  road  should  be  ''determined  absolutely"  by 
dividing  the  gross  value  on  the  mileage  basis,  but  only  that  the 
amount  of  stock  and  indebtedness  should  be  "presented  for  con- 
sideration" by  the  State  board;  and  that  it  is  ordinarily  true 
that  the  mileage  apportionment  is  fair  and  just. 

§  278.  Evidence  of  Inapplicability  of  Mileage  Rule  Admis- 
sible.— ^As  incident  to  this  unit  rule  of  valuation  with  mileage 
apportionment,  the  corporation  has  the  right  to  show  by  all 
proper  evidence  that  the  application  of  the  mileage  rule  of 
apportionment  to  such  valuation  is  for  any  reason  imperfect  and 
injust.  Thus  it  may  show  that  it  holds  property  included  in 
such  valuation  as  an  entirety  which  is  exempt  from  taxation. 
It  may  also  show  that  its  property  in  other  States  is  of  dispro- 
proportionate  value,  as,  for  instance,  that  it  is  located 
in  a  more  densely  settled  community,  where  it  is  pro- 
portionately more  productive,  or  consists  of  terminals  in  large 
cities  of  other  States.  All  such  facts  are  relevant  as  bearing 
upon  the  value  of  the  State's  portion  of  the  entire  property.  A 
State  statute  or  procedure  by  a  State  under  a  statute,  which 
denied  the  company  the  opportunity  of  proving  such  facts, 
would   doubtless  be  held   invalid.     Thus  in  the  Indiana  tele- 


1  See  supra.  Sec.  270. 

2 154  U.  S.  430,  supra;  Illinois  Central  R.  R.  Co.  v.  Green  (June,  1917), 
—  U.  S ,  —  L.  Ed.  — . 


280  VALUATION  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  §  279 

graph  company  case,  supra,  Sec.  270,  the  statute  was  held  valid 
because  it  had  been  construed  by  the  Supreme  Court  of  the 
State  as  requiring  a  deduction  from  the  valuation  if  such  cir- 
cumstances were  shown. 

§  279.    Stock  Market  Quotations  as  Evidence  of  Value. — ^In 

determining  the  value  of  the  entire  property  under  the  unit 
rule,  the  State  authorities  may  consider  any  facts  tending  to 
show  that  value.  Thus  the  stock  market  quotations  of  the  com- 
pany's securities  may  be  considered  because  the  stock  and  in- 
debtedness represent  the  property.  But  they  are  not  to  be  re- 
garded as  conclusive  standards  or  tests  of  value,  and  they  have 
not  been  declared  to  be  such  by  the  Supreme  Court.  They  are 
indicia  of  the  then  existing  public  estimate  of  the  value  of  the 
company's  property  as  shown  by  the  result  of  the  relative  pressure 
of  buying  and  selling  orders  for  small  interests  in  that  property. 
In  the  language  of  the  Supreme  Court^  such  quotations  repre- 
sent— 

"The  faith  which  a  purchaser  of  stock  in  such  a  company 
has  in  the  ability  with  which  the  company  will  be  managed, 
and  in  the  capacity  to  make  future  earnings.  It  may  be  well 
or  ill  founded.  It  is  but  matter  of  opinion  which  in  itself  is 
not  property.  While  the  value  of  the  property  is  one  of  the 
material  factors  going  to  make  up  the  market  value  of  the 
stock,  yet  it  is  plainly  not  the  sole  one.  Mere  speculation  has 
not  uncommonly  been  known  to  exercise  a  potent  influence 
on  the  market  price  of  stock.  "^  v 


1  Pullman's  Car  Co.  v.  Transportation  Co.,  171  U.  S.  155,  43  L.  Ed. 
108    (1899). 

2  See  Sec.  270,  supra.  This  case  involved  the  value  of  the  property 
of  a  manufacturing  company  and  was  not  one  of  taxation.  The 
franchise  value  was  excluded  as  not  properly  considered  in  determin- 
ing the  value  of  the  property.  But  the  other  reason  for  excluding 
market  value,  the  existence  of  speculative  considerations  therein,  may 
apply  to  a  case  of  taxation.  See  case  of  People  ex  rel.  v.  Coleman,  126 
N.  Y.  433,  for  discussion  of  the  relation  of  market  value  to  "actual 
value."  The  court  said  that  when  the  amount  of  capital  and  surplus 
was  undisclosed  and  unknown,  the  assessor  could  consider  the  market 
value  not  as  the  thing  to  be  valued  and  taxed,  but  as  an  aid  to  dis- 
covering actual  value. 


§  280  VALUATIOX  OF  INTERSTATE  PROPERTIES  FOR  TAXATION.  281 

The  taxing  authorities  have  the  right  to  consider  such  evi- 
dence, but  as  evidence  only.  Thus  in  the  Indiana  railroad  case, 
supra,  Sec.  263,  the  certificate  of  the  assessing  board  stated^  that 
in  arriving  at  the  basis  of  the  estimate  of  values,  the  board  had 
considered  the  cost  of  construction  and  equipment,  the  market 
value  of  the  stocks  and  bonds,  the  gross  and  net  earnings,  and 
all  other  matters  appertaining  thereto  that  would  assist  it  in 
arriving  at  the  true  cash  value  of  the  same. 

§  280.    Presumption  that  All  Evidence  Submitted  was  Con- 
sidered in  Valuation. — Whatever  evidence,  relative  to  the  value 
of  the  property  as  an  entirety  and  the  disproportionate  value  of 
the  property  in  other  States,  is  submitted  to  the  assessing  board, 
it  is  presumed  that  the  board  takes  all  those  matters  into  consid- 
eration in  connection  with  its  information  relative  to  the  total 
amount  of  the  stock  and  indebtedness  of  the  company.     There 
can  be  no  presumption  that  the  board  took  into  consideration 
matters  which  were  not  properly  receivable  and  properly  to  be 
considered  in  making  such  valuation.     This  is  the  rule  applied 
in  all  cases  of  the  assessment  of  property  for  taxation,  even  in 
jurisdictions  where  a  judicial  review  of  the  proceedings  of  tax 
assessing  boards  is  allowed.     The  presumption  is  always  that 
the  valuation  is  based  upon  the  evidence  submitted.^    It  is  true 
however,  that  in  this  class  of  cases  there  is  sometimes  great  prac- 
tical difficulty  in  determining  that  an  assessing  board  considered 
only  proper  elements  of  valuation  in  calculating  the  value  of  prop- 
erty within  the  State,  and  this  may  be  a  practical  embarrass- 
ment in  the  judicial  review  of  the  action  of  such  quasi  judicial 
tribunals. 


1154  U.  S.  433,  supra. 

2  As  to  the  right  to  have  the  property,  when  the  value  in  the  State  is 
ascertained,  assessed  equally  with  other  property,  see  infra,  Chapter 
XVI,  "Equal  Protection  of  the  Laws;"  see  also  infra,  "Due  Process  of 
Law  in  the  Assessment  of  Interstate  Properties,"  Chapter  XIV. 


CHAPTER    IX. 

TAXATION  OF  NATIONAL  BANKS. 

281.  Taxing  authority  of  States  over  national  banks. 

282.  Amendment  of  1868. 

283.  Supreme  Court  on  U.  S.  statute  authorizing  State  taxation  of 

national  banks. 

284.  Method  of  State  taxation  allowed  by  U,  S.  statute  is  exclusive. 

285.  State  franchise  tax  not  enforceable  against  national  banks. 

286.  State  may  require  bank  to  pay  tax  for  shareholders 

287.  Place  of  taxation. 

288.  Manner  of  assessment. 

289.  Real  estate  in  other  States  not  deducted  from  value  of  shares. 

290.  Territories  have  same   taxing  power   as   States   over  national 

banks. 

291.  No  deduction  on  account  of  holding  United  States  securities. 
-92.     Discrimination  through  taxation  of  State  banks  on  capital  or 

property. 

293.  Other  moneyed  capital  "is  other  taxable  moneyed  capital." 

294.  Equality  of  taxation  with  other  moneyed  capital. 

295.  Discriminations  through  exemptions  from  taxation. 

'^i96.     Allegations   of   discriminating  exemption   held   to   require   an- 
swer, 

297.  Rules  of  Supreme  Court  as  to   discrimination. 

298.  Discrimiuiating    exemption    must    be    of    competing    moneyed 

capital. 

299.  Meaning  of  "other  moneyed  capital." 

300.  No  discrimination  in  New  York  taxation  of  railroad,  business, 

mining  or  insurance  companies. 

301.  No  discrimination   in  New  York  taxation  of  trust  companies. 

302.  Nor  in  exemption  of  deposits  in  savings  banks,  building  and 

loan  associations  or  stock  in  foreign  corporations. 

303.  Discrimination  through  deduction  of  debts  from  "other  mon- 

eyed capital." 

304.  No  discrimination   in  deduction  of  debts  from  non-competing 

capital. 

305.  No    discriminaition    in    deduction    of    debts    of    unincorporated 

banks. 

306.  Discrimination  through  failure  to  assess  other  moneyed  capital. 

307.  Tax  upon  deposits  held  not  discriminative. 

308.  Discr'imination  must  be  substantial. 

309.  A  difference  in  taxation  not  necessarily  discriminative. 
(282) 


I    281  Ti^JCiVTION   OF   NATIONAL   BANKS.  283 

310.  Resident  and   non-resident   shareholders. 

311.  Difference  in  the  rate  of  taxation  not  necessarily  discrimina- 

tive. 

312.  Equality  of  taxation  requires  equality  in  valuation  as  in  rate 

of  taxation. 

313.  Supreme  Court  on  assessor's  practice  of  valuation, 

314.  Inequality  must  be  intentional  and  habitual. 

315.  Mere  mistake  in  judgment  no  discrimination. 

316.  Formal    resolution   not   necessary   for    intentional    discrimina- 

tion. 
"317.     A  California   discrimination   in  valuation   held   discMminative. 

318.  Difference  in  valuation  between  different  classes  of  personalty 

not  discriminative  against  national  banks. 

319.  Taxation  of  real  estate  of  national  banks. 

320.  Double  taxation  of  national  banks. 

321.  Enforcement  of  tax. 

322.  Visitorial   power   of   State   over   national   banks. 

323.  The   remedy  by   injunction. 

§  281.     Taxing-  Authority  of  State  Over  National  Banks.^— 

National  banks,  organized  under  Act  of  Congress,  are  instru- 
mentalities of  tlie  Federal  government  created  for  national 
public  purposes,  and  as  such,  are  subject  to  the  paramount 
authority  of  the  United  States.  It  has  been  held  by  the  Supreme 
Court,  not  only  that  any  attempt  by  a  State  to  define  their 
duties  or  control  the  conduct  of  their  affairs  is  absolutely  void, 
but  that  the  "respective  States  would  be  wholly  without  power 
to  levy  any  tax,  either  direct  or  indirect,  upon  the  national 
banks,  their  property,  assets  or  franchises,  were  it  not  for  the 
permissive  legislation  of  Congress."' 


1  A  number  of  decisions  have  been  rendered  in  the  State  courts  and 
United  States  Circuit  Courts  on  the  subject  of  State  taxation  of  na- 
tional banks,  where  subsequently  the  questions  discussed  have  been 
definitely  decided  by  the  Supreme  Court.  Other  decisions  of  these 
courts  relate  to  the  question  of  construction  of  State  statutes,  which 
are  not  within  the  scope  of  this  work.  It  has  been  the  aim,  however, 
to  give  such  of  the  State  decisions  as  apply  and  distinguish  the  rules 
laid  down  by  the  Supreme  Court,  or  which  bear  upon  questions  not 
included  in  the  decisions  of  that  court. 

-  Owensboro  National  Bank  v.  Owensboro,  173  U.  S.  664,  1.  c.  p.  668, 
43  L.  Ed.  850  (1899);  Davis  v.  Elmira  Savings  Bank,  161  U.  S.  276, 
40  L.  Ed.  700    (1896),  reversing  142  N.  Y.  590,  25  L.  R.  A.  546.     TMs 


284  TAXATION    OF    NATIONAL   BANKS.  §    282 

limitation  upon  the  taxing  power  of  the  State  is  more  comprehensive 
than  that  laid  down  by  the  court  in  McCulloch  v.  Maryland,  supra, 
Sec.  7.  The  taxes  declared  void  in  that  case  and  in  Osborn  v.  United 
States,  supra.  Sec.  8,  were  upon  the  operations  of  the  bank,  and  the 
ruling  was  declared  not  to  extend  to  a  tax  on  the  real  property  of  the 
bank  nor  to  a  tax  on  the  iinterest  of  citizens  in  the  bank,  when  taxed 
in  common  with  other  property  of  the  same  description. 

The  first  Act  of  Congress  providing  for  the  organization 
of  national  banks,  passed  February  25,  1863,^  contained  no 
grant  of  power  to  the  States  to  tax  national  banks  in  any  form ; 
but  the  amendatory  Act  of  June  3,  1864,-  See.  41,  provided 
as  follows: 

**  (1)  Provided  that  nothing  in  this  act  shall  be  construed  to 
prevent  all  the  shares  in  any  of  said  associations,  held  by  any 
person  or  body  corporate,  from  being  included  in  the  valua- 
tion of  the  personal  property  of  such  person  or  corporation  in 
the  assessment  of  taxes  imposed  by  or  under  State  authority, 
at  the  place  where  such  bank  is  located,  and  not  else^vhere, 
but  not  at  a  greater  rate  than  is  assessed  upon  other  moneyed 
capital  in  the  hands  of  individual  citizens  of  such  State.  (2) 
Provided,  further,  that  the  tax  so  imposed  under  the  laAvs  of 
any  State  upon  the  shares  of  any  of  the  associations  author- 
ized by  this  act  shall  not  exceed  the  rate  imposed  upon  the 
shares  of  any  of  the  banks  organized  under  authority  of  the 
State  where  such  association  is  located.  (3)  Provided,  also,  that 
nothing  in  this  act  shall  exempt  the  real  estate  of  associations  from 
either  State,  county,  or  municipal  taxes  to  the  same  extent, 
according  to  its  value,  as  other  real  estate  is  taxed." 

It  is  also  provided  in  Sec.  40  that  the  president  and  cashier 
shall  cause  to  be  kept  a  full  and  correct  list  of  the  names  and 
residences  of  all  the  shareholders  and  the  number  of  shares  held 
by  each,  in  the  banking  office,  and  that  the  list  shall  be  subject 
to  the  inspection  of  all  shareholders  and  creditors  of  the  asso- 
ciation and  the  officers  authorized  to  assess  taxes  under  State 
authority,  during  the  business  hours  of  each  day. 

§  282.     Amendment  of  1868.— In  1868,  the  section    of    the 
statute  authorizing  the  taxation  of  national  banks  was  amended 

iC.    58,  12  Statutes  665. 
2C.    106,  13  Statutes  99. 


§    283  TAXATION    OF   NATIONAL   BANKS.  285 

and  re-enacted  in  the  form  in  which  it  has  since  appeared  in 
the  Revised  Statutes,  as  follows : 

"Sec.  5219.  Nothing  herein  shall  prevent  all  the  shares  in 
any  association  from  being  included  in  the  valuation  of  the 
personal  property  of  the  owner  or  holder  of  such  shares,  in 
assessing  taxes  imposed  by  authority  of  the  State  in  which  the 
association  is  located;  but  the  legislature  of  each  State  may  de- 
termine and  direct  the  manner  and  place  of  taxing  all  shares  of 
national  banking  associations  located  within  the  State,  subject 
only  to  the  two  restrictions,  that  the  taxation  shall  not  be  at 
a  greater  rate  than  is  assessed  upon  other  moneyed  capital  in 
the  hands  of  individual  citizens  of  such  State,  and  that  the 
shares  of  any  national  banking  association  owned  by  non-resi- 
dents of  any  State,  shall  be  taxed  in  the  city  or  town  where 
the  bank  is  located,  and  not  elsewhere.  Nothing  herein  shall 
be  construed  to  exempt  the  real  property  of  associations  from 
either  State,  county,  or  municipal  taxes  to  the  same  extent, 
according  to  its  value,  as  other  real  property  is  taxed." 

It  will  be  observed  that  the  provision  in  the  original  act, 
that  the  tax  should  not  exceed  the  rate  imposed  upon  the  shares 
of  any  of  the  banks  authorized  under  the  authority  of  the  State 
where  the  association  was  located,  is  stricken  out.  This  amend- 
ment however,  was  not  material,  as  the  prohibition  of  discrimi- 
nation in  favor  of  State  banks  is  included  in  the  provision  that 
the  shares  shall  be  taxed  at  no  greater  rate  than  is  assessed  upon 
"other  moneyed  capital"  in  the  hands  of  individual  citizens 
of  the  State;  for  this  clearly  includes  shares  of  stock  in  State 
banks. ^  The  only  other  amendment  relates  to  the  place  of  as- 
sessment, the  original  act  providing  that  the  assessment  must  be 
at  the  place  where  the  bank  is  located  and  not  elsewhere,  while  in 
the  amended  act  the  legislature  may  determine  the  manner 
and  place  of  taxation,  subject  to  the  restriction  as  to  place,  that 
tlie  shares  of  non-residents  shall  be  taxed  at  the  location  of 
tlie  bank. 

§  283.  Supreme  Court  on  U.  S.  Statute  Authorizing-  State 
Taxation  of  National  Banks. — The  Supreme  Court,2  after  quot- 
ing this  statute.  Sec.  5219,  says: 

1  Mercantile  Bank  v.  New  York,  121  U.  S.  138,  30  L.  Ed.  895   (1887). 

2  Owensboro   National    Bank  v.   Owonsboro,  swpra. 


286  TAXATION   OF   NATIONAL   BANKS.  §    284 

"This  section,  then,  of  the  Revised  Statutes  is  the  measure 
of  the  power  of  a  State  to  tax  national  banks,  their  property 
or  their  franchises.  By  its  unambiguous  provisions  the  power 
is  confined  to  a  taxation  of  the  shares  of  stock  in  the  names  of 
the  shareholders  and  to  an  assessment  of  the  real  estate  of  the 
bank.  Any  State  tax  therefore  which  is  in  excess  of  and  not 
iu  conformity  to  these  requirements  is  void. 

"So  self-evident  are  these  conclusions  that  the  adjudicated 
cases  justify  the  deduction  that  they  have  been  accepted  from 
the  beginning  as  axiomatic  and  unquestioned,  since  the  con- 
troversies as  to  taxation  of  national  banks  illustrated  in  the 
opinions  of  this  court  mainly  depend,  not  upon  any  attempted 
exercise  of  a  power  to  tax  the  property  and  franchises  of  the 
banks,  but  involved  controversies  as  to  whether,  when  the 
shares  of  stock  in  the  names  of  the  shareholders  had  been  as- 
sessed according  to  law,  the  tax  could  be  imposed  upon  them 
because  of  alleged  discrimination  or  other  illegalities." 

In  a  later  case  the  court  said  that  the  only  taxation  of  na- 
tional banks  contemplated  by  the  U.  S.  statutes  is  taxation  on 
the  shares  of  stock  of  the  bank  and  on  its  real  property,  i 

§  284.  Method  of  State  Taxation  Allowed  by  U.  S.  Statute 
is  Exclusive. — The  taxing  power  of  the  State  in  relation  to 
national  banks,  thus  resting  upon  the  permission  of  Con- 
gress, and  Congress  having  provided  the  method  in  which 
this  power  may  be  exercised,  that  method  excludes  any  other. 

No  license  therefore  can  be  exacted  by  the  State  or  under 
State  authority  for  the  privilege  of  carrying  on  the  business 
of  a  national  bank, 2  nor  can  an  occupation  tax  be  imposed, 3 
nor  can  a  tax  levied  by  a  State  on  the  president  of  each  of  the 
banks  of  the  State  be  enforced  as  to  the  president  of 'the  na- 


1  First  National  Bank  v.  Albright,  208  U.  S.  547,  52  L.  Ed.  614 
(1908),  affirming  86  Pac.  548. 

2  Second  National  Bank  of  Titusville  (Pa.)  v.  Caldwell,  13  Fed. 
429;   Carthage  v.  First  National  Bank  of  Carthage,  71  Mo.  508. 

sBrooks  V.  State  (Texas),  58  S.  W.  Rep.  1033;  Nat.  Bank  of  Chatta- 
nooga V.  Mayor,  8  Heiskell  (Tenn.)  814.  National  banks  are  not  liable 
to  a  privilege  tax  imposed  by  a  city  ordinance  on  occupations  and 
buainess  transactions,  although  banks  and  banking  are  Included  in  its 
terms. 


§  285  TAXATION  OF  NATIONAL  BANKS.  287 

tional  bank.  1  The  State  can  tax  the  real  estate  of  the  bank 
as  other  real  estate  is  taxed,  because  authority  to  do  so  is 
expressly  given  by  the  Act  of  Congress.  But  this  is  the  only 
tax  which  can  be  levied  upon  the  property  of  the  bank,  for 
the  only  other  tax  authorized  is  upon  the  shares  of  the  share- 
holders. It  follows  therefore  that  no  tax  can  be  levied  by  the 
State  upon  the  personal  assets  of  the  bank,  such  as  safes, 
office  furniture,  etc. ,2  and  this  is  equally  true  whether  the 
bank  is  solvent  or  insolvent.^  Thus  the  assets  of  the  bank, 
when  in  the  hands  of  a  receiver,  are  not  taxable.  The  Su- 
preme Court  said,  in  Rosenblatt  v.  Johnston,  that  if  the  shares 
had  any  value  they  were  taxable  in  the  hands  of  the  holders, 
and  that  the  property  held  by  the  receiver  was  exempt  to  the 
same  extent,  as  it  was  when  in  the  possession  of  the  bank  be- 
fore his  appointment.  A  tax  on  the  personal  property  of  a 
national  bank  is  invalid,  even  though  the  legislature  has 
made  no  provision  taxing  the  shares  thereof,  and  the  tax 
actually  levied  does  not  exceed  the  amount  of  what  might 
have  been  assessed  on  the  shares  under  local  authority  there- 
for.4 

5  285.  State  Franchise  Tax  Not  Enforceable  Against  Na- 
tional Banks. — It  follows  that  a  national  bank  cannot  be  taxed 
by  a  State  under  a  statute  taxing  "the  property  and  fran- 
chises of  every  corporation  having  or  exercising  any  special 
or  exclusive  privilege  or  franchise  not  allowed  by  law  to 
natural    persons,    or   performing   any   public   service."     This 


1  Linton  v.  Childs,  105  Ga.  567. 

2  National  State  Bank  v.  Young,  25  Iowa  311;  San  Francisco  v. 
Bank,  92  Fed.  273;  State  v.  First  Nat.  Bank,  4  Nev.  348;  First  National 
Bank  v.  Province,  20  Montana  374. 

3  Rosenblatt  v.  Johnston,  104  U.  S.  462,  26  L.  Ed.  832  (1882).  See 
also  First  National  Bank  v.  San  Francisco,  129  Cal.  96;  Stapylton  v. 
Thaggard,  91  Fed.  93,  and  33  C.  C.  A.  353;  City  of  Boston  v.  Beal, 
5  C.  C.  A.  26,  55  L.  Ed.  26,  First  Circuit;  People  v.  National  Bank,  123 
Cal.  53;  Covington  City  National  Bank  v.  Covington,  21  Fed.  484; 
Woodward  v.  Ellsworth,  4  Colo.  580;  Baker  v.  King  County,  17  Wash. 
622. 

*  First  Nat.  Bank  v.  San  Francisco,  129  Cal.  98. 


288  t.\:s;ation  of  national  banks.  §  285 

was  the  decision  in  a  case  from  Kentucky.'  The  State  Court 
of  Appeals  decided  that  the  taxation  of  national  banks  under 
this  statute  was  valid,  as  in  effect  it  was  equivalent  to  a  tax 
upon  the  shares  of  the  shareholders.  The  Supreme  Court 
however  reversed  this  decision,  and  said  that  the  argument 
relied  on,  if  adopted,  would  operate  to  destroy  the  power  to 
tax  which  the  Act  of  Congress  sanctions,  and  that,  as  a  gen- 
eral principle,  it  is  settled  that  the  taxation  of  property,  fran- 
chises and  rights  of  a  corporation  is  one  thing,  and  the  tax- 
ation of  the  shares  of  stock  in  the  names  of  the  share- 
holders quite  another.  The  Court  said  in  this  regard,  at 
page  681 : 

"This  doctrine  has  been  applied  to  sanction  the  taxation  of 
the  one  where  the  other  was  covered  by  a  contract  of  exemp- 
tion. As  a  result  of  its  application  much  property  has  been 
brought  within  the  range  of  the  taxing  power  which  other- 
wise would  escape  taxation." 

It  said  further  that,  as  there  is  no  equivalency  between  the 
assessment  of  the  bank  and  the  assessment  of  the  shares,  it 
follows  that  the  tax,  which  was  assessed  on  the  franchises 
of  intangible  property  of  the  corj)oration,  was  not  within  the 
purview  of  the  authority  conferred  by  the  Act  of  Congress, 
and  was  therefore  illegal.  It  was  strongly  argued  that  there 
was  an  equivalency  in  fact,  as  the  tax  was  no  greater  than 
that  which  would  have  been  imposed  in  the  form  of  a  tax 
levied  upon  the  shareholders,  the  franchise  tax  being  based 
upon  the  valuation  of  the  combined  sum  of  the  par  of  the 
stock,  the  surplus  and  undivided  profits.  But  the  court  said 
that  if  mere  coincidence  of  the  amount  and  not  legal  power 
were  the  test,  only  pure  questions  of  fact  would  arise  in  any 
given  case,  and  continued:  ''The  argument  that  public 
policy  exacts  that  where  there  is  an  equality  in  amount  be- 
tween   an   unlawful    tax   and    a    lawful    one    the   unlawful    tax 


1  Owensboro  Nat.  Bank  v.  Owensboro,  173  U.  S.  664,  supra.  The 
same  statute  was  construed  by  the  court  in  the  case  of  Adams  Ex. 
Co.  V.  Ky.,  166  U.  S.  171,  supra,  Sec.  276,  and  Henderson  Bridge  Co.  v. 
Kentucky,  supra,  Sec.  215. 


§    286  TAXATION    OF    NATIONAL   BANKS.  289 

should  be  held  valid,  does  not  strike  us  as  worthy  of  serious 
consideration."^    The  court  added: 

**The  system  of  taxation  devised  by  the  act  of  Congress  is 
entirely  efficacious  and  easy  of  execution.  By  its  enforcement, 
as  interpreted,  settled  policies  of  taxation  have  been  evolved 
embracing  large  amounts  of  property  which  would  not  other- 
wise be  taxable,  and  which,  as  we  have  seen,  will  escape  tax- 
ation if  the  past  development  of  the  system  be  destroyed  by 
recognizing,  without  reason,  a  principle  inconsistent  with  the 
law  and  destructive  of  the  safeguards  which  it  imposes." 

"From  the  foregoing  conclusions,  it  results  that  as  the  taxes 
were  imposed  upon  the  bank  and  its  property  or  franchise, 
and  not  upon  the  shares  of  stock  in  the  name  of  the  stockhold- 
ers, such  taxes  were  void."^ 

§  286.  State  May  Require  Bank  to  Pay  Tax  of  Sharehold- 
ers.— Though  the  tax  is  only  authorized  to  be  levied  upon  the 
shares  of  the  individual  shareholders,  and  there  is  no  au- 
thority to  levy  any  tax  upon  the  corporate  property  other 
than  a  tax  upon  the  real  estate,  the  State  may  require  that 
the  tax  levied  upon  the  shareholders  shall  be  paid  through 
the  bank,  which  is  thus  made  the  agency  of  the  shareholders 
in  paying  the  tax,  and  which  may  recoup  itself  from  the  divi- 
dends. This  was  decided  by  the  Supreme  Court  in  a  case 
from  Kentucky,  where  it  held^  that  the  statutory  appointment 
of  the  bank  to  pay  the  whole  tax  in  solido  as  the  agent  of  the 
shareholders  was  not  inconsistent  with  the  Federal  law,  au- 
thorizing only  the  tax  upon  the  shareholders.  It  was  further 
said  that  this  was' the  only  mode  by  which,  certainly  and  with- 
out loss,  the  payment  of  the  tax  on  all  the  shares,  resident  and 
non-resident,  could  be  secured.  This  method  of  collection  was 
justified  by  experience,  and  it  was  not  to  be  rightly  inferred, 


1  But  as  to  the  effect  of  equivalency  ia  fact,  see  Postal  Tel.  Cable 
Co.  V.  Adams,  Sec.  233,  supra. 

•  This  Kentucky  statute  was  also  discussed  in  Scobee  v.  Bean,  22 
Ky.  Law  Rep.  1076,  59  S.  W.  Rep.  860;  First  National  Bank  r.  Stone, 
88  Fed.  409. 

8  National  Bank  v.  Commonwealth,  9  Wall.  35S,  19  L.  Ed.  700  (1870). 


290  TAXATION    OF    NATIONAL   BANKS.  §    286 

therefore,  that  Congress  intended  to  prohibit  it,  after  having 
expressly  permitted  the  State  to  levy  the  tax.i 

Where  the  bank  has  been  made  liable  for  the  payment  of 
the  tax  upon  the  shares  of  its  stockholders,  it  has  been  held 
that  the  State  may  force  the  bank  to  pay  the  tax  by  distraint 
of  its  property.2  The  distinction  however  between  a  tax  upon 
the  bank  as  the  statutory  agent  of  its  shareholders  and  a  tax 
upon  the  bank  property  as  such  must  be  preserved,  as  the 
former  tax  is  authorized  by  the  Act  of  Congress  and  the  lat- 
ter is  not.  Thus  an  assessment  upon  the  property  as  such,  or 
against  the  bank  upon  the  stock  in  solido,  is  invalid.s      This 


1  This  mode  of  collecting  the  tax  upon  national  bank  shares  has  been 
very  generally  adopted.  (See  State  Taxing  Systems,  infra,  appendix).. 
In  Hershire  v.  First  National  Bank,  35  Iowa  272,  it  was 
held  that  under  the  Iowa  statute  a  national  bank  was  not 
liable  for  the  taxes  assessed  against  the  shareholders  unless  it  had  in 
its  possession  dividends  or  property  belonging  to  them.  The  case  was 
distinguished  from  National  Bank  v.  Common-wealth,  9  Wall.  353, 
supra.  The  decision  was  based  on  the  difference  between  the  statute  in 
issue  and  that  of  Kentucky,  the  Iowa  statute  making  the  bank  simply 
the  agent  of  the  shareholders  to  pay  the  tax.  The  court  said  that  the 
bank  was  not  liable  for  the  taxes  except  as  other  agents  are  when  they 
have  money  belonging  to  the  principal  to  pay  them  with.  National 
Bank  v.  Commonwealth  was  also  distinguished  in  Sumpter  Co.  r.  Nat. 
Bank  of  Gainesville,  62  Ala.  464,  where  it  was  held  that  the  levy  upon 
the  stock  of  the  bank  was  not  authorized  by  the  statute  of  that  State. 
See  also  Mechanics  Bank  v.  Baker  (N.  J.)  46  Atl.  586,  65  N.  J.  L.  113, 
549. 

2  First  National  Bank  of  Omaha  v.  Douglas  County,  3  Dillon  330.  It 
was  said  by  Judge  Dillon:  "Undoubtedly  the  bank  could  be  made  liable 
to  pay  such  taxes  by  suit,  and  no  reason  is  seen  why  the  collection  may 
not  be  enforced  by  distraint  in  the  same  manner  as  other  taxes  are  col- 
lected." 

3  First  Nat.  Bank  of  Hannibal  v.  Merideth,  44  Mo.  500;  City  of  Spring- 
field V.  First  Nat.  Bank,  87  Mo.  441,  where  it  was  held  that  the  refusal 
of  the  officers  of  the  bank  to  furnish  the  assessor  with  a  list  of  the 
shareholders  did  not  justify  him  in  making  the  assessment  and  en- 
forcing the  tax  against  the  property  of  the  bank.  First  Nat.  Bk.  v. 
Faucher,  48  N.  Y,  524;  Nat.  Bank  of  Chemung  v.  Elmira,  53  N.  Y.  49; 
First  Nat.  Bk.  v.  Richmond,  42  Fed,  877;  Albuquerque  Nat.  Bk.  v. 
Perea,  5  N.  Mex.  664;  1st  Nat.  Bk.  v.  Chehalis  Co.,  6  Wash.  64;  Miller 

'^v.  Merchants'  Nat.  Bk.  (Ohio),  3  Nat.  Bk.  Cases  711. 


§  287  TAXATION  OF  NATIONAL  BANKS.  291 

distinction  is  essential  for  the  further  reason  that  in  States 
where  deduction  of  debt  is  allowed  in  the  assessment  of 
"other  moneyed  capital,"  the  national  bank  shareholder  is 
entitled  to  a  deduction  of  his  personal  indebtedness.! 

Making  a  national  bank  the  agent  of  the  State  to  collect 
taxes  assessed  against  the  shares  of  the  bank  has  been  held 
by  the  Supreme  Court  to  be  a  mere  matter  of  procedure,  and 
there  is  no  discrimination  against  national  banks  where  the 
State  banks  are  not  thus  compelled  to  pay  taxes  for  their 
shareholders,  and  the  shareholders  are  looked  to  directly  for 
such  payment.! 

§  287.  Place  of  Taxation. — The  Act  of  Congress  provides 
that  the  legislature  of  each  State  may  determine  the  manner 
and  place  of  taxing  the  shares,  subject  to  the  restriction  that 
those  owned  by  non-residents  of  the  State  shall  be  taxed  in 
the  city  or  town  where  the  bank  is  located  and  not  elsewhere.  3 
Where  within  the  State  the  shares  shall  be  taxed  therefore, 
whether  in  the  town  or  city  where  the  bank  is  located  or  in 
the  locality  of  the  shareholder's  residence,  is  subject  to  the 
determination  of  the  State. 4 

The  shares  of  non-residents  of  the  State  however  are  only 

1  First  Nat.  Bank  of  Richmond  v.  City  of  Richmond,  39  Fed.  309. 

2  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461,  42  L.  Ed.  236 
(1897),  affirming  168  Penn.  309. 

See  National  Bank  of  Commerce  v.  Allen,  223  Fed.  472.  See  also 
Charleston  National  Bank  v.  Melton,  171  Fed.  743. 

3  The  act  of  1864  provided  for  including  the  shares  in  the  valuation  of 
personal  property  at  the  place  where  the  bank  was  located  and  not  else- 
where, and  there  was  a  conflict  of  judicial  opinion  as  to  whether  the 
word  "place"  meant  the  State  or  the  town  where  the  bank 
was  located.  Opinion  of  Justices,  53  Me.  594;  Austin  v.  Aldermen,  14 
Allen  359;  Markoe  v.  Hartranft,  6  Am.  Law  Reg.  487.  A  statute  of  Illi- 
nois providing  for  the  taxation  of  shares  in  the  city  where  the  bank  was 
located  was  valid,  see  Tappan  y.  Merchants'  Nat.  Bank,  19  Wall.  490, 
22  L.  Ed.  189  (1874).  But  the  court  did  not  decide  whether  the  State 
could  provide  for  the  taxation  of  shareholders  at  any  other  place  within 
its  jurisdiction.  See  also  Austin  v.  Aldermen,  7  Wall.  694,  19  L.  Ed. 
224  (1869);  Waite  v.  Dowley,  94  U.  S.  527,  24  L.  Ed.  181  (1877). 

*  Buie  V.  Commissioners  of  Fayetteville,  79  N.  C.  267. 


292  TAXATION   OF    NATIONAL   BANKS.  §    288 

taxable  at  the  location  of  the  bank.  The  holder  of  national 
bank  shares  is  thus  protected  against  double  taxation  under 
competing  State  authority,  for  such  shareholder  cannot  be 
taxed  at  his  domicil  on  shares  in  a  national  bank  located  in 
another  State.i  The  Supreme  Court  of  Massachusetts  said,  in 
the  case  cited,  that,  "whatever  may  have  been  the  design  or 
motive,  we  can  have  no  doubt  that  it  is  within  the  constitu- 
tional power  of  Congress  to  establish  a  national  bank  in  any 
State  and  to  provide  that  its  shares  shall  have  such  a  local 
nature  as  to  be  exempt  from  taxation  by  other  States;  and 
that  this  power  has  been  exercised  in  the  present  instance." 

A  national  bank  has  under  the  law  but  one  location,  and 
therefore  only  one  taxable  situs  based  on  location.  Where  the 
bank  was  located  in  New  Jersey,  and,  for  the  convenience  of 
its  customers  in  Philadelphia,  maintained  a  clerk  in  that  city 
to  receive  deposits,  it  was  held  not  to  become  subject  to  taxa- 
tion in  Philadelphia. 2 

Where  the  statute  of  a  State  directs,  as  it  lawfully  may, 
that  residents  of  the  State  owning  stock  in  national  banks  lo- 
cated in  the  State  shall  be  assessed  for  taxation  thereon  at 
their  respective  residences  in  the  State,  such  shares  must  be 
returned  for  taxation  like  other  personal  property,  and  they 
would  not  therefore  be  taxable  at  the  location  of  the  bank,^ 
when  that  was  not  the  domicil  of  the  shareholder  resident  in  the 
State. 

§  288.  Manner  of  Assessment. — The  Act  of  Congress  pro- 
vides that  the  legislature  of  each  State  may  determine  the 
manner  as  well  as  the  place  of  taxation,  subject  to  the  other 
provisions  of  the  act.  Bank  shares  are  therefore  taxable,  as 
other  personal  property  of  like  character  is  taxable  under  the 
laws  of  the  State.  The  property  and  also  the  surplus  funds 
of  the  bank,  in  whatever  form  invested,  are  included  in  the 


1  Flint  V.  Board  of  Aldermen  of  Boston,  99  Mass.  141. 

2  See  National  State  Bank  of  Camden  v.  Pierce,  U.  S.  Circuit  Court 
of  Pennsylvania,  2  Nat.  Bank  Cases  177. 

3  See  Buie  v.  Commissioners  of  Fayetteyille,  79  N.  C.  267;  also  Golds- 
bury  V.  Warwick,  112  Mass.  384. 


§   288  TAXATION   OF   NATIONAL   BANKS.  293 

valuation  of  the  shares. i  The  shares  are  to  be  valued  at  their 
fair  cash  value  on  the  assumption  that  the  bank  will  continue 
its  business,  and  not  at  what  they  would  be  worth  in  case  the 
bank  should  be  wound  up,  when  that  is  not  in  contemplation.  2 
While  a  State  bank  is  changing  into  a  national  bank  and 
before  the  requirements  of  the  State  statute  are  fully  com- 
plied with,  it  is  subject  to  taxation.s  A  national  bank  is  not 
taxable  on  increase  of  stock,  that  is,  the  new  shares  are  not 
taxable,  until  the  certificate  of  increase  is  issued  by  the  comp- 
troller.4 

Shares  owned  by  a  national  bank  in  other  national  banks 
may  be  included  in  the  valuation  of  the  shares  of  the  bank.s 
Thus  in  the  case  last  cited  the  court  said,  at  page  70 :  "  The 
manifest  intention  of  the  law  is  to  permit  the  State  in  which 
a  national  bank  is  located  to  tax,  subject  to  the  limitations 
prescribed,  all  the  shares  of  its  capital  stock  without  regard 
to  their  ownership.  The  proper  inference  is,  that  the  law 
permits  in  the  particular  instance  the  taxation  of  the  national 
banks  owning  shares  of  the  capital  stock  of  another  national 
bank  by  reason  of  that  ownership  on  the  same  footing  with 
all  other  shares." 

This  principle  has  been  applied  to  the  ease  where  a  bank 
owns  certain  of  its  own  shares,  the  value  of  which  should 
be  divided  among  the  holders  of  the  remaining  shares  in  the 
assessment  of  the  value  of  their  respective  interests. s  It  was 
contended  in  a  Pennsylvania  case  that  national  bank  shares 
could  not  be  assessed  at  more  than  par,  because  other  mon- 
eyed capital,  that  is  money  at  interest,  was  only  assessed  at 
par,  and  that  par  must  therefore  be  the  maximum  of  taxable 
value  of  bank  shares.  But  the  Supreme  Court  held  this  posi- 
tion  untenable,   because   money   invested   in   a   bank   is  not 


1  First  National  Bank  v.  Concord,  59  N.  H.  75. 

2  National  Bank  of  Commerce  v.  New  Bedford,  155  Mass.  313. 
•■*  Commonwealth  v.  Bank,  Penn.  Com.  Pleas,  2  Pearson  386. 

*  Charleston  v.  People's  Nat.  Bank,  5  S.  C.  103. 

»  Bank  of  Redemption  v.  Boston,  125  U.  S.  60,  31  L.  Ed.  689  (1888). 

«  Dutton  V.  Citizens'  National  Bank,  53  Kansas  440. 


294  TAXATION   OF  NATIONAL  BANKS.  §   289 

money  put  out  at  interest,  and  the  par  value  of  stock  does 
not  necessarily  indicate  its  value,  i  It  is  immaterial  that  the 
bank's  property  or  surplus  may  be  invested  in  property  itself 
exempt  from  taxation,  see  mfra,  Sec.  291.  It  is  also  immaterial 
that  the  bank  holds  stocks  of  other  corporations  acquired  by 
it  in  the  course  of  business,  Avhether  such  corporations  are  lo- 
cated in  and  taxed  by  the  State  or  not.2  Deductions  are  not 
allowed  on  that  account,  unless  required  to  conform  to  sim- 
ilar deductions  allowed  in  the  case  of  other  moneyed  capital 
in  the  State. 

§  289.  Real  Estate  in  Other  States  Not  Deducted  from 
Value  of  Shares. — The  value  of  real  estate,  located  in  other 
States  and  assessed  for  taxation  there  under  their  laws,  is  not 
required  to  be  deducted  from  the  value  for  taxation  of  shares 
of  national  banks.  This  was  decided  by  the  Supreme  Court  in 
a  case  from  Utah,^  where  the  refusal  of  the  assessors  to 
make  such  a  deduction  was  made  an  objection  to  the  valid- 
ity of  the  tax.  The  court  said  that  the  State  of  domicil  is 
entitled  under  the  National  Banking  Law  to  collect  taxes 
upon  the  full  value  of  the  shares  of  stock,  and  to  permit  a 
deduction  for  the  real  estate  located  in  other  jurisdictions, 
the  value  of  which  necessarily  makes  part  of  the  value  of  the 
stock,  would  reduce  the  real  value  of  the  shares  for  taxation 
without  compensatory  equivalent.  The  language  of  a  Mary- 
land case  was  adopted,  at  page  561,  as  expressing  the  true 
rule  :4 

"The  true  criterion,  as  fixed  by  the  statute,  is  the  true  value 
of  the  stock,  without  reference  to  the  question  where,  or  in 
what  manner  or  nature  of  property  or  security,  the  capital 
stock  may  be  invested.  Whether  that  be  invested  in  real  es- 
tate, or  other  property  beyond  the  jurisdiction  of  this  State, 
the  latter  having  control  over  the  shares  and  their  true  value, 

1  Hepburn  v.  School  Directors,  23  Wall.  480,  23  L.  Ed.  112  (1875). 

2  Pacific  National  Bank  of  Tacoma  v.  Pierce  County,  20  Wash.  675. 

3  Commercial  Bank  v.  Chambers,  182  U.  S.  556,  45  L.  Ed.  1227  (1901), 
affirming  21  Utah  324. 

4  American  Coal  Co.  v.  County  Commissioners,  59  Md.  185,  194. 


§291  TAXATION   OP   NATIONAL   BANKS.  295 

the  peculiar  nature  and  value  of  the  investment  of  the  cap- 
ital stock  of  the  corporation,  beyond  the  limits  of  the  State, 
can  form  no  proper  subject  for  specific  deduction  or  abate- 
ment from  the  true  value  of  the  shares  of  stock,  when  pre- 
sented to  be  assessed  for  purposes  of  taxation.  It  is  exclu- 
sively with  the  shares  of  stock,  and  their  true  value,  as  rep- 
resenting the  entire  corporate  assets,  that  the  tax  commis- 
sioner has  to  deal,  and  not  with  the  nature  and  locality  of  the 
investment  of  the  capital  stock  of  the  corporation,  except  as 
to  the  real  estate  of  the  company  situate  within  this  State." 

§  290.  Territories  Have  Same  Taxing'  Power  as  States 
Over  National  Banks. — It  was  contended  by  a  national  bank 
of  Montana  Territory  that  Congress  had  only  given  consent 
to  the  taxation  of  stock  in  national  banks  by  the  States^  and 
therefore  such  stock  could  not  be  taxed  by  a  Territory.  But 
the  court  said^  that,  although  this  was  true  according  to  the 
letter  of  the  statute,  yet  the  word  ''State"  in  this  section 
must  be  construed  in  connection  with  the  other  sections  of 
the  act,  and  that  it  was  clearly  used,  not  in  contradistinction 
to  "Territory,"  but  in  its  general  popular  sense,  as  including 
both  the  District  of  Columbia  and  the  Territories. 

§  291.  No  Deduction  on  Account  of  Holding-  United  States 
Securities. — It  was  decided  by  the  Supreme  Court,  reversing 
the  New  York  Court  of  Appeals,  soon  after  the  adoption  of 
the  National  Banking  Act  of  1864,  that  it  is  immaterial  that 
the  capital  of  a  national  bank  is  invested  in  obligations  of 
the  Federal  government,  which  are  expressly  exempted  by 
Congress  from  taxation  under  State  authority,  whether  held 
by  individuals  or  corporations.^^  The  tax  authorized  by  Con- 
gress is  therefore  not  upon  the  national  banks,  but  upon  the 
interests  of  their  shareholders,  and  the  limited  State  tax  au- 


iTalbott  V.  Silver  Bow  County,  139  U.  S.  438,  35  L.  Ed.  210  (1891). 

2  Van  Allen  v.  Assessors,  3  Wall.  573,  18  L.  D.  229  (1866),  reversing 
33  N.  Y.  161,  Chief  Justice  Chase  and  Justices  Wayne  and  Swayne 
dissenting,  claiming  that  Congress  did  not  intend  to  subject  the  na- 
tional securities  even  by  indirection  to  State  taxation.  See  also  Bradley 
V.  People,  4  Wall.  459.  18  L.  Ed.  433  (1867).  Hager  v.  Am.  Nat.  Bank, 
159  Fed.  396,  6th  Cir.  (1908). 


296  TAXATION   OF   NATIONAL   BANKS.  §    292 

thorized  is  one  of  the  burdens  annexed  to  the  enjoyment  of 
the  rights  and  privileges  conferred  upon  national  banking  as- 
sociations. This  ruling  has  been  uniformly  followed  since. 
National  bank  shares  are  thus  taxable  by  State  authority  at 
their  full  value  like  other  property,  whether  the  whole  or  a 
part  of  the  capital  of  the  bank  is  invested  in  Federal  securi- 
ties.* 

§  292.  Discrimination  Through  Taxation  of  State  Banks 
on  Capital  or  Property. — As  national  securities,  whether  held 
by  individuals  or  corporations,  are  exempt  from  taxation  un- 
der State  authority,  it  follows  that  the  State  banks  when 
taxed  upon  their  property  or  capital  stock  can  claim  exemp- 
tion for  so  much  of  their  property  or  capital  representing 
their  property,  as  is  invested  in  such  exempt  securities.  The 
statute  of  New  York  in  force  at  the  time  of  the  adoption  of 
the  National  Banking  Act  authorized  the  taxation  of  State 
banks  upon  their  capital  stock,  and  it  was  provided  that  the 
tax  on  the  shares  of  national  banks  should  not  exceed  their 
par  value.  But  the  Supreme  Court  held,  in  the  case  last 
above  cited,  all  the  Judges  concurring,  that  this  taxation  of 
State  banks  upon  their  capital  stock  involved  a  discrimination 
against  the  national  banks.  The  court  said  at  page  581 :  '^In- 
asmuch as  the  capital  of  the  State  may  consist  of  the  bonds 
of  the  United  States  which  are  exempt  from  State  taxation, 
it  is  easy  to  see  that  this  tax  on  the  capital  is  not  an  equiva- 
lent for  a  tax  on  the  shares  of  the  stockholders." 


1  The  validity  of  a  State  statute  providing  for  the  taxation  of  Na- 
tional bank  stock  is  not  affected  by  the  fact  that  it  does  not  provide  for 
any  deduction  from  the  valuation  on  account  of  any  United  States 
bonds  held  by  the  bank,  Charleston  National  Bank  v.  Melton,  171  Fed. 
743,  Circuit  Court  of  S.  C.  1909. 

The  act  of  Kentucky  providing  a  method  of  taxing  State,  national 
banks  and  trust  companies  upon  each  $100  of  value  of  shares  of  such 
banks  and  companies  as  construed  by  the  Court  of  Appeals  of  the  State 
is  not  invalid  as  to  national  banks  under  the  Federal  law  as  imposing 
a  tax  upon  their  capital  and  surplus  and  not  on  their  shares.  Hager 
r.  Am.  Nat.  Bk.,  159  Fed.  396,  C.  C.  A.  6th  Cir.   (1908). 


§   293  T^VXATION   OF   NATIONAL   BANKS.  297 

This  ruling  was  made  prior  to  the  amendment  of  1868,  and 
while  there  was  an  express  provision  in  the  Act  of  Congress 
against  discrimination  in  favor  of  State  banks  j  this  pro- 
vision, as  stated,  is  included  in  the  more  comprehensive  pro- 
vision retained  in  the  amendment  of  1868  prohibiting  dis- 
crimination in  favor  of  moneyed  capital  in  the  hands  of  in- 
dividual citizens. 

§  293.  Other  Moneyed  Capital  is  Other  Taxable  Moneyed 
Capital. — ^After  the  decision  in  Van  Allen  v.  Assessors,  supra, 
Sec.  291,  the  New  York  statute  was  amended  so  as  to  provide  that 
no  tax  should  be  assessed  upon  the  capital  of  either  State  or  na- 
tional banks,  but  that  the  stockholders  in  both  should  be  charged 
upon  the  value  of  their  shares,  though  not  at  a  greater  rate  than 
was  assessed  on  other  moneyed  capital  in  the  hands  of  individual 
citizens  in  the  State.  This  was  also  claimed  to  be  invalid,  because 
the  personal  property  of  individuals  was  allowed  a  deduction  on 
account  of  their  holdings  of  United  States  securities,  and  there- 
fore there  was  a  discrimination  in  their  favor  as  against  the  na- 
tional banks.  The  court  held'-  that  this  was  not  such  a  discrimina- 
tion as  was  contemplated  by  the  Act  of  Congress.  The  true  con- 
struction of  the  clause  of  the  Act  of  Congress  is  that  the  rate 
of  taxation  upon  the  shares  shall  be  the  same  and  no  greater  than 
that  upon  the  moneyed  capital  of  individual  citizens  that  is  sub- 
ject to  taxation,  and  the  argument  really  meant  that  Congress 
should  have  repealed  the  exemption  of  securities  in  order  to  effect 
equality  of  taxation. 

While  the  statute  of  1864  was  in  force,  it  was  claimed  that  the 
taxation  of  national  bank  shareholders  in  Missouri  was  invalid, 
for  the  reason  that  the  State  by  charters  granted  under  the 
former  constitution,  authorizing  exemptions  from  taxation,  had 
made  contracts  of  exemption  with  two  banks  and  had  thus  disa- 
bled itself  from  taxing  their  shareholders  in  the  same  manner 


iVan  Allen  v.  Commissioners,  4  Wall.  244,  18  L.  Ed.  344.  See  also 
Bradley  v.  People,  4  Wall.  459,  supra,  applying  the  ruling  of  Van  Allen 
T.  Commissioners  to  tiie  taxing  laws  of  Illinois.  See  also  Exchange 
Nat.  Bank  v.  Miller,  1!)  Fed.  372. 


298  TAXATION  OP  NATIONAL  BANKS.  §  294 

as  those  of  national  banks  were  taxed.  The  court  decided^  how- 
ever, that  this  was  not  a  discrimination  within  the  meaning  and 
intent  of  the  act,  and  that  Congress  meant  no  more  than  to  require 
of  each  State,  as  a  condition  for  the  exercise  of  the  power  to  tax 
the  shares  of  national  hanks,  that  it  should  tax  them  in  like  man- 
ner as  it  did  the  shares  of  banks  of  its  own  creation,  so  far  as  it 
had  the  capacity. 

The  same  principle  was  applied  in  Delaware,**  where  the  only 
subjects  of  taxation  were  real  estate,  live  stock  and  bank  shares. 
The  court  held  that  the  words  "other  moneyed  capital"  imply 
that  national  bank  shares  are  to  be  classed  as  moneyed  capital ; 
and,  as  national  banks  were  subject,  under  the  Delaware  law, 
to  a  tax  of  only  one-fourth  of  one  per  cent,  which  was  the  rate 
imposed  upon  each  share  of  the  actual  value  of  every  banking 
institution  of  Delaware,  there  was  no  ground  for  complaint. 

§  294.    Equality  of  Taxation  With  Other  Moneyed  Capital. 

— The  National  Banking  Act,  as  amended  in  1868,  provides  that 
the  assessment  upon  the  shares  of  national  bank  stock  shall  not 
be  at  a  greater  rate  than  is  assessed  upon  other  moneyed  capital  in 
the  hands  of  individual  citizens  of  a  State.  Difference  in  the  rate 
of  the  tax  levy  between  bank  shares  and  other  moneyed  capital 
would  be  too  ob\dous  a  discrimination  for  question.^  But  there 
have  been  a  number  of  cases  of  alleged  discrimination  against 
national  banks  in  State  taxation,  growing  out  of  the  peculiarities 
in  the  different  taxing  systems  of  the  States.  Thus  some  States 
allow  deductions  of  debts  from  taxable  credits  only,  and  others 
allow    no    deduction   whatever.     In    some    States    the     sources 


iLionberger  v.  Rowse,  9  Wall.  468,  19  L.  Ed.  721  (1870),  affirming 
Supreme  Court  of  Missouri. 

2  First  Nat.  Bank  of  Wilmington  v.  Herbert,  44  Fed.  158. 

3  That  is,  an  actual  not  an  apparent  difference  in  rate,  see  Merchants' 
&  Manufacturers'  Bank  v.  Pennsylvania,  167  U.  S.  461,  supra.  It  was 
held  in  Providence  Institution  for  Savings  v.  Boston,  101  Mass.  575, 
that  the  rate  upon  bank  shares  need  not  be  as  low  as  the  lowest  rate 
upon  moneyed  capital  anywhere  in  the  State,  but  it  is  sufficient  if  the 
rate  on  the  bank  shares  is  the  same  as  the  rate  upon  moneyed  capital  in 
the  hands  of  individual  citizens  in  the  town  or  city  where  the  bank  is 
located. 


§   295  TAXATION   OF   NATIONAL   BANKS.  299 

of  municipal  and  State  revenues  have  been  separated,  and  there 
is  a  consequent  difference  in  the  method  of  taxation  of  different 
classes  of  property.  Also  the  States  differ  much  in  the  matter  of 
exemptions  from  taxation  allowed  according  to  the  different 
views  of  public  policy,  and  in  the  methods  adopted  to  solve  the 
difficult  problem  of  taxing  the  different  classes  of  personal  prop- 
erty. The  cases  of  alleged  discrimination  against  national  banks 
may  therefore  be  grouped  into  the  following  classes: 

First,  discriminations  through  exemption  of  other  property; 
second,  discriminations  through  deduction  of  debts  from  the  val- 
uation of  other  property;  and  third,  discriminations  through 
inequality  in  the  valuation  of  bank  shares  as  compared  with  other 
property. 

All  of  these  cases  of  alleged  discrimination,  particularly  the 
first  two  classes,  must  be  considered  in  the  light  of  the  construc- 
tion given  by  the  Supreme  Court  of  the  words  ''other  moneyed 
capital  in  the  hands  of  individual  citizens." 

§  295.  Discriminations  Through  Exemptions  from  Taxa- 
tion.— There  is  no  discrimination  against  national  bank  shares 
in  the  limited  exemption  of  property  held  for  charitable  and 
religious  uses,  allowed  by  the  States  from  considerations  of 
public  policy.^  Thus  it  was  said  by  the  court,  in  the  case  cited, 
that  it  was  not  intended,  by  the  Act  of  Congress  governing  State 
taxation  of  national  banks,  to  curtail  the  taxing  power  of  the 
State  or  prohibit  the  exemption  of  particular  classes  of  property, 
which  the  legislature  might  choose  to  exempt.  The  discretionary 
power  of  the  State  legislature  over  these  subjects  re- 
mains as  it  was  before  the  Act  of  Congress  was  passed,  for  the 
plain  intention  of  the  act  was  to  protect  the  corporations  formed 
under  its  authority  from  unfriendly  discrimination  by  the  States 
in  the  exercise  of  their  taxing  power. 

In  a  Pennsylvania  case,  this  principle  -was  extended  to  the 
exemption  of  mortgages,  judgments,  recognizances  and  money 
owing  upon  articles  of  agreement  for  the  sale  of  real  estate,  all 
of  which  were  exempted  from  taxation  except  for  State  pur- 


1  Adams  v.  Nashville,  95  U.  S.  19,  24  I..  Ed.  369  (1877). 


300  TAXATION   OP   NATIONAL  BANKS.  §   296 

poses.    The  court  held  that  this  did  not  constitute  a  discrimina- 
tion/ saying,  1.  e.  page  485 : 

''This  is  a  partial  exemption  only.  It  was  evidently  intended 
to  prevent  a  double  burden  by  the  taxation  both  of  property 
and  debts  secured  upon  it.  Necessarily  there  may  be  other 
moneyed  capital  in  the  locality  than  such  as  is  exempt.  If  there 
is,  moneyed  capital  as  such  is  not  exempt  Some  part  of  it 
only  is.  It  could  not  have  been  the  intention  of  Congress  to  exempt 
bank  shares  from  taxation  because  some  moneyed  capital  was 
exempt." 

§  296.  Allegations  of  Discriminating  Exemption  Held  to 
Require  Answer. — ^But  in  a  later  case  from  Pennsylvania,"  the 
allegations  of  the  plaintiff  in  his  petition  were  held  to  constitute 
a  sufficient  charge  of  discrimination  to  require  an  answer  from 
the  defendants.  The  Supreme  Court  reversed  the  judgment 
of  the  State  court  which  had  sustained  a  demurrer  to  the  peti- 
tion, following  the  decision  in  Adams  v.  Nashville.  This  petition 
charged  that  a  very  large  amount  of  property  in  Pennsylvania 
had  been  relieved  from  the  burden  of  county  taxation,  including 
all  bonds  or  certificates  of  loans  issued  by  any  railroad  com- 
pany, shares  of  stock  in  the  hands  of  stockholders  of  any  in- 
stitution or  company  of  the  State,  mortgages,  judgments  and 
moneys  due  or  owing  upon  articles  of  agreement  for  the  sale 
of  real  estate  and  loans  made  by  corporations,  all  of  which  were 
taxable  for  State  purposes  only. 

The  court  said  that,  as  the  Act  of  Congress  does  not  fix  a 
definite  limit  as  to  percentage  of  value,  beyond  which  the 
States  may  not  tax  national  bahk  shares,  eases  will  arise  in  which 
it  will  be  difficult  to  determine  whether  the  exemption  of  any 
particular  part  of  the  moneyed  capital  in  individual  hands  is  so 
serious  or  material  as  to  infringe  the  rule  of  substantial  equality. 

Counsel  urged  that  the  State  had  exempted  the  railroad  and 
other  securities  in  question  from  local  taxation,  because  it  derived 
its  principal  revenue  from  railroads  and  corporations,  and  there- 
fore conserved  its  own  interests  in  protecting  such  securities.  But 
the  court  replied  that  it  was  not  concerned  with  the  motives  of 


1  Hepburn  v.  School  Directors,  23  Wall.  480,  supra. 
2Boyer  v.  Boyer,  113  U.  S.  689,  28  L.  Ed.  1089  (1885). 


§    297  TAXATION   OF    NATIONAL   BANKS.  301 

public  policy  whicli  influenced  the  Commonwealth,  and  that  its 
sole  function  was  to  construe  the  legislation  of  Congress  permit- 
ting the  several  States  to  tax  national  bank  shares.  If  the  princi- 
ple of  substantial  equality  required  in  State  taxaUon  of  such 
shares  and  other  moneyed  capital  operates  to  disturb  the  peculiar 
policy  of  any  State,  the  remedy  is  with  Congress. 

The  court  said,  with  reference  to  the  Hepburn  case,  supra, 
Sec.  295,  that,  while  this  is  an  authority  for  the  proposition  that 
a  partial  exemption  by  a  State  of  moneyed  capital  for  local  pur- 
poses does  not,  of  itself  and  without  reference  to  the  aggregate 
moneyed  capital  not  so  exempt,  establish  the  right  to  the  same, 
exemption  in  favor  of  national  bank  shares,  yet  it  is  by  no  means 
authority  for  the  broad  proposition  that  national  bank  shares  can 
be  subjected  to  local  taxation  where  a  very  material  part,  rela-. 
tively,  of  other  moneyed  capital  in  the  hands  of  individual  citizens 
within  the  same  jurisdiction  or  taxing  district  is  exempt  from 
such  taxation.  It  laid  down  the  following  rules  deduced  from  the 
preceding  pages,  page  695  : 

§  297.    Rules  of  Supreme  Court   as   to   Discrimiration. — 

"1.  That  the  words  'at  a  greater  rate  than  is  assessed  upon 
other  moneyed  capital  in  the  hands  of  individual  citizens'  re- 
fer to  the  entire  process  of  assessment,  which,  in  the  case  of 
national  bank  shares,  includes  both  their  valuation  and  the 
rate  of  percentage  on  such  valuation;  consequently,  that  the 
Act  of  Congress  is  violated  if,  in  connection  with  a  fixed  per- 
centage applicable  to  the  valuation  alike  of  national  bank 
shares  and  of  other  moneyed  investments  or  capital,  the  State 
law  establishes  or  permits  a  mode  of  assessment  by  which  such 
shares  are  valued  higher  in  proportion  to  their  real  value  than 
in  other  moneyed  capital, 

"2.  That  a  State  law  which  permits  individual  citizens  to 
deduct  their  just  debts  from  the  valuation  of  their  personal 
property  of  every  kind,  other  than  national  bank  sliarcs,  or 
which  permits  the  taxpayer  to  deduct  from  the  sum  of  his 
credits,  money  at  interest  or  other  demands  to  the  extent  of 
his  bona  fide  indebtedness,  leaving  the  remainder  to  be  taxed, 
while  it  denies  the  same  right  of  deduction  from  the  cash 
value  of  bank  shares,  operates  to  tax  the  latter  at  a  greater 
rate  than  other  moneyed  capital."^ 


iSee  Pollard  v.  The  State,  65  Ala.  628,  orerruling  Mclver  v.  RoblH- 
Hon,  53  Ala.  456. 


302  TAXATION  OF  NATIONAL  BANKS.  §  299 

§  298.  Discriminating  Exemptions  Must  be  of  Competing" 
Moneyed  Capital. — This  decision,  however,  as  will  be  seen, 
was  rendered  with  reference  to  the  sufficiency  of  the  allegations 
in  the  complaint,  and  must  be  considered  in  the  light  of  the  more 
restricted  meaning  of  the  term  "other  moneyed  capital"  adopted 
by  the  court  in  later  decisions.  Thus  in  a  case  from  Montana  the 
Supreme  Court  held^  that  the  exemption  of  the  stock  of  mining 
corporations  does  not  constitute  a  discrimination,  saying  that  the 
restriction  imposed  in  the  act  requires  equality  of  assessment  with 
other  moneyed  capital, — not  with  other  property  generally,  but 
with  that  property  which  passes  under  the  description  of  moneyed 
capital,  citing  Mercantile  National  Bank  v.  New  York,  infra, 
See.  299. 

§  299.  Meaning  of  "Other  Moneyed  Capital. "—The  lead- 
ing authority  on  the  subject  of  the  definition  of  moneyed  capital 
adopted  by  the  Supreme  Court  is  found  in  the  New  York  National 
Bank  Case.^  Discriminations  were  claimed,  in  view  of  the  decision 
of  the  court  in  Boyer  v.  Boyer,  supra,  Sec.  296,  and  were  based 
upon  the  provisions  of  the  New  York  statute  exempting  certain 
classes  of  personal  property,  which,  it  was  claimed,  constituted  a 
very  material  part  of  all  the  moneyed  capital  in  the  hands  of 
individuals.  The  court,  in  this  case,  after  reviewing  the  decisions, 
defined  the  meaning  of  the  words  "other  moneyed  capital"  as 
used  in  the  statute,  as  follows,  page  155 : 

"Of  course  it  includes  shares  in  national  banks;  the  use  of 
the  word  'other'  requires  that.  If  bank  shares  were  not 
moneyed  capital,  the  word  'other'  in  this  connection  would 
be  without  significance.  But  'moneyed  capital'  does  not 
mean  all  capital,  the  value  of  which  is  measured  in  terms  of 
money.  In  this  sense,  all  kinds  of  real  and  personal  property 
would  be  embraced  by  it,  for  they  all  have  an  estimated  value 
as  the  subjects  of  sale.  Neither  does  it  necessarily  include  all 
forms  of  investment  in  which  the  interest  of  the  owner  is  ex- 
pressed in  money.  Shares  of  stock  in  railroad  companies, 
mining  companies,  manufacturing  companies,  and  other  cor- 


1  Talbott  V.  Silver  Bow  County,  139  U.  S.  438,  supra. 

2  Mercantile  National  Bank  v.  New  York,  121  U.   S.  138,  30  L.   Ed. 
895  (1887),  affirming  28  Fed.  776. 


§    299  •  TAXATION    OP    NATIONAL   BANKS.  303 

porations,  are  represented  by  certificates  sliowing  that  the 
owner  is  entitled  to  an  interest,  expressed  in  money  value,  in 
the  entire  capital  and  property  of  the  corporation,  but  the 
property  of  the  corporation  which  constitutes  its  invested  cap- 
ital may  consist  mainly  of  real  and  personal  property,  which 
in  the  hands  of  individuals,  no  one  would  think  of  calling 
moneyed  capital,  and  its  business  may  not  consist  in  any  kind 
of  dealing  in  money,  or  commercial  representatives  of  money. ' ' 

"The  terms  of  the  Act  of  Congress,  therefore,  include  shares 
of  stock  or  other  interests  owned  by  individuals  in  all  enter- 
prises, in  which  the  capital  employed  in  carrying  on  its  busi- 
ness is  money,  where  the  object  of  the  business  is  the  making 
of  profit  by  its  use  as  money.  The  moneyed  capital  thus  em- 
ployed is  invested  for  that  purpose  in  securities  by  way  of 
loan,  discount,  or  otherAvise,  which  are  from  time  to  time,  ac- 
cording to  the  rules  of  the  business,  reduced  again  to  money 
and  reinvested.  It  includes  money  in  the  hands  of  individu- 
als employed  in  a  similar  way,  invested  in  loans  or  in  securi- 
ties for  tiie  payment  of  money,  either  as  an  investment  of  a 
permanent  character,  or  temporarily  with  a  view  to  sale  or 
repayment  and  reinvestment.  In  this  way  the  moneyed  cap- 
ital in  the  hands  of  individuals  is  distinguished  from  what  is 
known  generally  as  personal  property."^ 

This  meaning  of  "other  moneyed  capital,"  which  restricts  it  to 
capital  competing  with  national  banks,  has  been  reaffirmed  in 
several  eases.*  Thus,  the  court  saids  that  the  main  purpose  of 
Congi'ess  in  fixing  limits  to  State  taxation  on  investments  in  na- 
tional banks  was  "to  render  it  impossible  for  the  State  in  levying 
such  a  tax  to  create  and  fix  an  unequal  and  unfriendly  competi- 


lAs  to  "competing  moneyed  capital"  see  also  McMahon  v.  Palmer, 
102  N.  Y.  176;  Mercantile  National  Bank  v.  Shields,  59  Fed.  952;  Nat. 
Bank  of  Baltimore  v.  Baltimore,  92  Fed.  239. 

•  National  Bank  of  Garnett  v.  Ayers,  160  U.  S.  660,  40  L.  Ed.  573 
(1896),  affirming  53  Kansas  440;  Talbott  v.  Silver  Bow  County,  supra; 
First  Nat.  Bank  v.  Chapman,  173  U.  S.  205,  53  L.  Ed.  669  (1899),  affirm- 
ing 56  Ohio  St.  310;  Aberdeen  Bank  v.  Chehalis  County,  166  U.  S.  440, 
41  L.  Ed.  1069  (1897),  affirming  6  Washington  64;  Bank  of  Commerce 
V.  Seattle,  166  U.  S.  463,  41  L.  Ed.  1079  (1897);  Commercial  Bank  v. 
Chambers,  182  U.  S.  556,  supra;  Lander  v.  Mercantile  Nat.  Bank,  186 
V.  S.  457,  46  L.  Ed.  1247  (1902),  affirming  105  Fed.  809. 

»  First  National  Bank  of  Wellington  v.  Chapman,  supra. 


304  TAXATION    OF    NATIONAL   BANKS.  §    300 

tion  by  favoring  institutions  or  individuals  carrying  on  a  similar 
business"  and  investments  of  a  like  character.  The  language  of 
the  Act  of  Congress  is  to  be  read  in  the  light  of  this  policy.  After 
quoting  from  the  opinion  in  Mercantile  National  Bank  v.  New 
York,  supra,  the  court  said : 

"The  result  seems  to  be  that  the  term  'moneyed  capital'  as 
used  in  the  Federal  statute  does  not  include  capital  which 
does  not  come  into  competition  with  the  business  of  national 
banks,  and  that  exemptions  from  taxation,  however  large, 
such  as  deposits  in  savings  banks  or  moneys  belonging  to  char- 
itable institutions,  which  are  exempted  for  reasons  of  public 
policy,  and  not  as  an  unfriendly  discrimination  as  against  in- 
vestments in  national  bank  shares,  cannot  be  regarded  as  for- 
bidden by  the  Federal  statute." 

§  300.  No  Discrimination  in  New  York  Taxation  of  Rail- 
road, Business,  Mining-  or  Insurance  Companies. — Under  the 
definition  of  moneyed  capital  quoted  above,  it  was  held  by  the 
Supreme  Courti  that  there  was  no  discrimination  against  national 
banks  in  the  tax  system  of  New  York,  on  account  of  the  exemption 
of  the  shares  of  either  railroad,  business,  insurance  or  mining  com- 
panies. The  court  said  that,  as  to  such  corporations,  so  far  as  the 
policy  of  the  government  with  reference  to  national  banks  is  con- 
cerned, it  is  indifferent  how  the  States  choose  to  tax  them,  or 
whether  they  are  taxed  at  all,  and  continued  at  page  156 : 

"Whether  property  interests  in  railroads,  in  manufacturing 
enterprises,  in  mining  investments  and  others  of  that  descrip- 
tion are  taxed  or  exempt  from  taxation,  in  the  contemplation 
of  the  law,  would  have  no  effect  upon  the  success  of  national 
banks. ' ' 

It  had  been  held  in  People  v.  Commissioners,  supra,  Sec.  19, 
that  there  was  no  discrimination  against  national  banks  in  the 
fact  of  an  allowance  to  insurance  companies  of  a  deduction  for 
their  holdings  in  national  securities,  as  such  companies  are  not 
in  the  words  or  contemplation  of  the  Act  of  Congress.  This 
ruling  was  reaffirmed. 


1  Mercantile  Bank  v.  New  York,  121  U.  S.  138,  supra. 


K    302  TAXATION    OP    NATIONAL    BANKS.  305 

§  301.  No  Discrimination  in  New  York  Taxation  of  Trust 
Companies.—  Trust  campanies  under  the  New  York  statute 
were  taxable  at  that  time  for  local  purposes  upon  the  actual  value 
of  their  capital  stock,  but  were  subject  to  a  franchise  tax,  in  the 
nature  of  an  income  tax,  payable  to  the  State.  It  was  urged  in 
the  case  last  cited  that  this  was  a  discrimination  in  their  favor  as 
against  the  banks,  including  national  banks. 

The  court,  after  enumerating  the  powers  of^  trust  companies 
tinder  the  law  of  New  York,  said  that  they  were  not  banks  in  the 
commercial  sense  of  that  word,  and  did  not  perform  the  func- 
tions of  banks  in  carrying  on  the  exchanges  of  commerce.  It  ad- 
mitted however,  that  receiving  money  on  deposit  and  investing  in 
loans  and  dealing  in  money  and  securities  did  properly  bring 
the  shares  of  stock  of  their  shareholders  within  the  definition  of 
moneyed  capital  as  used  in  the  Act  of  Congress.  But  the  court 
found  that,  under  the  method  of  taxation  adopted  by  the  State  of 
New  York,  there  was  no  substantial  discrimination,  as  trust  com- 
panies paid  the  State  franchise  tax  in  addition  to  that  for  local 
purposes  on  their  capital.^ 

§  302.  Nor  in  Exemption  of  Deposits  in  Savings  Banks, 
Building-  and  Loan  Associations  or  Stock  in  Foreign  Corpora- 
tions.—The  deposits  in  Savings  Banks  in  New  York,  amount- 
ing to  $437,107,501,  with  an  accumulated  surplus  of  $69,669,000, 
were  admitted  by  the  court^  to  be  ''moneyed  capital."  But  it 
was  said  to  be  equally  clear  that  such  institutions  are  not  within 


1  In  Jenkins  v.  Neff,  186  U.  S.  230,  46  L.  Ed.  1140  (1902),  affirming  163 
N.  Y.  320,  the  court  reaffirmed  this  ruling  as  to  trust  companies.  It 
■was  urged  that  trust  companies  by  recent  legislation  of  New  York,  had 
been  placed  on  an  equality  with  banks,  and  that  they  were  practically 
doing  a  banking  business  competing  with  national  banks.  But  the 
court  said  that  there  was  no  change  in  .the  legislation  of  New  York 
which  called  for  any  limitation  of  the  decision  in  the  Mercantile  Na- 
tional Bank  Case.  It  was  to  be  presumed  that  if  the  trust  or  other 
companies  were  exercising  powers  not  authorized  by  the  law,  the  State 
would  take  the  proper  stops  to  keep  them  within  their  statutory  limits, 
and  any  neglect  in  a  limited  time  to  do  so  could  not  be  construed  as  an 
assent  by  the  State  to  such  an  improper  assumption  of  power. 

2  Mercantile  Bank  v.  New  York,  supra. 


306  TAXATION  OF  NATIONAL  BANKS.  §  803 

the  meaning  of  the  Act  of  Congress,  because  no  one  could  suppose 
for  a  moment  that  savings  banks  come  into  business  competition 
with  the  national  banks  of  the  United  States.  Their  exemption 
was  therefore  in  accordance  with  wise  public  policy,  and  could  not 
operate  as  an  unfrinedly  discrimination  against  investments  in 
national  bank  shares.  It  is  immaterial  that  savings  banks  are  per- 
mitted to  transact  a  banking  business  in  the  way  of  loans  upon 
personal  securities.  They  are  substantially  institutions  organized 
in  pursuance  of  a  great  and  beneficial  public  policy,  for  the  pur- 
pose of  investing  the  savings  of  small  depositors. i 

The  same  principle  was  extended  to  Building  and  Loan  Associa- 
tions, and  it  was  held  that  the  exemption  of  their  funds  from  taxa- 
tion does  not  constitute  a  discrimination.s 

The  exemption  of  municipal  bonds  of  New  York  amounting  to 
$13,467,000  was  held  in  the  same  case  to  involve  no  discrimina- 
tion. Such  securities  undoubtedly  represent  moneyed  capital, 
but  as  from  their  nature  they  are  not  ordinarily  subject  to  taxa- 
tion, they  are  not  within  the  rule  established  by  Congress. 

The  court  decided  further  that  the  exemption  of  stocks,  owned 
by  citizens  of  New  York  in  corporations  created  by  other  States 
and  amounting  to  at  least  $250,000,000,  constituted  no  discrimina- 
tion. It  had  been  decided  by  the  courts  of  New  York  that  they 
were  not  subject  to  taxation,  as  they  had  no  sihis  within  the  terri- 
tory of  that  State  for  that  purposes 

§  303.  Discrimination  Throug-h  Deduction  of  Debts  from 
"Other  Moneyed  Capital. "—The  decisions  of  the  Supreme 
Court,  with  reference  to  discrimination  through  the  allowance  of 
deduction  of  debts  from  personal  property,  must  be  considered  in 
the  light  of  the  definition  of  other  moneyed  capital  first  an- 
nounced in  the  Mercantile  Bank  case,  supra,  Sec.  305.  Under  that 
definition,  where  the  right  of  deduction  is  given  to  all  personal 


IBank  of  Redemption  v.  Boston,  125  U.  S.  68;  Davenport  Bank  v. 
Davenport  Board  of  Equalization,  123  U.  S.  83,  23  L.  Ed.  94  (1887). 

2  Mercantile  National  Bank  of  Cleveland  v.  Hubbard,  98  Fed.  465. 

3  The  same  ruling  was  applied  to  the  taxing  laws  of  New  Jersey, 
which  did  not  differ  materially  from  the  laws  of  New  York,  Newark 
Banking  Co.  v.  Newark,  121  U.  S.  163,  30  L.  Ed.  904  (1887). 


S    303  T^VXATION    OF    NATIONAL   BANKS.  807 

property,  including  ''other  moneyed  capital,"  or  to  siicli  class  of 
personal  property  as  includes  other  moneyed  capital  competing 
with  national  banks,  the  same  right  of  deduction  must  be  given  to 
shareholders  in  national  banks.  Thus  the  State  of  New  York  by 
its  taxing  policy  allowed  a  deduction  of  just  debts  from  the  valua- 
tion of  all  personal  property,  excepting  so  much  thereof  as  con- 
sisted of  shares  of  stock  in  corporations.  The  Supreme  Court 
held  that  this  statute,  as  construed  by  the  New  York  Court  of 
Appeals,  was  a  discrimination  against  the  national  bank  shares 
in  violation  of  the  Act  of  Congress,  for  the  owners  of  these 
shares  could  not  diminish  the  amount  of  their  tax  by  the  amount 
of  their  debts  as  could  the  owners  of  "other  moneyed  capital."^ 
The  statute  under  which  the  assessment  was  made  however,  was 
not  rendered  void  by  this  discrimination,  nor  was  the  assessment 
made  thereunder  void,  but  was  entirely  valid  if  the  stockholder 
had  no  debts  to  deduct.  If  he  had  debts,  the  assessment  excluding 
them  from  computation  was  voidable,  but  the  assessing  officers 
acted  within  their  authority  in  assessing  him  without  deduction, 
until  they  were  duly  notified  that  he  had  debts.^ 

A  national  bank  can  maintain  suit  on  behalf  of  its  stockholders 
to  enjoin  the  collection  of  a  tax  unlawfully  assessed  because  of  the 
failure  to  allow  for  the  deduction  of  debts.^  The  court  in  the  case 
cited  permitted  an  amendment  to  the  pleadings  to  allow  each 
stockholder  to  show  the  amount  of  the  deduction  to  which  he  was 
entitled.* 

The  statute  of  Indiana,  allowing  the  taxpayer  to  deduct  from 
the  sum  of  his  credits,  money  at  interest  and  demands  against  per- 
sons or  corporations  the  amount  of  his  bona  fide  indebtedness,  but 


1  People  V.  Weaver,  100  U.  S.  539,  25  L.  Ed.  705  (1880).  See  opinion 
of  New  York  Court  of  Appeals  in  People  v.  Dolan,  36  N.  Y.  59;  Mc- 
Henry  t.  Downer,  116  Cal.  20,  45  L.  R.  A.  737  (annotated).  People 
ex  rel.  v.  Ryan,  88  N.  Y.  142,  holds  that,  where  debts  are  allowed  to  be 
deducted  from  the  value  of  the  shares,  a  debt  upon  a  note  for  bor- 
rowed money  which  was  invested  in  government  bonds  should  be  de- 
ducted, although  the  transaction  was  a  mere  device  to  escape  taxation. 

2  Supervisors  v.  Stanley,  105  U.  S.  305,  26  L.  Ed.  1044  (1882). 

3  Hills  v.  Exchange  Bank,  105  U.  S.  319.  26  I..  Ed.  1052  (1882). 

4  As  to  procedure  in  matter  of  claiming  deduction,  see  Stanley  v.  Su- 
pervisors of  Albany,  121  U.  S.  535,  30  L.  Ed.  1000  (1887). 


308  TAXATION    OP    NATIONAL    BANKS.  §    304 

not  permitting  deduction  from  any  other  kind  of  moneyed  capital, 
was  also  held  to  be  a  discrimination  against  national  banks.* 
Counsel  claimed  that  the  statute  of  Indiana  differed  from  the  New 
York  statute.  But  the  court  said  that  "credits,  money  loaned  at 
interest  and  demands  against  persons  or  corporations  are  more 
purely  representative  of  moneyed  capital  than  personal  property, 
so  far  as  they  can  be  said  to  differ, ' '  and  that  the  * '  rights,  credits, 
demands  and  money  at  interest  mentioned  in  the  Indiana  statute" 
meant  ''moneyed  capital  invested  in  that  way."  An  injunction 
was  therefore  allowed  against  the  enforcement  of  the  tax  as  to 
those  shareholders,  who  proved  that  they  were  entitled  to  deduc- 
tions for  debts. 

The  taxing  system  in  New  York,  it  was  held,  could  not  be  said 
to  contravene  the  Federal  law  forbidding  discrimination  against 
the  holders  of  national  bank  stock  merely  because  in  an  individual 
case  it  may  result  that  the  owner  of  shares  of  national  bank  stock, 
who  is  indebted,  might  sustain  a  heavier  tax  than  another  like- 
wise indebted  who  has  invested  his  money  elsewhere.  This  did 
not  necessarily  mean  that  there  was  a  discrimination  in  favor  of 
other  moneyed  capital.' 

§  304.  No  Discrimination  in  Deduction  of  Debts  from  Non- 
competing  Capital. — The  restriction  of  the  meaning  of  ''mon- 
eyed capital"  is  illustrated  in  the  rulings  of  the  court  with  refer- 
ence to  the  taxing  system  of  Ohio.    Thus  it  was  held^  that  share- 


lEvansville  Bank  v.  Britton,  105  U.  S.  322,  26  L.  Ed.  1053  (1882). 

Chief  Justice  Waite  and  Justice  Gray  dissented  on  the  ground  that 
they  did  not  thinli  it  was  the  intention  of  Congress  to  require  a  deduc- 
tion for  debts,  from  the  value  of  shares,  when  such  deduction  was  only 
allowed  to  other  persons  from  this  one  kind  of  moneyed  capital.  But 
Justice  Bradley  dissented  for  the  reason  that  in  his  opinion  the  law  was 
void  in  toto  as  to  national  banks;  that  the  probability  was  that  not  one 
in  ten  of  the  shareholders  would  ever  have  notice  of  the  assessment 
in  time  to  claim  deduction  for  debts,  and  one  who  had  notice  would 
naturally  be  reluctant  to  make  known  the  amount  of  his  debts  before  a 
board  of  bank  officers.  The  law  as  thus  construed  would  act  as  a  pro- 
hibition against  the  purchase  of  stock  by  those  who  owed  debts,  and  they 
constitute  a  considerable  portion  of  every  community. 

2  New  York  ex  rel.  v.  Purdy,  231  U.  S.  371,  58  L.  Ed.  274  (1913). 

sWhitbeck  v.  Mercantile  Bank,  127  U.  S.  193,  32  L.  Ed.  118  (1888). 


5    304  TAXATION    OF    NATIONAL    BANKS.  309 

holders  in  national  banks  of  Ohio  were  entitled  to  a  deduction 
of  their  bond  fide  indebtedness  under  the  provisions  of  the  Ohio 
statute  allowing  such  deductions  from  credits.  The  attention  of 
the  court  in  this  case  does  not  seem  to  have  been  called  to  the  speci- 
fic definition  in  the  Ohio  statute  of  the  "credits"  from  which  de- 
ductions were  allowed. 

But  in  a  later  case^  the  court  said  that  the  system  of  taxation 
adopted  in  Ohio  was  not  intended  to  be  unfriendly  or  discrimin- 
ative against  the  owners  of  shares  in  national  banks,  for  the  sys- 
tem was  adopted  by  the  State  prior  to  the  passage  of  the  Act  of 
Congress,  and  the  shares  in  national  banks  were  taxed  precisely 
like  the  shares  in  State  banks. 

The  discrimination  was  not  illegal,  unless  it  was  shown  clearly 
to  be  in  favor  of  moneyed  capital  other  than  that  employed  in 


1  National  Bank  of  Wellington  v.  Chapman,  173  U.  S.  205,  supra.  The 
term  "credits"  from  which  deduction  for  debts  is  allowed  in  the  Ohio 
statute  is  thus  defined  in  the  statute  (see  p.  209) : 

"The  term  'credits'  means  the  excess  of  the  sum  of  all  legal  claims 
and  demands,  whether  for  money  or  other  valuable  thing,  or  for  labor  or 
service  due  or  to  become  due  to  the  person  liable  to  pay  the  tax  thereon, 
including  deposits  in  banks,  or  with  persons  in  or  out  of  the  State, 
other  than  such  as  are  held  to  be  money  as  defined  in  this  section,  when 
added  together  (estimating  every  such  claim  or  demand  at  its  true 
value  in  money),  over  and  above  the  sum  of  legal  'bona  fide  debts  owing 
by  such  person;  but  in  making  up  the  sum  of  such  debts  owing,  no 
obligation  can  be  taken  into  account:  (1)  to  any  mutual  insurance 
company;  (2)  for  any  unpaid  subscription  to  the  capital  stock  of  any 
joint-stock  company;  (3)  for  any  subscription  for  any  religious,  scien- 
tific or  charitable  purpose;  (4)  for  any  indebtedness  acknowledged 
unless  founded  upon  some  consideration  actually  received  and  believed 
at  the  time  of  making  the  acknowledgment  to  be  a  full  consideration 
therefor;  (5)  for  any  acknowledgment  made  for  the  purpose  of  dimin- 
ishing the  amount  of  credits  to  be  listed  for  taxation;  (6)  for  any 
greater  amount  or  portion  of  any  liability  as  surety  than  the  person  re- 
quired to  make  the  statement  of  such  credits  believes  that  such  surety 
is  in  equity  bound  to  pay,  etc." 

The  court  refused  to  consider  the  report  of  the  auditor  of  the  State 
showing  that  the  total  credits,  after  deducting  debts  allowed,  amounted 
to  $106,000,000  to  $111,000,000,  the  amountr,  differing  to  that  extent  as 
presented  by  cbunsel,  as  there  v/as  nothing  to  show  that  the  report  had 
been  received  in  evidence  or  that  there  was  any  finding  on  the  subject. 


310  TAXATION  OF  NATIONAL  BANKS.  §  305 

State  or  national  banks.  The  term  "credits"  as  defined  in  the 
Ohio  statute  included  many  subjects  which  had  no  possible  rela- 
tion to  the  business  of  national  banks.  It  therefore  devolved  upon 
the  shareholders  who  complained  of  discrimination  to  show  how 
much  moneyed  capital  there  was  included  in  the  credits  from 
which  deductions  were  allowed,  and  the  record  afforded  no  means 
of  ascertaining  that  fact.  The  court  said  that  the  case  of  Whit- 
beck  V.  Mercantile  National  Bank  of  Cleveland,  supra,  was  not  an 
authority  adverse  to  this  principle,  as  the  attention  of  the  court 
in  that  case  was  not  called  to  the  peculiar  terms  of  the  Ohio  stat- 
ute.^ 

Under  this  decision  it  is  not  sufficient  that  the  credits  from 
which  deduction  is  allowed  include  sonie  moneyed  capital.  There 
must  be  some  evidence  from  which  the  court  can  determine  how 
much  moneyed  capital  is  in  fact  included,  in  order  to  decide 
whether  or  not  there  is  a  substantial  discrimination. 

§  305.  No  Discrimination  in  Deduction  of  Debts  of  Unin- 
corporated Banks. — It  was  held  in  this  same  case  that  the  de- 
duction of  debts  existing  in  the  business  from  the  amount  of 
moneyed  capital  belonging  to  a  banker  or  unincorporated  State 
Bank  is  necessary  for  the  determination  of  the  real  value  of  the 
capital  that  is  employed  in  the  business,  and  is  equivalent  in  its 
results  to  the  system  employed  in  the  case  of  incorporated  State 
banks  and  national  banks.  As  long  as  the  deduction  is  allowed  to 
the  debts  existing  in  the  business  only  and  not  to  general  debts 
disconnected  with  the  business,  there  is  no  discrimination.  The 
court  said,  at  page  216 : 

"Thus  in  both  incorporated  and  unincorporated  banks  the 
same  thing  is  desired,  and  the  same  result  of  assessing  the 
value  of  the  capital  employed  in  the  business,  after  the  deduc- 
tion of  the  debts  incurred  in  its  conduct,  is  arrived  at  in  each 
case  as  nearly  as  is  possible,  considering  the  difference  in  man- 
ner in  which  the  moneyed  capital  is  represented  in  unincor- 
porated banks  as  compared  with  incorporated  banks  which 


1  For  recent  decisions  involving  the  Ohio  law,  see  Lander  v.  Mercantile 
Nat.  Bank  of  Cleveland,  supra,  reversing  45  C.  C.  A.  666,  and  Cleveland 
Trust  Co.  V.  Lander,  62  Ohio  St.  266. 


§    306  T.VXATION    OP    NATIONAL    BANKS.  311 

have  a  capital  stock  divided  into  shares.  That  mathematical 
equality  is  not  arrived  at  in  the  process  is  immaterial.  It  can- 
not be  reached  in  any  system  of  taxation,  and  it  is  useless  and 
idle  to  attempt  it.  Equality,  so  far  as  the  differing  facts  will 
permit,  and  as  near  as  they  will  permit,  is  all  that  can  be 
aimed  at  or  reached.  That  measure  of  equality  we  think  is 
reached  under  this  system.  So  far  as  this  point  is  concerned, 
it  is  entirely  plain  there  is  no  discrimination  between  unincor- 
porated banks  and  bankers  on  the  one  hand  and  holders  of 
shares  in  national  banks  on  the  other. '  '^ 

§  306.  Discrimination  Through  Failure  to  Assess  Other 
Moneyed  Capital. — Efforts  to  resist  payment  of  taxes  upon 
national  bank  shares,  on  account  of  the  common  failure  of  taxing 
authorities  to  reach  intangible  personal  property  for  taxation, 
have  proved  unsuccessful.  Such  failure  growing  out  of  the  in- 
herent difficulties  of  enforcing  such  taxation,  does  not  constitute 
an  intentional  discrimination  within  the  meaning  of  the  Act  of 
Congress,  for  the  difficulty  is  not  in  the  State  statute  nor  in  its  in- 
tentional administration.  There  must  be  a  substantial  showing  in 
any  event  that  the  property  escaping  taxation  is  capital  compet- 
ing for  business  with  the  national  banks,  not  merely  a  general 
averment  of  a  legal  conclusion.  Facts  must  be  stated,  so  that  the 
court  can  determine  as  to  the  taxable  character  of  the  property 
which  it  is  claimed  is  exempted.^ 


iThe  Supreme  Court  of  Nebraska  reached  the  same  conclusion  in 
Dressier  v.  Wayne  County,  32  Neb.  834,  and  13  L.  R.  A.  614,  in  1891, 
v/here  the  court  construed  and  applied  the  decision  of  the  United  States 
Supreme  Court  in  Mercantile  National  Bank  v.  New  York,  121  U.  S. 
138,  supra,  overruling  the  opinion  previously  reported  in  the  same  case, 
25  Neb.  468.  The  court  held  that  the  term  "credits,"  as  used  in  the 
Nebraska  statute,  from  which  deduction  of  debts  was  allowed  was  not 
intended  to  include  any  moneyed  capital,  such  as  notes  or  other  credits 
of  that  character.  See  also  1st  Nat.  Bk.  v.  Turner,  154  Ind.  456,  making 
the  same  ruling  as  to  the  statute  of  Indiana;  and  in  Virginia,  Burroughs 
V.  Smith,  95  Va.  694,  and  People's  Nat.  Bk.  v.  Marye,  107  Fed.  570. 
But  see  Newport  v.  Mudgett,  18  Wash.  271,  distinguishing  1st  Nat.  Bk. 
of  Aberdeen  v.  Chehalis  Co.,  and  Nat.  Bk.  of  Com.  of  Seattle  v.  Seattle, 
supra,  p.  320,  and  holding  the  deduction  of  debts  from  the  assessed  value 
of  national  bank  shares  required  under  the  State  constitution. 

2  Aberdeen  Bank  v.  Chehalis  County,  166  U.  S.  440,  supra;  Primm  t. 
Fort,  23  Tex.  Civ.  App.  605. 


312 


TAXATION    OF    NATIONAL   BANKS.  §    308 


§  307.  Tax  Upon  Deposits  Not  Discriminative.— The  semi- 
annual tax  imposed  upon  interest-bearing  deposits  in  national 
banks,  which  the  bank  paid  upon  the  basis  of  average  deposits, 
charging  the  same  to  the  depositors  and  thereby  relieving  the 
latter  from  the  necessity  of  making  any  return,  did  not  discrim- 
inate unfairly  against  national  banks  where,  under  the  State 
laws,  the  State  banks  paid  a  franchise  tax  at  substantially  the 
same  rate  upon  the  average  amount  of  deposits,  after  deducting 
deposits  in  excess  of  $2000.00,  upon  which  the  depositors  are 
taxed  locally,  depositors  being  exempted  from  taxation  upon 
those  deposits  which  enter  into  the  calculation  of  the  av- 
erage. 

The  ruling  of  the  highest  State  court  that  this  tax,  which  the 
bank  could  pay  and  charge  to  depositors,  was  laid  upon  the  de- 
positor and  not  upon  the  bank,  was  conclusive  upon  the  Federal 
Supreme  Court,  when  testing  by  wi'it  of  error  from  the  State 
court,  the  validity  of  the  statute.^ 

§  308.    Discrimination  Must  be  Substantial.— Whatever  be 

the  character  of  the  discrimination,  it  must  be  substantial,  so  as 
to  constitute  an  etfective  violation  of  equality  of  taxation  upon 
national  bank  stock  as  compared  with  other  and  competing  mon- 
eyed capital.2  As  shown  supra,  Sec.  268,  the  fact  that  the  tax 
illegally  imposed  is  no  greater  in  amount  than  a  legal  tax 
would  be  constitutes  no  defense,  so  that  form  as  well  as 
substance  may  be  material  in  determining  the  validity  of 
the  tax. 

Thus  in  Wisconsin,  where  State  banks  were  required  to  pay 
a  semi-annual  State  tax  of  three-fourths  of  one  per  cent  on  the 
amount  of  the  capital  stock,  regardless  of  the  fact  whether  the 
capital  was  invested  in  United  States  securities  or  whether  it 
had  been  lost  in  business  or  not,  the  court  held  that  it  was  in  effect 


1  Clement  National  Bank  v.  Vermont,  232  U.  S.  120,  58  L.  Ed.  147 
(1913). 

2  Lionberger  v.  Rowse,  9  Wall.  468,  supra;  Richards  T.  Town  of  Rock 
Rapids,  31  Fed.  505. 


§  310  TAXATION  OF  NATIONAL  BANKS.  313 

a  franchise  tax,  and  therefore  a  fair  equivalent  to  that  imposed  on 
the  shares  of  stock  of  national  bauks.i 

The  revenue  law  of  Kentucky,  imposing  a  tax  on  bank  stock 
of  fifty  cents  on  each  share  equal  to  one  hundred  dollars  of  stock, 
was  held  valid  as  to  national  banks,^  because  the  tax  was  clearly 
intended  to  be  at  the  rate  of  fifty  cents  per  one  hundred  dollars 
or  one-half  of  one  per  cent  on  the  share,  whatever  the  par  value 
of  the  stock. 

§  309.  A  Difference  in  Taxation  Not  Necessarily  Discrim- 
inative.— ^Discrimination  against  national  banks  forbidden  by 
the  United  States  law  does  not  necessarily  result  from  the  adop- 
tion by  a  State  of  a  different  method  of  taxation  with  reference 
to  national  banks  from  what  it  has  adopted  for  State  banks.  The 
retroactive  provision  of  the  Kentucky  act  of  March  21,  1900,  re- 
lating wholly  to  national  banks,  such  banks  being  charged 
with  the  liability  for  taxes  for  the  past  year  on  their  capital  stock, 
whether  they  are  held  within  or  without  the  State,  and  sub- 
ject to  a  penalty  in  addition  for  delinquency,  was  held  to  operate 
as  a  discrimination  against  such  banks,  prohibited  by  the 
United  States  statute.^ 

§  310.  Resident  and  Non-resident  Shareholders. — While 
the  retroactive  features  of  the  Kentucky  act  of  March  21,  1900, 
making  it  the  duty  of  certain  officers  of  each  national  bank  to 
list  its  shares  for  taxation  and  requiring  the  bank  to  pay  the 
tax,  a  penalty  for  delinquency,  did  not,  so  far  as  the  shares  of 
the  resident  shareholders  were  concerned,  operate  against  the 
bank  contraiy  to  the  statute,  nor  involve  the  want  of  due 
process  of  law,  although  the  shareholders  and  the  number  of 
shares  might  not  be  the  same  as  when  the  liability  to  taxation 
arose,  where  such  statute  is  construed  by  the  State  courts  as  not 
imposing  any  new  liability  upon  the  domestic  shareholders  of  the 


iVan  Slyke  v.  The  State,  23  Wise.  655;  Bagnall  v.  The  State,  25 
Wise.  112,  affirmed  in  154  U.  S.  581. 

2  National  Bank  v.  Commonwealth,  9  Wall.  353,  supra. 

8  Covington  v.  First  National  Bank,  191  U.  S.  100,  49  L.  Ed.  963 
(1905),  affirming  129  Fed.  792. 


314  TAXATION   OF   NATIONAL  BANKS.  §   311 

bank,  but  is  simply  providing  another  method  for  the  assessment  of 
shares  which  have  escaped  taxation,  because  not  listed  for  taxa- 
tion, only  the  non-resident  shareholders  could  complain  of  the 
supposed  invalidity  of  these  provisions  as  to  them.^ 

§  311.  Difference  in  Rate  of  Taxation  Not  Necessarily  Dis- 
criminative.— The  statute  forbids  discrimination  between  na- 
tional and  State  banks  or  in  favor  of  other  moneyed  capital  in  the 
hands  of  private  individuals,  but  it  does  not  prohibit  a  difference 
in  rate  between  national  banks  under  different  circumstances,  pro- 
vided State  banks  and  competing  moneyed  capital  are  treated  in 
the  same  way.  Thus  the  statute  of  Pennsylvania  pro- 
vided that,  where  any  bank  collected  from  its  shareholders  a  tax 
of  eight  mills  on  the  dollar  upon  the  par  value  of  its  shares  and 
paid  the  same  into  the  State  treasury,  its  shares  and  so  much  of 
its  capital  and  profits  as  should  be  invested  in  real  estate  should  be 
exempted  from  local  taxation ;  but  if  any  national  bank  failed  to 
collect  the  tax  of  eight  mills  on  the  dollar  upon  the  par  value  of 
its  shares,  it  must  then  make  a  return  showing  the  full  number 
of  shares  of  capital  stock  issued  by  it  and  the  actual  value  thereof, 
which  should  be  assessed  for  taxation  at  the  same  rate  as  that  im- 
posed upon  other  moneyed  capital  in  the  hands  of  individual 
citizens,  that  is  to  say,  at  the  rate  of  four  mills  on  the  dollar  of 
the  actual  value  thereof.  Thus  if  the  bank  had  a  large  surplus 
and  its  stock  was  in  consequence  worth  several  times  its  par 
value,  it  would  naturally  elect  to  pay  the  eight  mills,  and  thus  in 
fact  pay  at  a  less  rate  on  the  actual  value  of  its  stock  than  a  bank 
without  a  surplus  whose  stock  was  only  worth  par.  The  court 
held  that  this  was  no  violation  of  the  National  Banking  Act.2  It 
was  urged  that  there  was  discrimination,  because,  in  case  the 
State  banks  did  not  elect  to  pay  the  eight  mills,  the  State  would 
look  to  the  stockholders  directly  for  the  regular  four  mills  tax; 
whereas  as  to  national  banks  it  would  reach  the  stockholders 
through  the  bank  itself,  and  hence  some  shareholders  in  State 


1  Citizens  National  Bank  v.  Kentucky,  217  U.  S.  443,  54  L.  Ed.  832 
(1910). 

« Merchants'  &  Manufacturers'  Bank  v.  Pennsylvania,  167  U.  S.  461, 
supra. 


§    313  TAXATION    OF    NATIONAL   BANKS.  315 

banks  might  escape  taxation.  But  the  court  said  that  this  was  a 
mere  matter  of  procedure  and  did  not  affect  the  validity  of  the 
law. 

§  312.  Equality  of  Taxation  Requires  Equality  in  Valua- 
tion as  in  Rate  of  Taxation. — It  is  obvious  that  inequality  in 
taxation  is, effected  as  surely  through  difference  in  valuation  by 
the  assessors  as  by  difference  in  the  rate  of  taxation  imposed  by 
law.  Such  inequality  between  the  assessment  of  national  bank 
shares  and  other  competing  moneyed  capital  involves  a  discrim- 
ination in  violation  of  the  Act  of  Congress.  This  principle  has 
been  applied  in  several  adjudged  cases  and  the  rule  established 
that  the  inequality,  to  constitute  discrimination,  must  be  some- 
thing more  than  sporadic  and  occasional,  must  in  fact  be  habitual 
and  intentional,  so  as  to  constitute  a  rule  of  conduct. 

Thus  the  Supreme  Court  said  in  a  New  York  case  :i 

''This  valuation,  then,  is  part  of  the  assessment  of  taxes. 

"It  is  a  necessary  part  of  every  assessment  of  taxes  which  is 
governed  by  a  ratio  or  percentage.  There  can  be  no  rate  or 
percentage  without  a  valuation.  This  taxation,  says  the  act, 
shall  not  be  at  a  greater  rate  than  is  assessed  on  other  moneyed 
capital.  What  is  it  that  shall  not  be  greater?  The  answer  is, 
taxation.  In  what  respect  shall  it  be  not  greater  than  the  rate 
assessed  upon  other  capital?  We  see  that  Congress  had  in  its 
mind  an  assessment,  a  rate  of  assessment,  and  a  valuation; 
and,  taking  all  these  together,  the  taxation  on  these  shares 
was  not  to  be  greater  than  on  other  moneyed  capital." 

In  an  Ohio  case  it  appeared  that  the  city  of  Cleveland  gener- 
ally assessed  bank  shares  higher  than  other  personal  property, 
and  that  this  was  not  a  mere  occasional  incident,  but  a  rule  of 
conduct  deliberately  adopted.  The  tax  on  national  bank  shares 
was  about  sixty  per  cent  of  its  real  value  greater  than  that  on 
other  moneyed  capital. 2 

§  313.    Supreme  Court  on  Assessors'  Practice  of  Valuation. 

— In  another  Ohio  case  from  Toledo,  it  appeai'ed  that  a  rule  of 
valuation  had  been  established  by  the  asssessors,  whereby  ordinary 


1  People  V.  Weaver,  100  U.  S.  539,  1.  c.  545,  supra. 

sPeltou  V.  National  Bank,  101  U.  S.  143,  25  L.  Ed.  901  (1880). 


816  TAXATION   OF    NATIONAL   BANKS.  §    313 

personal  property  was  assessed  at  about  one-third  of  its  actual 
value,  money  or  invested  capital  at  three-fifths  of  its  actual  value, 
while  the  assessment  of  shares  of  incorporated  banks  was  fully 
equal  to  their  selling  price  and  true  value  in  money.  It  was 
said  that  while  the  constitution  and  statutes  of  nearly  all  the 
States  have  enactments  designed  to  compel  uniformity  of  taxation 
and  assessments  at  the  actual  value  of  all  property  liable  to 
taxation,  yet  it  is  a  matter  of  common  observation  that  in  the 
assessment  of  real  estate  this  rule  is  habitually  disregarded. ^ 
The  opinion  concluded,  1.  c.  p.  Ifi3 : 

**And  while  it  may  be  true  that  there  has  not  been  in  other 
States  such  concerted  action  over  a  large  district  of  country 
by  the  primary  assessors  in  fixing  the  precise  rates  of  depar- 
ture from  actual  value,  as  is  shown  in  this  case,  it  is  believed 
that  the  valuation  of  real  estate  for  purposes  of  taxation  rarely 
exceed  half  of  its  current  salable  value.  If  we  look  for  the 
reason  for  this  common  consent  to  substitute  a  custom  for  the 
positive  rule  of  the  statute,  it  will  probably  be  found  in  the 
difficulty  of  subjecting  personal  property,  and  especially  in- 
vested capital,  to  the  inspection  of  the  assessor  and  the  grasp 
of  the  collector.  The  effort  of  the  land  owner,  whose  property 
lies  open  to  view,  which  can  be  subjected  to  the  lien  of  a  tax 
not  to  be  escaped  by  removal,  or  hiding,  to  produce  something 
like  actual  equality  of  burden  by  an  undervaluation  of  his 
land,  has  led  to  this  result.  But  whatever  may  be  its  cause, 
when  it  is  recognized  as  the  source  of  manifest  injustice  to  a 
large  class  of  property  around  which  the  constitution  of  the 
State  has  thrown  the  protection  of  uniformity  of  taxation  and 
equality  of  burden,  the  rule  must  be  held  void,  and  the  injus- 
tice produced  under  it  must  be  remedied  so  far  as  the  judicial 
power  can  give  remedy." 


2Cummings  v.  National  Bank,  101  U.  S.  153,  25  L.  Ed.  903  (1880). 
Chief  Justice  Waite  dissenting.  As  to  the  presumption  of  violation  of 
official  duty  in  such  cases,  see  comments  on  this  opinion  in  New  York 
ex  rel.  v.  Barker,  179  U.  S.  279,  1.  c.  286,  45  L.  Ed.  190  (1900),  affirming 
158  N.  Y.  709.  But  it  was  held  in  Texas,  Engelke  v.  Schlenker,  75  Tex. 
559,  that  the  legality  of  the  assessment  of  a  tax  upon  the  property  of  a 
national  bank  which  does  not  exceed  its  true  value  cannot  be  affected 
by  the  custom  of  the  assessor  to  assess  other  property  at  a  uniform 
valuation  less  than  its  true  value. 


5    314  TAXATION   OF    NATIONAL   BANKS.  317 

§  314.    Inequality  Must  be  Intentional  and  Habitual. — In 

both  these  Ohio  cases  injuuetions  were  granted,  complaiuauts  hav- 
ing paid  into  court  the  amount  admitted  to  be  due.  This  principle 
that  inequality  in  valuation  constitutes  discrimination  has  been 
followed,  but  with  the  qualification  already  noted,  that  it  must 
affirmatively  appear  that  the  inequality  is  intentional  and  habit- 
ual. Thus  in  a  New  York  case,  where  the  assessors  had  adopted 
the  plan  of  valuing  bank  shares  at  par,^  and  an  action  at  law 
had  been  brought  to  recover  taxes  alleged  to  have  been  illegally 
collected,  the  court  held  that  the  testimony  did  not  warrant  the 
inference  that  there  was  an  habitual  assessment  of  national  bank 
shares  at  a  higher  rate  than  other  moneyed  capital,  and  com- 
mented on  the  assessment  at  par  as  follows,  1.  c.  p.  548 : 

"A  different  method  might  have  led  to  perplexing  difficul- 
ties, owing  to  the  great  fluctuations  to  which  shares  in  bank- 
ing institutions  are  subject,  their  value  depending  very  much 
on  the  skill  and  wisdom  of  the  managers  of  those  institutions. 
Intelligent  men  constantly  differ  in  their  estimate  of  the  value 
of  such  property,  and  the  stock  market  shows  almost  daily 
changes.  Presumptively  the  nominal  value  is  the  true  value, 
any  increase  from  profits  going,  in  the  natural  course  of  things, 
in  dividends  to  the  stockholders.  This  method,  applied  to  all 
banks,  national  and  State,  comes  as  near  as  practicable,  con- 
sidering the  nature  of  the  property,  to  securing,  as  between 
them,  uniformity  and  equality  of  taxation;  it  cannot  be  con- 
sidered as  discriminating  against  either.  Both  are  placed  on 
the  same  footing."    .     .     . 

It  was  said  that  the  proper  remedy  in  such  a  case,  if  relief 
was  not  afforded  by  the  State  revising  boards,  was  by  application 
to  a  court  of  equity  to  restrain  the  collection  of  the  excess  upon 
payment  or  tender  of  what  was  admitted  to  be  due. 

In  another  Ohio  case  it  appeared  that  other  moneyed  capital 
was  valued  on  a  sixty  per  cent  basis  and  bank  shares  at  a  rate 
of  sixty-five  per  cent,  and  the  collection  of  the  excessive  five  per 
cent  was  restrained.2 


1  Stanley  v.  Supervisors  of  Albany,  121  U.  S.  535,  supra.  See  also  as 
to  procr-dure,  Williams  v.  Suporvisors,  122  U.  S.  154,  supra. 

aWhitbeck  v.  Mercantile  National  Bank  of  Cleveland,  127  U.  S.  193, 
supra. 


318  TAXATION    OF    NATIONAL    BANKS.  §    315 

In  a  case  from  Illinois,  where  it  appeared  that  the  assessments 
were  partial,  unequal,  unjust,  and  lacking  in  uniformity,  but 
that  there  was  no.  intentional  discrimination  against  national 
banks,  it  was  said  as  to  the  New  York  and  Ohio  cases  above 
cited  :^ 

"It  is  held  in  these  cases  that  when  the  inequality  of  valua- 
tion is  the  result  of  a  statute  of  the  State  designed  to  discrim- 
inate injuriously  against  any  class  of  persons  or  any  species  of 
property,  a  court  of  equity  will  give  appropriate  relief;  and 
also  where,  though  the  law  itself,  is  unobjectionable,  the  offi- 
cers who  are  appointed  to  make  assessments  combine  together 
and  establish  a  rule  of  principle  of  valuation,  the  necessary 
result  of  which  is  to  tax  one  species  of  property  higher  than 
others,  and  higher  than  the  average  rate,  the  court  will  also 
give  relief.  But  the  bill  before  us  alleges  no  such  agreement 
or  common  action  of  assessors,  and  no  general  rule  or  discrim- 
inating rate  adopted  by  a  single  assessor,  but  relies  on  the 
numerous  instances  of  partial  and  unequal  valuations  which 
establish  no  rule  on  the  subject." 

§  315.    Mere  Mistake  in  Judgment   No   Discrimination.  — 

The  rule  of  the  Kimball  case  was  applied  by  the  United  States 
Circuit  Court  for  the  Southern  District  of  Ohio,^  where  it  ap- 
peared from  the  testimony  that  there  was  a  general  understand- 
ing at  a  meeting  of  the  assessors  from  all  parts  of  the  State,  that 
real  estate  should  be  assessed  at  two-thirds  to  three-fourths  of  its 
value ;  and  there  was  evidence  tending  to  show  great  inequality 
in  valuations  of  all  kinds  of  personal  property,  including  shares 
of  national  banks,  which  were  valued  at  about  86.7  per  cent,  a 
higher  rate  than  that  at  which  other  personal  property  was  taxed. 
But  it  did  not  appear  that  this  arose  otherwise  than  from  a  mis- 
take in  judgment.    The  court  said,  at  p.  375 : 


1  National  Bank  v.  Kimball,  103  U.  S.  732,  26  L.  Ed.  469  (1881).  See 
also  First  National  Bank  of  Chicago  v.  Farwell,  7  Fed.  518;  Stanley  v. 
Board  of  Supervisors,  15  Fed.  483;  Exchange  National  Bank  v.  Miller, 
19  Fed.  372;  First  National  Bank  of  Toledo  v.  Lucas  County,  25  Fed. 
749;  First  National  Bank  v.  Lindsay,  45  Fed.  619;  Lacy  v.  McCafferty, 
215  Fed.  352. 

2  Exchange  National  Bank  v.  Miller,  19  Fed.  372. 


§    316  TAXATION    OF    NATIONAL    BANKS.  319 

"It  would,  perhaps,  be  more  exact  to  say  that  the  judgment 
of  the  assessors,  in  their  official  valuation,  differs  from  the 
judgment  of  witnesses  in  their  unofficial  valuation,  as  ex- 
pressed in  their  testimony.  The  differences  are  no  greater 
than  frequently  arise  between  witnesses  in  cases  on  trial  on 
questions  of  value.  And  there  is  no  certain  standard  by  which 
the  court  can  determine  which  is  correct.  Valuations,  except- 
ing of  money  and  of  standard  marketable  articles,  are,  at  best, 
uncertain.  The  influences  which  affect  salable  values  are  vari- 
ous and  often  complicated.  Much  depends  upon  who  is  the 
owner  or  vendor,  as  well  as  upon  who  is  the  purchaser.  The 
shrinkage  in  the  value  of  estates  results  in  many  instances 
largely  from  the  consideration  that  the  salable  value  imparted 
by  the  fact  of  the  ownership  of  the  deceased  is  gone.  A  thou- 
sand influences,  tangible  and  intangible,  so  affect  the  salable 
value  of  property,  real  and  personal,  in  the  city  and  in  the 
country,  as  to  make  its  true  valuation  a  work  of  exceeding 
difficulty,  and  it  is  not  to  be  wondered  at,  nor  is  it  a  circum- 
stance of  itself  warranting  an  appeal  to  a  court  of  chancery, 
that  there  are  great  inequalities  in  valuations  for  taxation.  To 
correct  these  the  State  has  provided  for  appeals  to  appropri- 
ate tribunals,  whose  duty  it  is  to  equalize  valuations  and  the 
burden  of  taxation.  When  these  are  exhausted  all  that  can 
be  done,  practically,  is  done,  excepting  in  cases  of  intentional 
discrimination."^ 

§  316.  Formal  Resolution  Not  Necessary  for  Intentional 
Discrimination. — But  it  is  not  necessary  that  the  intention  of 
the  assessors  to  discriminate  should  be  proved  by  formal  resolu- 
tion to  that  effect. 

In  another  case  in  Ohio,  in  the  Northern  District,2  it  was  said 
that  there  was  nothing  in  the  Kimball  case  which  modified  tlie 
r)rineiple  declared  in  the  Cummings  and  Pelton  cases.  While  in- 
equality of  valuation  arrived  at  by  an  erroneous  mathematical 


1  The  mere  fact  that  there  is  a  different  mode  of  taxing  moneyed 
capital  in  savings  banks  and  other  corporations  from  that  employed  in 
the  case  of  national  banks  is  not  enough  to  show  discrimination.  Rich- 
ards V.  Rock  Rapids  (Iowa),  31  Fed.  505.  The  court  said  that,  if 
the  total  burden  of  taxation  upon  the  property  of  the  State  bank  was 
substantially  equal  to  that  upon  the  national  bank,  there  was  no 
ground  to  complain. 

a  First  Nat.  Bank  of  Toledo  v.  Lucas  County,  25  Fed.  749. 


320  TAXATION  OF  NATIONAL  BANKS.  §  317 

calculation  will  not  justify  equitable  relief  any  more  tlian  a  re- 
sult reached  by  the  imperfect  process  of  human  judgment,  yet, 
where  the  evidence  shows  upon  its  face  that  there  is  a  systematic 
rule  which  necessarily  discriminates,  a  court  of  equity  has  juris- 
diction to  relieve.  It  appeared  in  this  case  that  there  was  a  tacit , 
understanding  that  all  personal  property  should  be  valued  at 
six-tenths  of  its  actual  value,  but  national  banks  were  assessed 
at  a  larger  per  cent.  The  collection  of  the  excess  was  restrained, 
although  the  assessment  was  imposed  by  the  State  Board  of 
Equalization  in  the  attempt  to  equalize  national  banks  inter  sese 
throughout  the  State.  It  seems  that  the  average  rate  for  national 
banks  was  sixty-eight  per  cent,  while  that  of  the  State  banks  was 
fifty-nine  per  cent.    The  court  added  at  p.  757 : 

"Certainly,  the  conspicuous  and  intelligent  officials  consti- 
tuting this  State  Board  of  Equalization  understood,  as  we  do, 
that  inequalities  and  discriminations  were  the  necessary  out- 
come of  their  'rules;'  and  they  found  their  justification,  no 
doubt,  and  not  unnaturally,  in  the  decision  of  the  State  Su- 
preme Court  that,  as  long  as  they  kept  below  the  'true  value 
in  money'  in  all  cases,  there  was  no  violation  of  the  constitu- 
tion and  laws  of  the  State  of  Ohio,  and  discriminations  were 
immaterial.  But  they  certainly  overlooked  the  Act  of  Con- 
gress as  interpreted  by  the  Supreme  Court  of  the  United 
States.  For,  although  their  action  in  the  premises  did  not 
necessarily,  nor  in  fact,  result  in  taxing  any  national  bank  at 
a  valuation  higher  than  its  true  value  in  money,  as  shown  by 
the  bank's  own  return,  or,  perhaps,  not  higher  than  its  true 
value  in  money  as  shown  by  the  selling  price  in  the  market,  it 
did  result,  as  we  can  see  in  a  general  way,  if  we  take  the  State 
of  Ohio  as  the  unit  of  locality  in  assessing  the  national  banks, 
on  the  average,  higher  than  the  'other  moneyed  capital'  in- 
vested in  State  banks. '*i 

§  317.  A  California  Discrimination  in  Valuation  Held  Dis- 
criminative.— That  the  intentional  and  habitual  discrimina- 
tion in  the  valuation  of  the  shares  of  national  banks  as  to  other 
moneyed  capital  is  unlawful  was  clearly  shown  in  the  decision 
of  the  Supreme  Court  that  the  assessment  in  California  of  the 


1  See   Ch.   XVI    on    Equal    Protection    of   the   Laws    in   Valuation    of 
Property  for  Taxation. 


5    3 IS  TAXATION    OF    NATIONAL    BANKS,  321 

stock  of  national  banks  at  their  market  value,  while  the  assess- 
ment of  State  banks  and  other  moneyed  corporations  did  not  in- 
clude all  the  intangible  elements  of  value  which  is  part  of  the 
market  value  of  the  shares  of  stock,  was  unlawful  and  discrimin- 
ative.^ 

The  court  said  that  the  general  market  value  of  stock  is  its 
true  cash  and  selling  value,  and  this  necessarily  included  all  the 
indirect  and  intangible  elements  of  value  which  entered  into  an 
estimate  of  the  worth  of  the  stock ;  and  it  was  said  further  that  if 
the  statutes  of  California  compelled  the  assessing  officers  in  the 
valuation  of  the  property  of  State  banks  to  include  all  of  the 
elements  of  value,  the  discrimination  that  the  court  found  now 
to  exist  would  disappear. 

§  318.  Difference  in  Valuation  of  Different  Classes  of  Per- 
sonalty Not  Necessarily  Discriminative  Against  National 
Banks. — The  difficulty  in  reaching  for  taxation  intangible 
per.sonal. property  has  led  to  the  adoption  in  the  State  of  Mary- 
land of  a  system  of  valuation  of  bonds  and  certificates  of  indebt- 
edness, adjusted  upon  a  sliding  scale  according  to  the  rate  of  in- 
terest to  be  paid.  Thus  bonds  bearing  six  per  cent  interest  are 
assessed  at  fifty  per  cent  of  their  face ;  those  bearing  five  per 
cent  at  forty-one  and  two-thirds  of  their  face,  and  so  on.    It  was 


1  San  Francisco  National  Bank  v.  Dodge,  197  U.  S.  70,  49  L.  Ed.  669 
(1905),  reversing  the  Circuit  Court  of  Appeals  of  the  9th  Circuit, 
which  had  affirmed  a  decree  of  the  Circuit  Court  for  the  Northern  Dis- 
trict of  California  dismissing  the  bill  to  restrain  the  enforcement  of 
taxes  on  the  shares  of  stock  of  National  Banks,  Chief  Justice  Puller 
and  Justice  Brewer,  Brown  and  Peckham  dissenting.  This  dissent 
seems  to  have  been  based  not  upon  the  principle  as  to  discrimination  in 
valuation  being  unlawful,  but  as  to  the  construction  of  the  statute  by 
the  California  Court  and  as  to  the  jurisdiction  of  equity  over  the  cause. 

The  California  statute  was  construed  by  the  Circuit  Court  of  Appeals 
of  the  9th  Circuit  in  Nevada  National  Bank  v.  Dodge,  119  Fed.  57, 
where  it  was  held  that  the  State  statute  was  valid,  and  that  it  was  im- 
material that  the  State  tax  the  property  instead  of  the  shares  of  State 
banks  as  the  assessment  did  not  appear  to  be  higher  in  fact.  The  ques- 
tion of  discrimination  in  valuation  decided  by  the  Supreme  Court  does 
not  seem  to  have  been  raised. 


322  TAXATION   OF   NATIONAL   BANKS.  §    319 

urged  by  a  national  bank  that  certain  private  bankers,  whose 
business  was  in  competition  with  national  banks,  were  investing 
their  capital  in  these  securities,  thus  obtaining  an  advantage 
over  national  banks  which  were  assessed  at  their  full  valuation 
equally  with  other  property  and  with  State  banks  and  trust  com- 
panies. The  United  States  Circuit  Court  of  Appeals^  held  that 
there  was  no  discrimination  within  the  meaning  of  the  Act  of 
Congress. 

The  court  said  that  the  term  "moneyed  capital"  as  used  in  the 
Act  of  Congress  had  a  restricted  meaning,  and  the  fact  that  some 
property,  not  shown  to  be  an  appreciable  portion  of  the  whole, 
escaped  taxation  furnished  no  ground  of  relief.  That  the  taxa- 
tion of  personal  property  had  always  been  a  vexatious  question, 
as  the  great  mass  of  personal  property  which  could  be  readily 
hidden  escaped  the  eyes  of  the  assessor,  and  nothing  was  more 
conclusively  settled  by  human  experience  than  that  it  is  impos- 
sible to  collect  taxes  upon  this  kind  of  property  with  any  rea- 
sonable approach  to  accuracy  and  equality.  Widows  and  orphans 
and  trustees  and  guardians  and  others  who  had  the  least  ex- 
perience in  business  and  were  the  least  able  to  bear  it,  were  com- 
pelled to  carry  the  burden,  while  those  who  were  most  ingenious 
in  evasion  escaped  taxation,  and  extensive  evasion  and  downright 
perjury  was  the  result.  The  court  said  that  the  law-makers  had 
adopted  a  scheme  for  bringing  hoarded  wealth  from  hiding  by  a 
promise  of  taxation  at  a  rate  which  would  not  be  practically  con- 
fiscatory, and  a  large  amount  had  been  returned,  and  the  question 
was  whether  the  valuation  of  this  property  for  the  purpose  of 
taxation  at  thirty  cents  on  the  hundred  dollars  worked  such  a 
discrimination  against  the  national  banks,  that  the  courts  would 
be  compelled  to  declare  the  legislation  void.  The  court  concluded 
that  this  legislation  was  not  inspired  by  any  spirit  of  hostility  to 
national  banks,  but  to  meet  an  emergency,  and  did  not  fall  within 
the  inhibition  of  the  Act  of  Congress. 

§  319.    Taxation  of  Real  Estate  of  National  Banks. — The 

real  estate  of  national  banks  wherever  located,  whether  in  the 


1  National  Bank  of  Baltimore  v.  Baltimore,  40  C.  C.  A.  254,  100  Fed.  24. 


§  319  TAXATION  OF  NATIONAL  BANKS.  323 

State  of  the  bank's  location  or  elsewhere,  is  taxable  like  other 
real  estate.  As  already  pointed  out,  there  need  be  no  deduction 
from  the  value  of  the  shares  of  national  banks  on  account  of  the 
value  of  real  estate  located  and  taxed  in  other  States,  supra,  Sec. 
289.  There  is  no  provision  in  the  Act  of  Congress  requiring  the 
deduction  of  the  valuation  of  real  estate  located  in  the  State  of 
the  location  of  the  bank  from  the  valuation  of  the  shares.  Where 
the  laws  of  the  State  require  the  appraised  value  of  the  real  es- 
tate of  corporations  to  be  deducted  from  the  actual  value  of  the 
shares  before  they  are  listed  for  taxation,  national  bank  share- 
holders are  entitled  to  the  same  deduction,  and  the  denial  of  this 
right  would  be  not  only  violative  of  the  Act  of  Congress,  but  a 
denial  of  the  equal  protection  of  the  laws.^  It  has  been  held  in  a 
number  of  State  courts  construing  the  laws  of  those  particular 
States,  that  the  assessed  value  of  the  real  estate  must  be  deducted 
from  the  valuation  of  the  shares.  Thus  the  Court  of  Appeals  of 
Maryland^  decided  that  the  State  can  tax  the  real  property  or 
the  shares  of  stock  of  a  national  bank  but  not  both.  The  court 
said  that  it  is  not  a  mere  metaphysical  subtlety  to  say  that  the 
corporate  property  is  represented  by  the  shares  of  stock,  and  that 
it  is  substantially  true  that  the  taxes  assessed  on  the  property  of 
the  corporation  are  in  reality  paid  by  the  shareholders  and  paid 
by  them  directly.s 

It  was  held  in  Indiana,  where  the  statute  directed  that  the 
realty  and  its  value  deducted  from  the  capital  stock,  the  shares 
of  which  must  then  be  taxed  to  the  holders,  that  the  bank  could 
not  recover  the  taxes  paid  on  its  realty  on  the  ground  that  the 
value  of  the  realty  had  not  been  deducted  from  the  capital  stock, 


1  City  National  Bank  v.  Paducah,  U.  S.  Circuit  Court  of  Kentucky,  1 
National  Bank  Cases  300. 

-  County  Commissioners  of  Frederick  County  v.  Farmers'  &  Mechanics' 
Bank,  48  Md.  117. 

•  On  this  point  that  double  taxation  of  banks  is  effected  by  taxing 
both  property  and  stock,  see  New  Haven  v.  City  Bank,  31  Conn.  106; 
Nichols  V.  N.  H.  &  N.  Co.,  42  Conn.  103;  People  ex  rel.  v.  Tax  Com- 
missioners, 69  N.  Y.  91;  Citizens'  National  Bank  v.  Loftin,  85  Ind.  341. 
But  contra,  upholding  the  right  of  double  taxation,  see  City  of  Mem- 
phis V.  Bank,  6  Baxter  415;  Macon  v.  First  National  Bank,  59  Ga.  648. 


324  TAXATION    OF    NATIONAL    BANKS.  §    320 

for  the  wrong  in  not  making  the  deduction  was  done  to  the  stock- 
holders and  not  to  the  bank.i 

In  New  York,2  the  State  court,  construing  the  New  York  stat- 
ute, held  that  the  assessor  must  deduct  from  the  actual  value  of 
each  share  the  sum  bearing  the  same  proportion  thereto,  as  the 
assessed  value  of  the  real  estate  of  the  bank  bore  to  the  actual, 
rather  than  the  nominal,  value  of  the  capital  stock.s 

In  other  States  it  has  been  held  that,  where  the  statute  requires 
the  shares  to  be  taxed  at  their  actual  value  without  deduction  for 
the  real  estate,  this  includes  the  taxation  of  the  realty,  Avhich  is 
accordingly  exempt  from  unequal  separate  assessment.^ 

§  320.  Double  Taxation  of  National  Banks.  —  These  deci- 
sions of  the  State  courts,  however,  denying  the  right  of  double 
taxation  by  taxing  the  bank  shares  without  deduction  for  the 
assessed  value  of  the  real  estate,  are  based  upon  State  laws.  If 
the  State  allows  the  double  taxation  of  other  moneyed  capital  in- 
vested in  corporate  shares,  through  the  taxation  of  both  the  cor- 
porate shares  and  corporate  property,  there  is  no  prohibition  in 
the  National  Banking  Act  requiring  the  deduction  of  the  value 
of  the  real  estate  so  as  to  avoid  double  taxation  in  the  case  of 
national  banks.s  There  is  no  discrimination  in  double  taxation  if 
all  of  the  same  class  are  subject  to  it. 

The  Act  of  Congress  protects  against  double  taxation,  as  al- 
ready shown,  in  the  case  of  shares  held  by  non-residents,  by  pro- 


1  Board  of  Commissioners  v.  First  National  Bank,  57  N.  E.  Rep. 
(Ind.)  728. 

2  People  ex  rel.  v.  Tax  Commissioner,  69  N.  Y.  91. 

3  The  statute  in  this  case  provided  for  deducting  "from  the  value  of 
such  shares  such  sum  as  is  in  the  same  proportion  to  such  value  as  is 
the  assessed  value  of  the  real  estate  of  the  bank  to  the  whole  amount 
of  the  capital  stock  of  the  said  bank." 

4  Board  of  Commissioners  of  Rice  County  v.  Faribault,  23  Minn.  280. 
See  also  Lackawanna  v.  National  Bank,  94  Pa.  221;  County  of  Lancaster 
V.  Lancaster  County  National  Bank,  Common  Pleas  of  Pennsylvania,  2 
Naitional  Bank  Cases  415. 

5  People's  National  Bank  v.  Marye  (Cir.  Ct.  Va.),  107  Fed.  570,  the 
court  saying  that  this  seemed  to  be  the  view  of  the  Supreme  Court  in 
National  Bank  v.  Commonwealth,  9  Wall.  353,  1.  c.  358,  supra. 


§  321  TAXATION  OP  NATIONAL  BANKS.  325 

viding  that  such  shares  cannot  be  taxed  in  the  State  of  the  own- 
er's doniicil,  but  only  at  the  location  of  the  bank.  There  is  no 
protection,  however,  against  the  incidental  double  taxation  grow- 
ing out  of  the  ownership  by  the  bank  of  the  real  estate  located  in 
other  States.  The  value  of  such  real  estate  is  included  in  the 
valuation  of  the  shares  of  the  bank,  and  is  also  assessed  for  taxa- 
tion in  the  States  where  situated. 

§  321.  Enforcement  of  Tax. — "Where  the  bank  is  made  the 
statutory  agent  of  the  shareholders  for  the  payment  of  the  tax 
and  the  duty  imposed  upon  it  to  pay  the  whole  tax  to  the  State,  * 
reimbursing  itself  from  the  shareholders,  it  has  been  held  that 
the  State  may  enforce  the  collection  of  the  tax  from  the  bank  by 
the  methods  employed  in  other  cases,  supra,  Sec.  269. 

Where  the  assessment  is  against  the  shareholder  personally, 
without  any  statutory  right  to  enforce  payment  from  the  bank, 
the  State  may  employ  the  same  remedies  against  the  shareholders 
as  against  other  delinquents  in  the  payment  of  personal  property 
taxes.  Thus  a  stockholder  in  a  national  bank  is  bound  to  take  no- 
tice of  the  time  appointed  by  the  statute  for  the  hearing  of  com- 
plaints in  regard  to  assessment  of  bank  stock ;  and  the  proceeding 
by  which  the  valuation  is  determined,  though  it  may  be  followed, 
if  the  tax  is  not  paid,  by  a  sale  of  the  delinquent's  property,  is 
due  process  of  law.^  Where  the  State  statute  authorizes  not  only 
distress  and  sale  of  personal  property,  but  fine  for  misconduct 
for  the  non-pa^onent  of  the  personal  property  tax,  such  statute 
may  be  enforced  against  the  delinquent  national  bank  stock- 
holder. ^ 

The  invalidity  of  the  provision  of  a  State  statute  providing  for 
the  taxation  of  national  banks  as  applied  to  a  certain  class  of 
stockholders  in  violation  of  the  Federal  law,  was  held  not  to  war- 
rant an  injunction,  restraining  the  collection  of  the  tax  imposed 
thereunder  on  the  stockholders  of  the  bank,  where  the  bill  filed 


1  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461,  supra. 

2  Palmer  v.  McMahon,  133  U.  S.  660,  33  L.  Ed.  772  (1890),  affirming 
102  N.  Y.  106;  see  infra.  Sec.  331.  As  to  subjecting  non-resident  own- 
ers of  shares  in  national  banks  to  personal  liability,  see  City  of  New 
York  v.  McClean,  infra,  Sec.  398. 


826  TAXATION    OF    NATIONAL   BANKS.  §    322 

did  not  show  the  amount  which  was  invalid,  or  the  payment  or 
the  tender  of  the  part  lawfully  imposed,  i 

§  322.    Visitorial  Power  of  State  Over  National  Banks. — 

The  State  has  the  power  to  require  the  cashier  of  a  national 
hank  to  furnish  to  the  designated  official  a  true  list  of  the  names 
of  shareholders  and  the  number  of  shares.2  The  court  said  that 
the  national  banks  are  subject  to  State  legislation,  except  where 
such  legislation  is  in  conflict  with  some  Act  of  Congress,  or  where 
it  tends  to  destroy  or  impair  the  utility  of  the  banks  as  agencies 
of  the  United  States,  or  interfere  "wdth  the  purposes  of  their 
creation.  It  was  no  objection  to  such  a  law  that  the  Act  of  Con- 
gress requires  the  national  bank  to  keep  a  list  of  its  stockholders 
posted  up  in  its  business  office.  The  State  has  the  right  to  pass 
such  a  law  for  the  purpose  of  enforcing  its  taxation  of  the  shares. 
It  was  objected  that  the  purpose  of  the  act  was  to  enable  the 
towns  of  residence  of  the  shareholders  to  tax  them,  and  that  this 
was  invalid  under  the  Act  of  Congress  as  it  then  stood.  The 
court  replied  it  could  not  determine  that  question  until  it  was 
properly  raised  through  an  attempt  to  collect  such  a  tax. 

It  is  provided  by  the  National  Banking  Act,  Sec.  5241,  that 
the  banking  associations  shall  not  be  subject  to  any  visitorial 
powers  other  than  such  as  are  authorized  by  the  act  or  are  vested 
in  the  courts  of  the  country.  It  was  held  in  the  United  States 
Circuit  Court  of  Ohio^  that  this  section  did  not  warrant  an  in- 
junction against  a  proceeding  under  the  State  law  of  Ohio,  in 
which  the  cashier  was  directed  to  produce  the  deposit  books  of 
the  bank  so  that  it  could  be  ascertained  whether  any  person  had, 
at  the  date  of  assessment  for  taxation,  any  money  on  deposit  sub- 
ject to  taxation  in  the  county,  which  had  not  been  returned  by 
the  owner  for  that  purpose. 


I  Charleston  National  Bank  v.  Melton,  171  Fed.  743. 

2Waite  V.  Dowley,  94  U.  S.  527,  supra. 

3  First  National  Bank  v.  Youngstown  v.  Hughes,  6  Fed.  737.  But  in 
a  prior  case  between  the  same  parties  an  injunction  seems  to  have 
been  allowed,  see  First  National  Bank  of  Youngstown  v.  Hughes,  2 
Nat.  Bank  Cases  176. 


§    823  T.VXATION    OF    NATIONAL   BANKS,  327 

§  323.  The  Remedy  by  Injunction. — Although  the  taxes 
may  be  levied  upon  the  shareholders  of  a  bank,  the  bank  is  never- 
theless a  party  in  interest,  especially  where  it  is  made  liable  for 
•^he  tax,  and  is  therefore  entitled  to  litigate  in  its  own  name  the 
validity  of  the  tax  against  its  stockholders.  The  right  to  proceed 
in  equity  when  such  remedy  is  given  by  the  State  statute  is 
clear^  and  irrespective  of  the  State  statute,  where  the  right  to 
proceed  in  equitj''  is  given  under  the  rules  concerning  the  remedy 
ju  equity  for  illegal  taxation  in  the  Federal  courts.^ 


1  Lander  v.  Mercantile  National   Bank  of  Cleveland,  118  Fed.  785, 
affirming  109  Fed.  21. 

2  See  infra.  Sec.  531. 

See  Cummings  v.  Bank,  101  U.  S.  153,  supra;  San  Francisco  National 
Bank  v.  Dodge,  supra. 


CHAPTER    X. 

THE  FOURTEENTH  AMENDMENT. 

§  324.  Occasion  and  immediate  purpose  of  amendment. 

325.  Slaughter  House  Cases. 

326.  Privileges  and  immunities  of  citizens  of  United  States. 

327.  Construction  of  amendment. 

.  328.  Amendment  applies  only  to  State  action. 

329.  Protection  not  limited  to  citizens. 

330.  Corporations  are  "persons"  under  Fourteenth  Amendment. 

331.  "Any  person"  and  "any  person  within  the  jurisdiction"  distin- 

guished. 

332.  Application  of  amendment  to  State  taxation. 

333.  Justice  Field  on  Fourteenth  Amendment  and  State  taxation. 

334.  Circuit  Judge  Jackson   on  Fourteenth  Amendment   and   State 

taxation. 

335.  "Due  process  of  law"  and  "the  equal  protection  of  the  laws" 

distinguished. 

336.  Jurisdiction  over  State  courts  under  the  Amendment  of  1914. 

337.  Substance  and  not  form  regarded  in  alleged  violations  of  Four- 

teenth Amendment. 

338.  Fourteenth  Amendment  in  condemnation  for  public  purposes. 

Amets'dmext  XIV  TO  U.  S.  Constitution 
Proposed,  June  16,  1866.     Declared  ratified,  July  28,  1868. 

"Section  1.  All  persons  born  or  naturalized  in  the  United  States  and 
subject  to  the  jurisdiction  thereof  are  citizens  of  the  United  States  and 
of  the  State  wherein  they  reside.  No  State  shall  make  or  enforce  any 
law  which  shall  abridge  the  privileges  or  immunities  of  citizens  of  the 
United  States,  nor  shall  any  State  deprive  any  person  of  life,  liberty  or 
property  without  due  process  of  law;  nor  deny  to  any  person  within  its 
jurisdiction  the  equal  protection  of  the  laws." 

"Section  5.  The  Congress  shall  have  power  to  enforce,  by  appropri- 
ate legislation,  the  provisions  of  this  Article." 

§  324.     Occasion  and  Immediate  Purpose  of  Amendment. — 

The  restraints  upon  the  State  power  of  taxation  discussed  in 
the  preceding  chapters  have  been  those  growing  out  of  the  rela- 
tion of  the  State  to  the  Federal  government,  created  by  the  Con- 

(328) 


§   324  THE   FOURTEENTH    AMENDMENT.  329 

stitution  of  the  United  States.  Prior  to  1868  there  was  no  guar- 
anty in  the  Federal  Constitution  of  due  process  of  law  or  the  equal 
protection  of  the  laws  to  the  people  of  the  States,  except  as 
against  the  power  of  the  Federal  government.  Thus  the  first 
eight  of  the  amendments,  known  as  the  Federal  Bill  of  Rights, 
which  were  adopted  immediately  upon  the  ratification  of  the 
Constitution,  having  been  made  an  implied  condition  of  ratifica- 
tion in  some  of  the  States,  have  been  uniformly  construed  as 
applying  only  to  the  Federal  government  and  not  to  the  States. 
There  was  then  no  appeal  to  the  Federal  Courts  against  any  vio- 
lation by  State  power  of  equal  protection  of  the  laws  in  taxation, 
which  did  not  involve  an  interference  with  national  authority. 

The  Fourteenth  Amendment  has  been  called  the  child  of  the 
Civil  War,  but  it  may  more  accurately  be  said  that  it  is  the  off- 
spring of  Eeconstruction.  It  was  framed  by  the  Joint  Recon- 
struction Committee  of  Congress  in  1866,  its  ratification  was  ex- 
acted as  a  condition  of  the  admission  of  the  reconstructed  States 
into  the  Union,  and  its  adoption  was  proclaimed  under  the  di- 
rection of  a  joint  resolution  of  Congress  during  the  angry  politi- 
cal controversies  of  1868.^  The  occasion  and  immediate  purpose 
of  the  adoption  of  the  amendment  were  doubtless  the  securing  the 
results  of  the  Civil  "War  and  protecting,  through  the  national 
power,  the  recently  emancipated  negroes  of  the  South. 

The  amendment  contains  in  the  first  section  a  distinct  declara- 
tion of  what  shall  constitute  citizenship  of  the  United  States,  and 
provides  that  all  persons  born  or  naturalized  in  the  United  States 
and  subject  to  the  jurisdiction  thereof  are  citizens  of  the  United 
States  and  of  the  State  wherein  they  reside.    This  in  effect  over- 


1  The  validity  of  the  adoption  was  at  first  disputed  by  the  minority 
party  in  Congress  on  the  ground  that  certain  States  had  recalled  their 
ratification  before  the  result  was  proclaimed,  and  that  Congress  had  no 
authority  to  make  the  ratification  a  condition  of  readmission  of  the 
reconstructed  States  into  the  Union.  These  questions,  however,  were 
never  determined.  See  Miller's  Lectures  on  the  Constitution,  p.  653. 
Although  many  cases  have  been  before  the  Supreme  Court  involving  the 
construction  of  the  Fourteenth  Amendment,  in  no  one  has  any  question 
been  raised  as  to  its  ratification  and  incorporation  in  the  Constitution. 


330  THE   FOURTEENTH    AMENDMENT.  §    324 

ruled  the  decision  in  the  Dred  Scott  case.^  Other  provisions  re- 
lated to  securing  the  results  of  the  war^  and  to  the  protection  of 
the  national  debt  from  repudiation.  In  order  to  protect  the  newly 
emancipated  race  from  the  action  of  State  governments,  it  was 
deemed  necessary  to  extend  the  guaranty  of  the  Federal  Bill  of 
Rights.  It  was  therefore  provided  that  no, State  shall  make  or 
enforce  any  law  which  shall  abridge  or  impair  the  immunities  of 
citizens  of  the  United  States,  nor  shall  any  State  deprive  any 
person  of  life,  liberty  or  property  without  due  process  of  law,  nor 
deny  to  any  person  within  its  jurisdiction  the  equal  protection  of 
the  laws. 

Owing  to  the  circumstances  attending  the  adoption  of  the 
amendment,  the  full  import  and  scope  of  the  concluding  clause 
were  not  immediately  realized,^  and  there  was  a  disposition  in 
the  Supreme  Court  at  first  to  limit  the  application  of  the  guaran- 
ties of  due  process  of  law  and  the  equal  protection  of  the  laws  to 
the  protection  of  the  newly  enfranchised  race  against  hostile  State 


119  Howard  393,  15  L.  Ed.  691  (1857).  This  case  held  that  persons 
whose  ancestors  were  members  of  the  African  race  imported  into  this 
country  and  held  as  slaves  could  not,  though  emancipated,  or  born  of 
parents  who  were  free,  become  citizens  of  a  State  in  the  sense  in  which 
that  word  was  used  in  the  Constitution  of  the  United  States. 

2  See  also  infra,  Sec.  560. 

3  Thus  Judge  Cooley,  in  the  first  edition  of  his  "Constitutional  Limi- 
tations," published  soon  after  the  adoption  of  the  amendment,  says,  p. 
294:  "The  most  important  clause  in  the  Fourteenth  Amendment  is 
that  part  of  Section  1  which  declares  that  all  persons  born  or  naturalized 
in  the  United  States  and  subject  to  the  jurisdiction  thereof,  are  citizens 
of  the  United  States  and  of  the  State  wherein  they  reside.  This  pro- 
vision very  properly  puts  an  end  to  any  question  of  the  title  of  the 
freedmfen  and  others  of  their  race  to  the  rights  of  citizenship;  but  it 
may  be  doubtful  whether  the  further  provisions  of  the  same  section 
surround  the  citizen  with  any  protections  additional  to  those  before 
possessed  under  the  State  constitutions.  But  as  a  principle  of  State 
constitutional  law  has  now  been  made  a  part  of  the  Constitution  of  the 
United  States,  the  effect  will  be  to  make  the  Supreme  Court  of  the 
United  States  the  final  arbiter  of  cases  in  which  a  violation  of  this 
principle  by  State  laws  is  complained  of,  inasmuch  as  the  decisions  of 
the  State  courts  upon  laws  which  are  supposed  to  violate  it  will  be 
subject  to  review  in  that  court  on  appeal." 


§   325  THE   FOURTEENTH    AMENDMENT.  331 

legislation.  Comparatively  few  cases  however,  have  been  pre- 
sented wherein  these  guaranties  have  been  invoked  for  the  protec- 
tion of  the  class  for  whose  benefit  they  were  primarily  intended. 
The  gradual  judicial  recognition,  as  shown  in  the  opinions  of  the 
Supreme  Court,  of  the  broad  scope  of  these  provisions  of  the  Four- 
teenth Amendment  in  the  protection  of  all  persons,  white  as  well 
as  colored,  corporate  as  well  as  individual,  against  any  discrimin- 
ating legislation,  is  a  notable  illustration  of  the  developing  power 
of  our  jurisprudence. 

§  325.  Slaughter  House  Cases.— The  amendment  was  first 
brought  before  the  Supreme  Court,  in  the  Slaughter  House  Cases, 
in  1873,  wherein  an  act  of  .the  State  of  Louisiana  granting  the  ex- 
clusive right  for  twenty-five  years  to  maintain  slaughter  houses  in 
New  Orleans  was  attacked  as  a  monopoly,  which,  it  was  claimed, 
violated  the  privileges  and  immunities  of  citizens  of  the  United 
States,  and  deprived  them  of  their  liberty  and  property  without 
due  process  of  law.  The  court,  in  a  notable  opinion  by  Justice 
Miller,!  held  that  the  privileges  and  immunities  of  citizens  of  the 
United  States,  not  those  of  citizens  of  the  State,  are  protected  by 
the  amendment,  and  that  the  privileges  and  immunities  thus  pro- 
tected are  those  which  arise  out  of  the  nature  and  essential  char- 
acter of  the  national  government.  The  argument  had  not  been 
much  pressed  in  the  cases,  that  the  charter  deprived  the  plaintiffs 
of  their  property  without  due  process  of  law,  or  that  it  denied 
to  them  the  equal  protection  of  the  laws.  The  court  said  as  to 
the  guaranties  of  the  amendment,  page  80 : 

"The  first  of  these  paragraphs  has  been  in  the  Constitution 
since  the  adoption  of  the  Fifth  Amendment,  as  a  restraint 
upon  Federal  power.  It  is  also  to  be  found  in  some  form  of 
expression  in  the  constitutions  of  nearly  all  the  States  as  a 
restraint  upon  the  power  of  the  States.  This  law,  theA,  has 
practically  been  the  same  as  it  now  is  during  the  existence  of 
the  government,  except  so  far  as  the  present  amendment  may 
pJace  the  restraining  power  over  the  States  in  this  matter  in 
the  hands  of  the  Federal  government." 

^  16  Wall.  36.  21  L.  Ed.  394  (1873).     Chief  .Tustice  Chase  and  .Justices 
Field,  Swayne  and  Bradley  dissenting. 


332  THE   FOURTEENTH    AMENDMENT.  §    326 

As  to  the  equal  protection  of  the  laws,  it  was  said,  1.  c.  81 : 

"In  the  light  of  the  history  of  these  amendments,  and  the 
pervading  purpose  of  them,  which  we  have  alreadj^  discussed, 
it  is  not  difficult  to  give  a  meaning  to  this  clause.  The  exist- 
ence of  laws  in  the  States  where  the  newly  emancipated  ne- 
groes resided,  which  discriminated  with  gross  injustice  and 
hardship  against  them  as  a  class,  was  the  evil  to  be  remedied 
by  this  clause,  and  by  it  such  law^s  are  forbidden. 

"If,  however,  the  State  did  not  conform  their  laws  to  its  re- 
quirements, then  by  the  fifth  section  of  the  article  of  amend- 
ment. Congress  was  authorized  to  enforce  it  by  suitable  legis- 
lation. We  doubt  very  much  whether  any  action  of  a  State 
not  directed  by  way  of  discrimination  against  the  negroes  as 
a  class,  or  on  account  of  their  race,  Avill  ever  be  held  to  come 
within  the  purview  of  this  provision.  It  is  so  clearly  a  pro- 
vision for  that  race  and  that  emergency,  that  a  strong  case 
would  be -necessary  for  its  application  to  any  other.  But  as  it 
is  a  State  that  is  to  be  dealt  with,  and  not  alone  the  validity 
of  its  laws,  W'C  may  safely  leave  that  matter  until  Congress 
shall  have  exercised  its  power,  or  some  ease  of  State  oppres- 
sion, by  denial  of  equal  justice  in  its  courts,  shall  have  claimed 
a  decision  at  our  hands.  We  find  no  such  case  in  the  one  be- 
fore us,  and  do  not  deem  it  necessary  to  go  over  the  argument 
again,  as  it  may  have  relation  to  this  particular  clause  of  the 
amendment. ' ' 

In  a  later  case  from  West  Virginia,  where  the  Fourteenth 
Amendment  was  invoked  by  a  colored  man  on  account  of  dis- 
crimination against  negroes  in  the  summoning  of  jurors,  the  court 
referred  to  the  opinion  in  the  Slaughter  House  Cases,  saying: 

"If  this  is  the  spirit  and  meaning  of  the  amendment,  whether 
it  means  more  or  not,  it  is  to  be  construed  liberally  to  carry  out 
the  purpose  of  its  framers."^ 

§  326.  Privileg-es  and  Immunities  of  Citizens  of  United 
States. — ^As  will  be  seen  from  the  opinion  in  the  Slaughter 
House  Cases,  the  far-reaching  importance  of  the  last  clause  of  the 
first  section  of  the  amendment,  relating  to  "due  process  of  law" 
and  the  "equal  protection  of  the  laws,"  was  not  then  realized, 
nor  were  these  provisions  really  involved  in  the  question  before 


iStrauder  v.  West  Virginia,  100  U.  S.  303,  25  L.  Ed.  664  (1880). 


§   326  THE   FOURTEENTH    AMENDMENT.  333 

the  court,  which  turned  essentially  upon  the  meaning  given  to  the 
term  "privileges  and  immunities  of  citizens  of  the  United  States." 
What  these  are  has  not  been  definitely  decided,  although  in  subse- 
quent cases  this  ruling  has  been  adhered  to.  It  was  said  in  one 
case  1  that  they  are  the  privileges  and  immunities  arising  out  of 
the  nature  and  essential  character  of  the  Federal  government  and 
granted  or  secured  by  the  Constitution  of  the  United  States.  It 
has  been  strongly  urged  that  they  include  the  rights  guaranteed 
by  the  first  eight  amendments  of  the  Constitution  which  prescribe 
limitations  to  Federal  power,  such  as  the  guaranty  of  the  right  to 
trial  by  Jury  and  the  securities  against  unreasonable  searches  and 
seizures,  compulsory  self-incrimination,  quartering  soldiers  on 
the  people  in  time  of  peace,  excessive  bail  and  cruel  or  unusual 
punishments.  It  has  been  said  that  if  the  rights  of  Federal  citi- 
zenship include  only  those  protected  by  the  express  and  implied 
guaranties  of  the  Constitution,  such  as  free  access  to  the  seat  of 
government,  the  right  to  the  protection  of  the  government  on  the 
high  seas  or  in  foreign  parts  and  the  right  to  use  the»navigable 
waters  of  the  United  States,  that  these  rights  are  all  protected 
against  hostile  State  action  and  do  not  require  the  guaranty  of 
this  amendment.    Thus  Judge  Cooley  remarks  :2 

*'It  may  well  be  questioned  whether  the  provision  just  con- 
sidered was  necessary.  It  is  certainly  not  clear  that  there  can 
exist  any  privilege  or  immunity  of  a  citizen  of  the  United 
States  which,  independent  of  the  Fourteenth  Amendment,  is 
not  beyond  State  control." 

-->ut  he  adds  that  the  provision  has  its  importance  in  the  fact 
that  it  embodies  in  express  law  what  before,  to  some  extent,  rested 
in  implication  merely.^ 


1  Duncan  v.  Missouri,  152  U.  S.  377,  38  L.  Ed.  485  (1894),  and  cases 
cited. 

2  Principles  of  Constitutional  Law,  247. 

3  In  O'Neil  v.  Vermont,  144  U.  S.  361,  36  L.  Ed.  465  (1892),  Mr.  Jus- 
tice Field  said  in  tiie  dissenting  opinion,  concurred  in  by  Justices  Har- 
lan and  Brewer,  that  after  much  reflection  he  thought  that  the  privileges 
and  immunities  of  citizens  of  the  United  States  are  such  as  have  their 
recognition  in  or  guaranty  from  the  Constitution  of  the  United  States; 


334  THE   FOURTEENTH    AMENDMENT.  §    327 

§  327.  Construction  of  Amendment. — But  the  distinction 
between  the  privileges  and  immunities  of  the  citizens  of  tlie  State 
and  those  pertaining  to  national  citizenship  is  not  material  in  the 
consideration  of  the  limitations  upon  the  State's  taxing  power 
under  this  amendment. 

The  Fourteenth  Amendment  creates  no  rights ;  it  only  extends 
the  guaranty  of  Federal  protection  to  the  rights  already  existing, 
whatever  their  origin,  whether  created  by  the  State  or  not.  All 
property  rights  whatsoever  are  protected  by  the  guaranty  of  due 
process  of  law  and  the  equal  protection  of  the  laws.  The  compar- 
ative importance  of  the  provisions  of  this  first  section  of  the 
Fourteenth  Amendment  is  illustrated  by  the  fact  that  compara- 
tively few  cases  have  come  before  the  Supreme  Court  on  the  ques- 
tion of  the  distinction  between  State  and  Federal  citizenship, 
while  the  docket  has  been  crowded  with  those  involving  the  ques- 
tions of  due  process  of  law  and  the  equal  protection  of  the  laws. 
Only  five  years  after  the  Slaughter  House  decision  Justice  Miller 
in  delivering  the  opinion  of  the  court^  contrasted  the  ' '  due  process 
of  law  under  the  Fifth  and  Fourteenth  Amendments, ' '  saying : 

"It  is  not  a  little  remarkable,  that  while  this  provision  (due 
process  of  law)  has  been  in  the  Constitution  of  the  United 
States,  as  a  restraint  upon  the  authority  of  the  Federal  gov- 
ernment, for  nearly  a  century,  and  while,  during  all  that  time, 
the  manner  in  which  the  powers  of  that  government  have  been 
exercised  has  been  watched  with  jealousy,  and  subjected  to 
the  most  rigid  criticism  in  all  its  branches,  this  special  limita- 
tion upon  its  powers  has  rarely  been  invoked  in  the  judicial 
forum  or  the  more  enlarged  theater  of  public  discussion.  But 
while  it  has  been  a  part  of  the  Constitution,  as  a  restraint  up- 
on the  power  of  the  States,  only  a  very  few  years,  the  docket  of 


that  the  rights  of  persons  declared  or  recognized  in  the  amendments  are 
rights  belonging  to  them  under  the  Constitution;  and  the  Fourteenth 
Amendment,  as  to  all  such  rights,  places  a  limit  upon  State  power  by 
ordaining  that  no  State  shall  make  or  enforce  any  law  which  would 
abridge  them.  In  this  connection  see  the  argument  by  John  Randolph 
Tucker  in  the  case  of  the  Chicago  Anarchists,  Spies  v.  Illinois,  123  U.  S. 
131,  31  L.  Ed.  80  (1888),  and  an  interesting  discussion  by  Mr.  W.  B. 
Guthrie  in  his  lectures  on  the  Fourteenth  Amendment,  pp.  62  to  65. 
1  Davidson  v.  New  Orleans,  96  U.  S.  97,  103,  24  L.  Ed.  616  (1878). 


5    328  THE   FOURTEENTH    AMENDMENT.  335 

this  court  is  crowded  with  cases  in  which  we  are  asked  to  hold 
that  State  courts  and  State  legislatures  have  deprived  their 
own  citizens  of  life,  liberty,  or  property  without  due  process 
of  law." 

During  the  nearly  forty  years  that  have  passed  since  these 
words  were  written,  as  the  volumes  of  the  court's  opinions  will 
show,  not  a  term  has  passed  in  which  some  question  involving  due 
process  of  law  or  the  equal  protection  of  the  laws  has  not  been 
before  the  court  for  adjudication. 

§  328.    Amendment  Applies  Only  to  State  Action. — It  has 

been  uniformly  held  that  the  prohibitions  of  the  Fourteenth 
Amendment  are  addressed  only  to  the  States,  and  have  no  refer- 
ence to  individual  invasion  of  private  rights.  It  is  under  this 
amendment  as  under  the  clause  of  the  Constitution  prohibiting 
State  impairment  of  the  obligation  of  contracts,  the  Federal  law 
can  be  invoked  only  where  the  action  complained  of  is  by  the  State 
or  under  State  authority. 

But  while  this  is  true,  yet  the  protection  can  be  obtained,  not 
only  against  the  political  body  called  a  State,  but  against  any 
agency  thereof,  against 'any  organization,  association,  official  or 
individual  acting  under  State  authority.  Thus  the  Supreme 
Court  said  :^ 

"A  State  acts  by  its  legislative,  its  executive,  or  its  judicial 
authorities.  It  can  act  in  no  other  way.  The  constitutional 
provision,  therefore,  must  mean  that  no  agency  of  the  State, 
or  of  the  officers  or  agents  by  whom  its  powers  are  exerted, 
shall  deny  to  any  person  within  its  jurisdiction  the  equal  pro- 
tection of  the  laws.  Whoever,  by  virtue  of  public  position  un- 
der a  State  government,  deprives  another  of  property,  life,  or 
liberty,  without  due  process  of  law,  or  denies  or  takes  away 
the  equal  protection  of  the  laws,  violates  the  constitutional  in- 
hibition; and  as  he  acts  in  the  name  and  for  the  State,  and  is 
clothed  with  the  State's  power,  his  act  is  that  of  the  State. 
This  must  be  so,  or  the  constitutional  prohibition  has  no  mean- 
ing. Then  the  State  has  clothed  one  of  its  agents  with  power 
to  annul  or  to  evade  it." 


■i-Ex  parte  Virginia.  100  U.  S.  339,  347,  25  L.  Ed.  676  (1880). 


336  THE   FOURTEENTH    AMENDMENT.  §    329 

The  prohibitions  of  the  amendment  refer  to  all  the  instru- 
mentalities and  authorities  of  the  State.  Thus  a  municipal  ordi- 
nance enacted  under  legislative  authority  has  the  force  of  law  in 
the  municipality,  and  is  therefore  State  action  within  the  prohi- 
bition of  the  amendment.  "Whatever  the  agency,  where  one  acts  in 
the  name  of  or  for  the  State,  his  act  is  that  of  the  State. 

This  does  not  mean  however,  that  an  erroneous  decision  of 
a  State  court,  whereby  the  unsuccessful  party  loses  his  property, 
deprives  him  of  such  property  without  due  process  of  law,  where 
he  has  had  a  full  hearing  according  to  the  regular  course  of  judi- 
cial proceedings.^ 

The  same  principle  applies  as  in  the  ease  of  the  alleged  impair- 
ment of  contracts,  where  the  court  said  that  the  State  court 
might  err,  in  its  (the  Supreme  Court's)  opinion,  and  in  its  con- 
struction or  application  of  the  law,  but  that  would  give  no 
ground  for  invoking  the  constitutional  prohibition  of  impair- 
ment of  obligation  of  contract,  unless  it  involved  a  denial  of  a 
Federal  right.     See  supra,  Sec.  68. 

§  329.  Protection  Not  Limited  to  Citizens. — The  broad  ap- 
plication of  the  guaranties  of  due  process  of  law  and  the  equal 
protection  of  the  laws  is  not  confined  to  the  protection  of  citizens, 
whether  considered  in  relation  to  State  or  national  citizenship.  It 
extends  to  all  persons,  citizens  and  aliens,  our  own  people  and  the 
strangers  within  our  gates.  This  was  the  decision  of  the  Su- 
preme Court  in  a  California  case,^  where  it  was  held  that  China- 
men living  in  this  country  under  provisions  of  the  treaty  were 
entitled  to  the  protection  of  the  Fourteenth  Amendment ;  and  the 
court  said  that  the  provisions  guaranteeing  due  process  of  law  and 
equal  protection  of  the  laws  are  ''universal  in  their  application 
to  all  persons  within  the  territorial  jurisdiction,  without  regard 
to  any  differences  of  race,  of  color,  or  of  nationality,  and  the  equal 
protection  of  the  laws  is  a  pledge  of  the  protection  of  equal  laws ' ' 
to  all. 


1  Central  Land  Co.  v.  Laidley,  159  U.  S.  103,  40  L.  Ed.  91  (1896);  Ar- 
rowsmith  v.  Harmoning,  118  U.  S.  194,  30  L.  Ed.  243   (1887). 
2Yick  Wo  v.  Hopkins,  118  U.  S.  356,  369,  30  L.  Ed.  220  (1887). 


§    330  THE   FOURTEENTH   AMENDMENT.  337 

§  330.  Corporations  Are  "Persons"  Under  Fourteenth 
Amendment. — It  was  not  until  1886/  in  the  case  of  Santa 
Clara  County  v.  Southern  Pacific  Railroad  Company,^  that  it 
was  definitely  determined  by  the  Supreme  Court  that  corporations 
are  persons  within  the  provisions  of  the  Fourteenth  Amendment 
and  are  therefore  entitled  to  ''due  process  of  law"  and  to  the 
*  *  equal  protection  of  the  laws. " 

Mr.  Chief  Justice  Waite  said: 

"The  court  does  not  wish  to  hear  arguments  on  the  question 
whether  the  provision  in  the  Fourteenth  Amendment  to  the 
Constitution,  which  forbids  a  State  to  deny  to  any  person  within 
its  jurisdiction  the  equal  protection  of  the  laws,  applies  to  these 
corporations.     We  are  all  of  opinion  that  it  does." 

In  a  later  case^  the  court  said : 

"It  is  well  settled  that  corporations  are  persons  within  the 
provisions  of  the  Fourteenth  Amendment  of  the  Constitution 
of  the  United  States.  The  rights  and  securities  guaranteed  to 
persons  by  that  instrument  cannot  be  disregarded  in  respect 
to  these  artificial  entities  called  corporations,  any  more  than 
they  can  be  in  respect  to  the  individuals  who  are  the  equitable 
owners  of  the  property  belonging  to  such  corporations.  A 
State  has  no  more  power  to  deny  to  corporations  the  equal  pro- 
tection of  the  laws  than  it  has  to  individual  citizens. ' ' 

This  right  of  the  corporation,  whether  domestic  or  foreign, 
to  due  process  of  law  and  the  equal  protection  of  the  laws  does  not 


1  It  had  been  assumed,  however,  though  not  expressly  decided,  in 
Railroad  Co.  v.  Richmond,  96  U.  S.  521,  24  L.  Ed.  734  (1878). 

2  118  U.  S.  394,  30  L.  Ed.  118  (1887).  This  had  been  already  decided 
in  the  U.  S.  Circuit  Court  of  California  in  an  elaborate  opinion  by  Jus- 
tices Field  and  Sawyer,  18  Fed.  385,  and  9  Sawyer  165,  210.  The  ruling 
has  been  in  many  cases  affirmed:  Pembina  Mining  Co.  v.  Pennsylvania, 
125  U.  S.  181,  31  L.  Ed.  650  (1888);  Gulf,  Colorado  &  Santa  Fe  R.  R. 
Co.  v.  Ellis,  165  U.  S.  150,  41  L.  Ed.  666  (1897),  and  cases  cited;  Minne- 
apolis &  S.  L.  R.  R.  v.  Beckwith,  129  U.  S.  26,  32  L.  Ed.  585  (1889); 
Charlotte,   Etc.,  R.   R.   Co.   v.   Gibbes,   142   U.   S.   386,   35   L.   Ed.   1051 

(1891);   Waters  Pierce  Oil  Co.  v.  Texas,  177  U.  S.  28,  44  L.  Ed.  657 

(1890). 

3  165  U.  S.  1.  c.  154,  supra. 


338  THE   FOURTEENTH    AMENDMENT.  §    332 

affect  the  power  of  the  State  to  exclude  foreign  corporations,  other 
than  those  directly  engaged  in  interstate  commerce  or  in  the  em- 
ploy of  the  Federal  government,  or  to  prescribe  such  conditions  by 
way  of  license  charges  or  otherwise  as  it  may  deem  proper  to  im- 
pose upon  their  admission  to  do  business  in  the  State.  But  the 
effect  of  it  is  that,  when  admitted,  they  are  entitled  to  the  protec- 
tion of  these  constitutional  guaranties  equally  with  others.^ 

§  331.  "Any  Person"  and  "Any  Person  Within  the  Juris- 
diction" Distinguished. — It  will  be,  noted  that  there  is  a  differ- 
ence in  the  language  of  the  two  prohibitions.  A  State  must  not 
deprive  any  person  of  life,  liberty  or  property  without  due  process 
of  law,  but  the  clause  forbidding  denial  of  the  equal  protection  of 
the  laws  is  limited  to  "any  person  within  its  jurisdiction.''  The 
Supreme  Court  said^  that  it  could  not  assume  that  these  words 
"within  its  jurisdiction"  were  inserted  in  this  connection  without 
any  object,  nor  was  it  at  liberty  to  eliminate  them  from  the  Con- 
stitution and  interpret  the  clause  in  question  as  though  they  were 
not  to  be  found  in  that  instrument,  though  it  did  not  attempt  to 
state  what  is  their  full  import.  It  held  however,  that  where  a  Vir- 
ginia corporation  had  sold  goods  to  a  corporation  in  Tennessee 
which  subsequently  became  insolvent,  and  had  never  been  ad- 
mitted to  do  business  in  Tennessee  under  conditions  subjecting 
it  to  process  issuing  from  the  courts  of  that  State,  the  vendor  was 
not  under  this  clause  within  the  jurisdiction  of  the  State  of  Ten- 
nessee, and  could  not  therefore  claim  the  ' '  equal  protection  of  the 
laws"  under  the  Fourteenth  Amendment,  in  the  distribution  of  the 
assets  of  the  insolvent  purchaser. 

§  332.    Application  of  Amendment  to  State  Taxation. — The 

first  application  of  the  amendment  to  taxation  was  by  the  legis- 
lative department  of  the  government  in  the  Act  of  Congress  of 
May  31,  1870,  which  has  ever  since  been  on  the  statute  book  as 
section  1977,  Revised  Statutes  of  the  United  States.  The  act 
provides  as  follows : 


1  See  supra,  Sec.  178. 

2  Blake  v.  McClung,  172  U.  S.  239,  261,  43  L.  Ed.  432   (1899) 


§    332  THE   FOURTEENTH   AMENDMENT.  339 

"All  persons  within  the  jurisdiction  of  the  United  States 
shall  have  the  same  right  in  every  State  and  Territory  to  make 
and  enforce  contracts,  to  sue,  be  parties,  give  evidence,  and  to 
the  full  and  equal  benefit  of  all  laws  and  proceedings  for  the 
security  of  persons  and  property  as  is  enjoyed  by  white  citi- 
zens and  shall  be  subject  to  like  punishment,  pains,  penalties, 
taxes,  licenses,  and  exactions  of  every  kind,  and  to  no  other." 

This  act  was  passed  under  the  authority  of  the  fifth  section  of 
the  amendment  providing  that  "Congress  shall  have  power  to  en- 
force by  appropriate  legislation  the  provisions  of  this  article. ' '  It 
was  a  constitutional  exercise  of  the  power  of  Congress  under  the 
Fourteenth  Amendment,^  as  it  is  directed  against  State  and  not 
individual  action.  The  legislative  prohibition,  it  will  be  seen,  is 
aimed  directly  at  discriminations  against  the  colored  race,  declar- 
ing that  all  persons  shall  be  subject  to  the  same  taxation  as  white 
citizens. 

The  comprehensive  character  of  the  constitutional  guaranties 
and  their  application  to  discriminating  taxation  was  first  judi- 
cially recognized  in  two  notable  opinions  of  Justice  Field  of  the 
Supreme  Court,  sitting  in  the  Circuit  Court  of  California,  and 
one  by  Circuit  Judge  Jackson,  afterwards  Justice  of  the  Supreme 
Court,  in  the  Northern  District  of  Ohio.  The  first  case  was  a  suit 
brought  to  recover  of  the  Southern  Pacific  Railroad  Company 
State  and  county  taxes  for  the  years  1880  and  1881,  and  the  de- 
fense was  set  up  that  the  assessment,  under  the  newly  adopted 
constitution  of  California,  which  allowed  a  deduction  from  other 
property  for  mortgages  thereon,  but  forbade  such  deduction  from 
railroad  property,  was  an  unjust  and  unlawful  discrimination 
conflicting  with  the  Fourteenth  Amendment.  The  suit  was 
brought  in  the  State  court  and  removed  to  the  United  States 
court.  On  motion  to  remand,  it  was  held  that  the  case  involved 
a  Federal  question,  the  law  at  that  time  permitting  a  removal 
by  the  defendant  on  that  ground.2  On  the  trial  upon  the  merits 
the  assessment  was  adjudged  invalid  as  violative  of  the  Four- 

1  Strauder  v.  West  Virginia,  100  U.  S.  303,  supra;  Neal  v.  Delaware, 
103  U.  S.  370,  p.  385,  26  L.  Ed.  567  (1881). 

2  County  of  San  Mateo  v.  So.  Pac.  R.  R.  Co.,  13  Fed.  145. 


340  THE   FOURTEENTH    AMENDMENT.  §    333 

teenth  Amendment  by  Justice  Field,   Justice    Sawyer   concur- 
ring.^ 

In  the  following  year,  another  case  involving  substantially  the 
same  question  was  before  the  same  court.2  Justice  Field,  Justice 
Sawyer  concurring,  held  these  assessments  invalid  in  an  exhaus- 
tive opinion,  which  is  an  important  contribution  to  the  constitu- 
tional law  of  taxation.  This  opinion,  though  delivered  on  the  cir- 
cuit, is  really  the  foundation  opinion  concerning  the  broad  con- 
struction of  the  Fourteenth  Amendment  and  its  application  to  dis- 
criminating taxation. 

§  333.  Justice  Field  on  Fourteenth  Amendment  and  State 
Taxation. — He  said : 

"The  amendment  was  adopted  soon  after  the  close  of  the 
civil  war  and  undoubtedly  had  its  origin  in  a  purpose  to  se- 
cure the  newly  made  citizens  in  the  full  enjoyment  of  their 
freedom.  But  it  is  in  no  respect  limited  in  its  operation  to 
them.  It  is  universal  in  its  application,  extending  its  pro- 
tective force  over  all  men,  of  every  race  and  color,  within  the 
jurisdiction  of  the  States  throughout  the  broad  domain  of  the 
republic.  A  constitutional  provision  is  not  to  be  restricted  in 
its  application  because  designed  originally  to  prevent  an  exist- 
ing wrong.  Such  a  restricted  interpretation  was  urged  in  the 
Dartmouth  College  case,  to  prevent  the  application  of  the 
provision  prohibiting  legislation  by  States  impairing  the  obli- 
gation of  contracts  to  the  charter  of  the  college,  it  being  con- 
tended that  the  charter  was  not  such  a  contract  as  the  prohi- 
bition contemplated.  Chief  Justice  Marshall,  however,  after 
observing  that  it  was  more  than  possible  that  the  preservation 
of  rights  of  that  description  was  not  particularly  in  view  of 
the  framers  of  the  Constitution  when  that  clause  was  intro- 
duced, said: 

"  'It  is  not  enough  to  say  that  this  particular  case  was  not 
in  the  mind  of  the  convention  when  the  article  was  framed, 


1  13  Fed.  722,  733. 

2  County  of  Santa  Clara  v.  So.  Pac.  R.  R.  Co.,  18  Fed.  385,  397.  This 
judgment  was  affirmed  in  the  Supreme  Court  but  on  another  point,  118 
U.  S.  395,  the  court  holding  that  corporations  are  persons  within  the 
meaning  of  the  Fourteenth  Amendment,  supra.  But  see  opinion  of 
Justice  Field  in  the  Supreme  Court,  p.  422, 


§    333  THE    FOURTEENTH    AMENDMENT.  341 

nor  of  the  American  people  when  it  was  adopted.  It  is  neces- 
sary to  go  further  and  to  say  that,  had  this  particular  case 
been  suggested,  the  language  would  have  been  so  varied  as  to 
exclude  it,  or  it  would  have  been  made  a  special  exception. 
The  case  being  within  the  words  of  the  rule  must  be  within  its 
operation  likewise,  unless  there  be  something  in  the  literal 
construction  so  obviously  absurd  or  mischievous,  or  repugnant 
to  the  general  spirit  of  the  instrument,  as  to  justify  those  who 
expound  the  Constitution  in  making  it  an  exception. '  4  Wheat. 
644. 

"All  history  shows  that  a  particular  grievance  suffered  by 
an  individual  or  a  class,  from  a  defective  or  oppressive  law,  or 
the  absence  of  any  law,  touching  the  matter,  is  often  the  occa- 
sion and  cause  for  enactments,  constitutional  or  legislative, 
general  in  their  character,  designed  to  cover  cases  not  merely 
of  the  same,  but  all  cases  of  a  similar,  nature.  The  wrongs 
which  were  supposed  to  be  inflicted  upon  or  threatened  to  cit- 
izens of  the  enfranchised  race,  by  special  legislation  directed 
against  them,  moved  the  framers  of  the  amendment  to  place 
in  the  fundamental  law  of  the  nation  provisions  not  merely 
for  the  security  of  those  citizens,  but  to  insure  all  men,  at  all 
times,  and  at  all  places,  due  process  of  law,  and  the  equal  pro- 
tection of  the  laws.  Oppression  of  the  person  and  spoliation 
of  property  by  any  State  were  thus  forbidden,  and  equality 
before  the  law  was  secured  to  all." 

After  quoting  from  Mr.  Edmunds,  who  was  a  member  of  the 
Senate  when  the  amendment  was  adopted  by  that  body,  as  to  the 
thorough  discussion  and  scrunity  to  which  the  language  of  the 
amendment  was  subjected  before  adoption,  the  opinion  proceeded : 

""With  the  adoption  of  the  amendment  the  power  of  the 
States  to  oppress  any  one  under  any  pretense  or  in  any  form 
was  forever  ended;  and  henceforth  all  persons  within  their 
jurisdiction  could  claim  equal  protection  under  the  laws.  And 
by  equal  protection  is  meant  equal  security  to  every  one  in  his 
private  rights — in  his  right  to  life,  to  liberty,  to  property,  and 
to  the  pursuit  of  happiness.  It  implies  not  only  that  the  means 
which  the  laws  afford  for  such  security  shall  be  equally  acces- 
sible to  him,  but  that  no  one  shall  be  subject  to  any  greater 
burdens  or  charges  than  such  as  are  imposed  upon  all  others 
under  like  circumstances.    .    .    . 

"Unequal  taxation,  so  far  as  it  can  be  prevented,  is,  there- 
fore,  with   other  unequal   burdens,   prohibited  by  the   aiiiend- 


342  THE   FOURTEENTH    AMENDMENT.  §    833 

ment.  There  undoubtedly  are,  and  always  will  be,  more  or 
less  inequalities  in  the  operation  of  all  general  legislation  aris- 
ing from  the  different  conditions  of  persons  from  their  means, 
business,  or  position  in  life,  against  which  no  foresight  can 
guard.  But  this  is  a  very  different  thing,  both  in  purpose  and 
effect,  from  a  carefully  devised  scheme  to  produce  such  ine- 
quality; or  a  scheme,  if  not  so  devised,  necessarily  producing 
that  result.  Absolute  equality  may  not  be  attainable,  but  gross 
and  designed  departures  from  it  will  necessarily  bring  the 
legislation  authorizing  it  within  the  prohibition.  The  amend- 
ment is  aimed  against  the  perpetration  of  injustice,  and  the 
exercise  of  arbitrary  power  to  that  end.  The  position  that  un- 
equal taxation  is  not  within  the  scope  of  its  prohibitory  clause 
would  give  to  it  a  singular  meaning.  It  is  a  matter  of  history 
that  unequal  and  discriminating  taxation,  leveled  against  spe- 
cial classes,  has  been  the  fruitful  means  of  oppressions.  .  .  . 
It  would,  indeed,  as  counsel  in  the  San  Mateo  case  ironic- 
ally observed,  be  a  charming  spectacle  to  present  to  the 
civilized  world,  if  the  amendment  were  read,  as  contended  it 
does  in  law:  'Nor  shall  any  State  deprive  any  person  of  his 
property  without  due  process  of  law,  except  it  he  in  the  form 
of  taxation;  nor  deny  to  any  person  within  its  jurisdiction  the 
equal  protection  of  the  laws,  except  it  he  hij  taxation.' 
No  such  limitation  can  be  thus  ingrafted  by  implication  upon 
the  broad  and  comprehensive  language  used.  The  power  of 
oppression  by  taxation  without  due  process  of  law  is  not  thus 
permitted;  nor  the  power  by  taxation  to  deprive  any  person 
of  the  equal  protection  of  the  laws." 

The  Justice  commented  on  the  fact  that  the  Act  of  Congress^ 
expressly  provides  for  equality  of  taxation,  and  proceeded : 

"The  fact  to  which  counsel  allude,  that  certain  property  is 
often  exempted  from  taxation  by  the  States,  does  not  at  all 
militate  against  this  view  of  the  operation  of  the  Fourteenth 
Amendment,  in  forbidding  the  imposition  of  unequal  burdens. 
Undoubtedly,  since  the  adoption  of  that  amendment,  the  power 
of  exemption  is  much  more  restricted  than  formerly;  but  that 
it  may  be  extended  to  property  used  for  objects  of  a  public 
nature  is  not  questioned, — that  is,  where  the  property  is  used 
for  the  promotion  of  the  public  wellbeing  and  not  for  any  pri- 
vate end." 


1  See  supra,  Sec.  311, 


§    334  THE   FOURTEENTH    AMENDMENT.  343 

After  stating  that  property  held  for  religious  and  educational 
purposes  was  property  exempted  from  taxation,  he  continued : 

""Whatever  the  exemption,  it  can  only  be  sustained  for  the 
public  service  or  benefit  received.  The  equality  of  protection 
which  the  Fourteenth  Amendment  declares  that  no  State  shall 
deny  to  any  one,  is  not  thus  invaded.  That  amendment  re- 
quires that  exactions  upon  property  for  the  public  shall  be 
levied  according  to  some  common  ratio  to  its  value,  so  that 
each  owner  may  contribute  only  his  just  proportion  to  the 
general  fund.  When  such  exaction  is  made  without  reference 
to  a  common  ratio,  it  is  not  a  tax,  whatever  else  it  may  be 
termed ;  it  is  rather  a  forced  contribution,  amounting,  in  fact, 
to  simple  confiscation." 

§  334.  Circuit  Judge  Jackson  on  Fourteenth  Amendment 
and  State  Taxation. — In  the  Ohio  case,^  Judge  Jackson  (later 
of  the  Supreme  Court)  held  invalid  an  ordinance  providing  for 
street  improvements  in  the  city  of  Toledo,  not  only  on  the  ground 
that  it  involved  the  taking  of  property  without  compensation  first 
paid  to  the  owner,  but  also  because  it  authorized  a  special  as- 
sessment without  notice  or  opportunity  to  be  heard,  which  was  a 
taking  of  property  without  due  process  of  law.  The  court  declared 
that  the  Fourteenth  Amendment  was  intended  to  place  the  same 
limitation  upon  the  power  of  the  State  which  the  Fifth  Amend- 
ment had  placed  upon  the  power  of  the  Federal  government,  and 
that  the  same  application  was  made  in  the  matter  of  taxation. 
It  is  no  longer  an  open  question  that  the  provisions  of  the  Federal 
Constitution,  prohibiting  the  State  from  depriving  any  person  of 
his  property  without  due  process  of  law,  apply  to  taxation  by  the 
State  or  by  its  subordinate  agencies,  and  that,  with  respect  to  all 
such  taxes  based  on  values  and  apportionment  and  involving  judi- 
cial or  quasi  judicial  ascertainment  and  determination  as  to  the 
amount  to  be  imposed  upon  the  citizen  or  made  a  charge  upon  his 
property,  due  process  of  law  demands  and  requires  that  at  some 
stage  in  the  proceeding,  before  the  tax  charge  is  fixed  and  made 
final  and  collected,  he  shall  have  notice  or  an  opportunity  to  be 
heard  in  reference  thereto. 


1  Scott  V.  Toledo,  36  Fed.  385. 


344  THE   FOURTEENTH    AMENDMENT.  §    335 

§  335.  "Due  Process  of  Law"  and  "The  Equal  Protection 
of  the  Laws"  Distinguished. — The  requirement  of  "due  proc- 
ess of  law ' '  or  its  legal  equivalent  ' '  the  law  of  the  land, ' '  in  its 
hroader  sense,  may  include  all  that  is  connoted  by  "equal  pro- 
tection of  the  laws."  One  who  is  injured  by  arbitrary  or  class 
legislation  may  justly  claim  that  he  is  deprived  of  his  property 
without  due  process  of  law,  and  so  the  term  "due  process  of 
law"  in  State  constitutions  has  been  held  to  involve  the  prohibi- 
tion of  class  legislation.^ 

The  Supreme  Court  has  not  defined  either  "due  process  of 
law"  or  the  "equal  protection  of  the  laws."  As  to  the  former 
phrase,  it  said,^  1.  c,  p.  101 : 

''It  must  be  confessed  however,  that  the  constitutional  mean- 
ing or  value  of  the  phrase  'due  process  of  law,'  remains  today 
without  that  satisfactory  precision  of  definition  which  judicial 
decisions  have  given  to  nearly  all  the  other  guarantees  of  per- 
sonal rights  found  in  the  constitutions  of  the  several  States  and 
of  the  United  States." 

Apart  from  the  imminent  risk  of  a  failure  to  give  any  defini- 
tion which  would  be  at  once  perspicuous,  comprehensive  and  sat- 
isfactory, there  was  wisdom  in  ascertaining  the  intent  and  appli- 
cation of  such  an  important  phrase  in  the  Federal  Constitution 
by  the  gradual  process  of  judicial  inclusion  and  exclusion,  as  the 
cases  presented  for  decision  should  require,  with  the  reasoning 
on  which  such  decisions  might  be  founded.  The  eourt^  has  re- 
cently declared  that  it  had  never  attempted  to  define  with  preci- 
sion the  words  ' '  due  process  of  law. ' ' 

So  also  the  court  has  declined  to  define  with  precision  what 
is  the  "equal  protection  of  the  laws,"  though  it  is  said  that  the 
equal  protection  of  the  laws  is  the  pledge  of  the  protection  of 
equal  laws.4    And  in  a  very  recent  case,  holding  invalid  the  anti- 


1  Sheppard  v.  Johnson,  2  Humphrey  285;  Sutton  v.  Hate,  96  Tenn.  710. 

2  Davidson  v.  New  Orleans,  96  U.  S.  97,  decided  in  1877,  supra. 
3Holden  v.  Hardy,  169  U.  S.  389,  42  L.  Ed.  780   (1898),  affirming  14 

Utah  71. 

4  Yiek  Wo  v.  Hopkins,  118  U.  S.  356,  369,  supra. 


§   335  THE   FOURTEENTH   AMENDMENT.  345 

trust  law  of  Illinois,i  the  court  has  repeated  that  both  these  two 
guaranties  are  secured  if  the  laws  operate  on  all  alike  and  do  not 
subject  the  individual  to  an  arbitrary  exercise  of  the  powers  of 
government. 

But  there  has  been  a  practical  distinction  observed  in  the 
application  of  the  terms,  which  for  convenience  may  be  followed 
in  analyzing  the  decisions.  Due  process  of  law  is  required  in  tax 
procedure,  in  the  assessment  and  collection  of  taxes;  and,  in  a 
broader  sense,  the  taking  of  property  by  taxation  under  due  pro- 
cess of  law  requires  that  the  tax  must  be  made  for  a  lawful,  that 
is  for  a  public,  purpose.  On  the  other  hand,  the  equal  protection, 
of  the  laws  involves  the  question  of  what  is  a  reasonable  classifi- 
catioyi  for  taxation,  in  other  words,  to  what  extent  equality  of 
taxation  is  protected  by  the  Federal  power  under  the  Fourteenth 
Amendment. 

The  practical  distinction  between  due  process  of  law  and  the 
equal  protection  of  the  laws  is  illustrated  in  a  case  in  the  Su- 
preme Court,  which  is  not  however,  concerned  with  taxation.  In 
Cotting  V.  Kansas  City  Stock  Yards,2  the  act  of  the  State  of 
Kansas,  regulating  charges  in  public  stockyards  and  applying 
only  to  the  defendant  corporation  and  not  to  other  companies  or 
corporations  engaged  in  like  business,  was  adjudged  to  be  in  vio- 
lation of  the  Fourteenth  Amendment.  The  opinion  of  Justice 
Brewer,  with  whom  concurred  Chief  Justice  Fuller  and 
Justice  Peckham,  was  that  the  unreasonable  rates  imposed  and 
the  extreme  and  cumulative  penalties,  constituted  a  deprivation 
of  property  without  due  process  of  law ;  while  the  remaining  six 
Justices,  Harlan,  Gray,  Brown,  "White,  Shiras  and  McKenna, 
concurred  only  in  the  second  ground  on  which  the  decision  was 
based,  that  the  discrimination  in  the  legislation,  directed,  as  it 
was,  against  the  defendant  company  alone,  constituted  a  denial 
of  the  er|ual  protection  of  the  laws.  In  other  words,  the  arhitrnry 
classification  constituted  a  denial  of  the  equal  protection  of  the 
laws,  and  these  latter  judges  expressed  no  opinion  upon  the 


1  Connolly  v.   Union   Sewer  Pipe  Co.,   184   U.   S.   540.   46   L.   Ed.   679 
(1902),  affirming  99  Fed.  354. 

2  183  U.  S.  79,  46  L.  Ed.  92  (1902),  reversing  82  Fed.  850. 


346  THE   FOURTEENTH    AMENDMENT.  §    336 

point  whether  the  statute  by  its  necessary  operation  would  de- 
prive the  company  of  its  property  without  due  process  of  law. 

It  would  seem,  however,  that  one  who  is  compelled  to  pay 
charges  which  are  unlawful,  through  arbitrary  classification,  is 
not  only  denied  the  ''equal  protection  of  the  laws,"  but  is  also 
thereby  deprived  of  his  property  ''without  due  process  of  law." 

§  336.  Jurisdiction  Over  State  Courts  Under  the  Amend- 
ment of  1914. — Prior  to  the  amendment  to  the  Judiciary  Act, 
December  13,  1914,  it  was  an  anomalous  fact,  illustrative  of  the 
dual  sovereignty  in  our  form  of  government  and  the  complex 
character  of  our  jurisprudence,  that  the  final  determination  of 
questions  of  the  violation  of  this  amendment  did  not  always  rest 
with  the  Federal  courts,  although  this  Fourteenth  Amendment 
protects  the  citizens  under  this  guaranty  of  protection  against 
the  action  of  the  State  government  or  any  one  acting  under  State 
authority. 

Under  our  judicial  system,  whereunder  the  Federal  courts 
in  cases  of  adverse  citizenship  administer  state  laws  and  follow, 
as  a  rule,  the  decision  of  the  State  wherein  they  have  jurisdic- 
tion, the  State  courts  also,  in  the  lawful  exercise  of  their  powers, 
may  decide  Federal  questions  when  presented  for  judgment. 
Under  the  original  Judiciary  Act  of  1789,  the  appellate  jurisdic- 
tion of  the  Supreme  Court,  in  reviewing  decisions  of  the  highest 
courts  of  the  states,  was  limited  to  cases  where  the  decision  was 
against  the  Federal  right,  privilege,  or  exemption  claimed. 
Where  the  judgment  of  the  highest  court,  therefore,  was  in  favor 
of  the  party  claiming  the  federal  right,  the  decision  of  the  State 
court  was  final  and  could  not  be  reviewed  by  writ  of  error  by  the 
Supreme  Court.  In  a  number  of  cases,  therefore,  arising  under 
the  Fourteenth  Amendment,  prior  to  this  amendment  of  the 
Judiciary  Act  in  1914,  decisions  of  State  courts  have  been  ren- 
dered, sustaining  the  claim  of  Federal  right  or  exemption,  and 
judging  State  statutes  to  be  invalid;  and  these  decisions  were 
final  within  that  jurisdiction. 

An  interesting  illustration  of  this  jurisdiction  of  the  State 
courts,  is  found  in  the  decision  of  the  Supreme  Court  of  Mis- 


§   336  THE   FOURTEENTH   AMENDMENT,  347 

souri/  that  a  constitutional  amendment  duly  ratified  by  the 
people,  adopting  what  is  known  as  the  California  plan  of  taxing 
mortgages  as  a  part  of  the  real  estate,  allowing  a  deduction  of 
the  value  of  the  mortgage  to  the  owner,  except  in  case  of  rail- 
roads, was  violative  of  the  Fourteenth  Amendment  because  the 
exemption  was  an  arbitrary  classification.  As  this  decision  was 
in  favor  of  the  Federal  immunity  in  the  suit,  the  decision  of  the 
State  court  construing  the  Constitution  of  the  United  States 
under  the  then  jurisdiction  of  the  Supreme  Court,  was  final. 

The  same  provision  of  the  California  Constitution  had  been 
held  by  the  Supreme  Court  of  that  State  to  be  valid  and  not 
violative  of  the  Fourteenth  Amendment.^  Thus,  by  the  decisions 
of  the  State  courts  construing  the  Federal  Constitution,  the  same 
system  of  taxation  was  held  valid  in  one  State  and  invalid  in  an- 
other. 

Under  a  recent  Act  of  Congresss  the  Judicial  code  was  amend- 
ed so  that  the  Supreme  Court  can  now  require,  by  certiorari 
or  otherwise,"  any  such  case  to  be  certified  to  the  Supreme 
Court  for  final  determination,  although  the  decision  of  the  State 
court  may  have  been  in  favor  of  the  right  or  immunity  claimed 


1  Russell  V.  Croy,  164  Mo.  68. 

2  Railroad  Co.  v.  Board  of  Equalization,  60  Cal.  35. 

3  The  Act  of  December  23,  1914,  amending  the  Judicial  Code,  Sec, 
237,  is  as  follows: 

"It  shall  be  competent  for  the  Supreme  Court  to  require,  by  certiorari 
or  otherwise,  any  such  case  to  be  certified  to  the  Supreme  Court  for  its 
review  and  determination,  with  the  same  power  and  authority  in  the 
case  as  if  it  had  been  carried  by  appeal  or  writ  of  error  to  the  Supreme 
Court,  although  the  decision  in  such  case  may  have  been  in  favor  of  the 
validity  of  the  treaty,  or  statute,  or  authority  exercised  under  the 
United  States,  or  may  have  been  against  the  validity  of  the  State's 
statute  or  authority  claimed  to  be  repugnant  to  the  Constitution, 
treaties,  or  laws  of  the  United  States,  or  in  favor  of  the  title,  right, 
privilege,  or  immunity  claimed  under  the  Constitution,  treaty,  statute, 
commission,  or  authority  of  the  United  States." 

The  American  Bar  Association,  at  its  meeting  of  1911,  recommended 
the  amendment  of  R.  S.,  U.  S.  709,  so  that  the  final  judgment  of  the 
State  court,  when  a  Federal  claim  was  involved,  could  be  reviewed  on 
writ  of  error  where  the  claim  was  affirmed,  as  well  as  where  it  was 
denied. 


348  THE   FOURTEENTH    AMENDMENT.  §    337 

by  the  Federal  Constitution  and  laws.    As  it  is  for  the  Supreme 
Court  to  determine  when  such  jurisdiction  shall  be  exercised,  the  - 
State  courts  will  continue  as  in  the  past  to  render  judgment 
in  such  cases,  which  will  be  final  if  certiorari  is  not  granted. 

§  337.  Substance  and  Not  Form  Regarded  in  Alleged  Viola- 
tions of  Fourteenth  Amendment. — In  determining  whether  the 
Fourteenth  Amendment  has  been  disregarded  by  any  of  the 
agencies  of  the  State,  substance  and  not  form  merely  will  be  con- 
sidered. It  was  said  in  a  condemnation  case^  that  the  mere  fact 
of  notice  and  opportunity  for  hearing  does  not  necessarily  decide 
the  question  as  to  whether  there  was  due  process  of  law.  "A  State 
may  not,  by  any  of  its  agencies,  disregard  the  prohibitions  of  the 
Fourteenth  Amendment.  The  judicial  authorities  may  keep 
within  the  letter  of  the  statute,  prescribing  forms  of  procedure 
in  the  courts,  and  give  the  parties  interested  the  fullest  oppor- 
tunity to  be  heard,  and  yet  it  might  be  that  its  final  action  would 
be  inconsistent  with  that  amendment."  The  State  cannot  make 
anything  due  process  of  law  which  by  its  own  legislation  it  chooses 
to  declare  such.  There  must  be  *'due  process"  in  substance  as 
well  as  in  form. 

On  the  other  hand,  the  court  has  uniformly  insisted  that  there 
must  be  a  substantial  failure  to  atford  due  process  of  law  or  the 
equal  protection  of  the  laws,  before  it  will  interfere  especially 
with  the  taxing  system  established  by  the  State.  Essentials  and 
non-essentials  are  carefully  distinguished.^  Courts  are  always 
reluctant  to  interfere  with  the  taxing  system  established  by  legis- 
lative authority,  and  it  has  been  repeatedly  held  that  this  applies 
with  especial  force  to  the  Federal  Supreme  Court  in  its  juris- 
diction under  this  amendment.  It  must  clearly  appear  that 
what  the  State  is  attempting  to  do  violates  the  constitutional 
rights  of  the  property  owners.3 


1  Chicago,  Burlington  &  Q.  R.  R.  Co.  v.  Chicago,  166  U.  S.  226,  235, 
41  L.  Ed.  979   (1887),  affirming  149  III.  457. 

2  Castillo  V.   McConnico,   168   U.   S.   674,  42   L.   Ed.   622    (1898),   dis- 
missing writ  of  error  to  47  La.  Ann.  1473.    See  infra,  Sec.  338. 

3 King  V.  Mullins,  171  U.  S.  404,  43  L.  Ed.  214  (1899). 


§   338  THE   FOURTEENTH   AMENDMENT.  349 

§  338.    Fourteenth  Amendment  in  Condemnation  for  Public 

Purposes. — The  power  to  condemn  private  property  for  public 
uses  is  closely  analogous  to  the  power  of  taxation,  and  the  broad- 
ened construction  of  the  Fourteenth  Amendment  is  illustrated 
in  the  decisions  of  the  Supreme  Court  relative  to  its  application 
to  the  exercise  by  the  States  of  the  former  power.  The  Fifth 
Amendment  to  the  Constitution,  which,  as  above  stated,  applies 
only  to  the  Federal  government,  provides  not  only  that  no 
person  shall  be  deprived  of  life,  liberty  or  property  without  due 
process  of  law,  but  also  that  private  property  shall  not  be  taken 
for  public  use  without  just  compensation.  In  Davidson  v.  New 
Orleans,  supra,  Sec.  306,  decided  in  1877,  Justice  Miller,  in  de- 
livering the  opinion  of  the  court,  commented  upon  the  fact  that 
these  words  relating  to  the  taking  of  private  property  for  public 
uses,  which  are  in  immediate  juxtaposition  in  the  Fifth  Amend- 
ment, are  left  out  of  the  Fourteenth. i 

In  the  California  irrigation  case  in  1896,2  the  court  again  re- 
ferred to  this  omission,  saying  that  the  States  are  not  specific- 
ally prohibited  by  the  Federal  Constitution  from  taking  private 
property  for  any  but  a  public  use.  But  it  is  claimed,  said  the 
court,  that  the  citizen  is  deprived  of  his  property  without  due 
process  of  law,  if  it  be  taken  by  or  under  State  authority  for 
any  other  than  a  public  use  either  under  the  power  of  taxation 
or  the  right  of  eminent  domain. 

But  later  at  the  same  term,  in  a  condemnation  case,^  the 
court  held  unanimously  that  due  jprocess  of  law  under  the 
Fourteenth  Amendment  does  protect  the  citizen  in  proceedings 
for  condemnation,  and  requires  not  only  that  the  use  should  be 
public,  but  that  just  compensation  should  be  paid.  It  said,  1.  c, 
241,  that  a  judgment  of  the  State  court,  even  if  it  be  authorized 
by  statute,  whereby  private  property  is  taken  by  the  State,  or 


1  But  see  remarks  of  Justice  Bradley  in  this  case. 

2Fallbrook  Irrigation  District  v.  Bradley,  164  U.  S.  112,  1.  c.  158,  41 
L.  Ed.  3C9  (1897),  reversing  68  Fed.  948. 

3  Chicago,  Burlington  &  Quincy  R.  R.  Co.  v.  Chicago,  166  U.  S.  226, 
supra. 


350  THE   FOURTEENTH    AMENDMENT.  §    338 

under  its  direction,  for  public  use,  without  compensation  made 
or  secured  to  the  owner,  is  upon  principle  and  authority  wanting 
in  the  due  process  of  law  required  by  the  Fourteenth  Amend- 
ment to  the  Constitution,  and  the  affirmance  of  such  judgment 
by  the  highest  court  of  the  State  is  a  denial  by  that  State  of  the 
right  secured  to  the  owner  by  that  instniment. 


CHAPTER    XI. 

DUE  PROCESS  OF  LAW  IN  TAXATION  PROCEDURE. 

§  339.  Due  process  of  law  is  "the  law  of  the  land." 

340.  Due  process  of  law  in  taxation  does  not  require  judicial  hearing. 

341.  Notice  and  hearing  not  required  in  cases  of  licenses,  etc. 

342.  Hearing  not  required  where  valuation  is  fixed  by  taxpayer. 

343.  Where  amount  of  tax  is  dependent  on  valuation,  hearing  is  re- 

quired. 

344.  Notice  and  hearing  in  inheritance  taxes. 

345.  Actual  notice  and  hearing  held  sufficient  in  absence  of  statute. 

346.  Rehearing  or  appeal  to  courts  not  required  in  valuation. 

347.  Ruling  of  State  court  that  hearing  is  required  is  conclusive. 

348.  Personal  notice  of  fixed  public  session  of  revision  boards  not 

required. 

349.  Provision  for  notice  may  be  implied. 

350.  Distinction  between  assessments  for  general  and  special  taxa- 

tion. 

351.  Notice  by  publication. 

352.  Due  process  satisfied  by  opportunity  for  hearing  at  any  stage 

of  proceeding.  . 

353.  Collection  of  taxes  through  summary  proceedings. 

354.  Collection  of  taxes  through  distraint  and  seizure. 

355.  Legislative  discretion  in  imposing  penalties  on  delinquents. 

356.  Plenary  power  of  State  in  assessments  and  re-assessments. 

357.  The  equalization  of  assessments. 

358.  Assessment  in  its  relation  to  tax  titles. 

359.  Assessment  by  boards  of  railroad  commissioners. 

360.  State  boards  of  equalization  in  taxation  procedure. 

361.  Estoppel  of  taxpayer  by  his  return  for  assessment. 

362.  A  joint  and  unapportioned  assessment  of  taxable  and  non-tax- 

able property  is  void  in  toto. 

363.  Legislative  legalization  of  defective  assessment  held  void. 

364.  Forfeiture  of  lands  for  taxes. 

365.  Rights  of  adverse  claimants  in  Kentucky  tax  forfeitures. 

366.  New  remedies  for  collection  of  taxes  may  be  adopted. 

367.  Effect  of  statutory  conclusiveness  of  tax  deeds. 

368.  Essentials  only  considered  in  reference  to  due  process  of  law. 

369.  Limitation  and  curative  statutes. 

370.  Jurisdiction  of  United  States  Courts  in  enforcing  collection  of 

State  taxes. 

(351) 


352  DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  §    339 

371.  No  want  of  due  process  of  law  when  tax  sale  is  subject  to  right 

of  redemption. 

372.  Due  process  in  assessment  of  trustees. 

373.  Discretionary    and    mandatory    statutory    requirements    distin- 

.guished. 

374.  Enforcement  of  tax  lien  by  plenary  civil  action. 

375.  Due  process  in  Michigan  railroad  taxation. 

§  339.    Due  Process  of  Law  is  "The  Law  of  the  Land."— 

"The  prohibition  against  depriving  the  citizen  or  subject  of  his 
life,  liberty,  or  property  without  due  process  of  law,"  said  Jus- 
tice Miller/  in  a  notable  opinion,  "is  not  new  in  the  constitu- 
tional history  of  the  English  race.  It  is  not  new  in  the  constitu- 
tional history  of  this  country,  and  it  was  not  new  in  the  Consti- 
tution of  the  United  States  when  it  became  a  part  of  the  Four- 
teenth Amendment  in  1866. ' ' 

Due  process  of  law  in  the  Fourteenth  Amendment  means,  as 
the  same  words  in  the  Fifth  Amendment  were  held  to  mean,  "by 
the  law  of  the  land."  The  latter  phrase  in  Magna  Charta  was 
said  by  Cokez  to  mean  the  * '  due  course  and  process  of  the  law. ' ' 

The  law  of  the  land  or  due  process  of  law  usually  implies 
and  includes  a  regular  course  of  judicial  procedure,  summons, 
hearing  and  judgment.    In  the  famous  words  of  Mr.  Webster  :3 

"By  the  law  of  the  land  is  most  clearly  intended  the  gen- 
eral law,  a  law  which  hears  before  it  condemns,  which  pro- 
ceeds upon  inquiry,  and  renders  judgment  only  after  trial. 
The  meaning  is  that  every  citizen  shall  hold  his  life,  liberty, 
property  and  immunities  under  the  protection  of  the  general 
rules  which  govern  society.  Everything  which  may  pass  un- 
der the  form  of  an  enactment  is  not  therefore  to  be  considered 
the  law  of  the  land." 

The  definition  of  Justice  Story*  is  more  applicable  to  the  '  *  due 
process  of  law ' '  in  tax  procedure  : 


1  Davidson  v.  New  Orleans,  96  U.  S.,  1.  c.  101,  supra. 
>2  Inst.  45,  50. 

3  From  the  argument  in  Dartmouth  College  Case,  4  Wheat.  518,  581, 
supra. 

4Story  on  Constitution,  5th  Ed.,  Sec.  1945. 


§   340         DUE  PROCESS  OP   LAW  IN   TAXATION   PROCEDURE.  353 

"Due  process  of  law  in  each  particular  case  means  such  an 
exertion  of  the  powers  of  government  as  the  settled  maxims  of 
law  permit  and  sanction,  and  under  such  safeguards  for  the 
protection  of  individual  rights,  as  those  maxims  prescribe  for 
the  class  of  cases  to  which  the  one  being  dealt  with  belongs." 

§  340.  Due  Process  of  Law  in  Taxation  Does  Not  Require 
Judicial  Hearing. — Due  process  of  law  in  taxation  is  that  which 
is  due  and  appropriate  in  that  class  of  cases,  that  which  in  the 
experience  of  our  race  in  the  enjoyment  of  self-government  has 
been  found  due  and  appropriate. 

Thus  it  has  been  uniformly  held  by  the  Federal  and  State 
courts,  for  substantially  the  same  provision  is  in  all  the  State 
constitutions,  that  due  process  of  law  in  taxation  does  not  re- 
quire regular,  nor  indeed  any,  judicial  procedure.  This  has 
been  the  ruling  both  before  and  since  the  adoption  of  the  Four- 
teenth Amendment.  Governments  must  have  their  revenues 
without  delay  at  the  times  appointed,  and  obviously  the  collec- 
tion cannot  be  postponed  to  wait  the  determination  of  a  common 
law  trial.  They  must  from  necessity  proceed  in  a  summary 
way.^ 

The  leading  and  very  illustrative  ease  on  this  subject  in  the 
Supreme  Court  is  Murray  v.  Hoboken  Land  Co.,^  decided  in 
1856,  holding  that  summary  process  by  way  of  distress  warrant 
from  the  United  States  Treasury  against  a  defaulting  collector, 
constituting  a  lien  upon  his  real  estate,  was  ''due  process  of  law" 
under  the  Fifth  Amendment  of  the  United  States  Constitution. 
The  court,  in  an  exhaustive  opinion  by  Justice  Curtis,  holds 
that  the  term  and  its  legal  equivalent,  "the  law  of  the  land," 
must  be  construed  in  the  light  of  the  common  law,  and  the  sum- 
mary remedies  authorized  thereby  in  claims  against  public  de- 
faulters and  in  the  collection  of  taxes.    It  said : 

**It  may  be  added,  that  probably  there  are  few  governments 
that  do  or  can  permit  their  claims  for  public  taxes,  eitl^er  on 
the  citizen  or  on  the  officer  employed  for  their  collection  or 
disbursement,  to  become  subjects  of  judicial  controversy  ac- 


1  Bartlett  v.  Wilson,  59  Vt.  23. 

2  18  Howard  272,  15  L.  Ed.  372. 


354  DUE   PROCESS   OF    LAW    IN    TAXATION    PROCEDURE.  §    340 

cording  to  the  course  of  the  law  of  the  land.  Imperative 
necessity  has  forced  a  distinction  between  such  claims  and  all 
others,  which  has  sometimes  been  carried  out  by  sunmiary 
methods  of  proceeding,  and  sometimes  by  systems  of  fines  and 
penalties,  but  always  in  some  way  observed  and  yielded  to." 

The  principle  thus  declared  has  been  uniformly  applied  by 
the  Supreme  Court  in  cases  where  due  process  of  law  in  the  tax 
procedure  of  the  States  has  been  in  question.  In  the  first  tax- 
ation case  under  the  Fourteenth  Amendment,  it  was  said  that 
due  process  of  law  in  taxation  does  not  mean  by  a  judicial  hear- 
ing. The  nation  from  which  we  inherit  the  phrase  itself  has 
never  relied  upon  the  courts  of  justice  in  the  collection  of  taxes, 
though  she  has  passed  through  a  successful  resistance  to  un- 
lawful taxation.^ 

In  another  taxation  case,^  it  was  said  that  taxes  have  not,  as  a 
general  rule,  in  this  country  since  its  independence,  nor  in  Eng- 
land before  that  time,  been  collected  by  regular  judicial  pro- 
ceeding. The  necessities  of  government,  the  nature  of  the  duty 
to  be  performed,  and  the  customary  usages  of  the  people  have 
established  a  different  procedure,  which  in  regard  to  that  matter 
is,  and  always  has  been,  ' '  due  process  of  law. ' ' 

In  another  early  ease  under  the  Fourteenth  Amendment,  the 
meaning  of  "due  process  of  law"  was  exhaustively  discussed, 
1.  c,  page  104,  in  a  memorable  opinion  by  Justice  Miller.^  He 
laid  down  the  proposition : 

"That  whenever  by  the  laws  of  a  State,  or  by  State  author- 
ity, a  tax,  assessment,  servitude  or  other  burden  is  imposed 
upon  property  for  the  public  use,  whether  it  be  for  the  whole 
State  or  for  some  more  limited  portion  of  the  community,  and 
those  laws  provide  for  a  mode  of  confirming  or  contesting  the 
charge  thus  imposed  in  the  ordinar}^  courts  of  justice,  with 
such  notice  to  the  person,  or  such  proceeding  in  regard  to  the 
property  as  is  appropriate  to  the  nature  of  the  case,  the  judg- 


1  Justice  Miller  in  McMillen  v.  Anderson,  95  U.  S.  37,  24  L.  Ed.  335 
(1878). 

2  Justice  Miller  in  Kelly  v.  Pittsburgh,  104  U.  S.  78,  26  L.  Ed.  658 
(1881). 

s  Davidson  v.  New  Orleans,  supra. 


§    341  DUE   PROCESS   OF   LAW   IN   TAXATION"   PROCEDURE.  355 

ment  in  such  proceedings  cannot  be. said  to  deprive  the  owner 
of  his  property  without  due  process  of  law,  however  obnoxious 
it  may  be  to  other  objections.^ 

§  341.  Notice  and  Hearing  Not  Required  in  Cases  of  Li- 
censes, Etc. — Due  process  of  law  in  taxation  is  that  which  is 
due  and  appropriate,  i.  e.,  suitable  to  the  nature  of  the  case.  In 
what  are  known  as  license,  privilege  or  occupation  taxes,  and 
those  imposed  upon  specific  things,  where  the  amount  to  be  paid 
is  fixed  by  law,  and  no  valuation  is  required,  hearing  would  be 
of  no  service,  and  therefore  none  is  required. 

Justice  Field,^  in  the  opinion  already  referred  to,  supra, 
Sec.  333,  says  that  the  distinction  between  taxes  upon  licenses 
and  taxes  upon  values  is  plain  and  everywhere  recognized. 

The  same  distinction  was  later  made  by  the  same  judge  in 
delivering  the  opinion  of  the  Supreme  Court  in  the  California 
Drainage  District  Case,^  1.  c.  page  708 : 

*'It  is  sufficient  to  observe  here  that  by  'due  process'  is 
meant  one  which,  following  the  forms  of  law,  is  appropriate 
to  the  case,  and  just  to  the  parties  to  be  affected.  ...  Of 
the  different  kinds  of  taxes  which  the  State  may  impose,  there 
is  a  vast  number  of  which  from  their  nature  no  notice  can  be 


1  Justice  Bradley  gave  an  opinion,  concurring  in  the  conclusion,  but 
saying  that  he  thought  the  opinion  of  the  court  narrowed  the  scope  of 
the  inquiry  as  to  what  is  due  process  of  law  more  than  it  should  do. 
He  thought  that  the  court  is  entitled,  under  the  Fourteenth  Amendment, 
to  see  not  only  that  there  is  some  process  of  law,  but  due  process  of  law; 
and  in  judging  what  is  due  process  of  law,  attention  must  be  given  to 
the  cause  and  object  of  the  taking,  whether  under  the  taxing  power, 
the  power  of  eminent  domain,  the  power  of  assessment  for  local  im- 
provement, or  none  of  these.  If  found  to  be  suitable  and  admissible  in 
the  special  case,  it  will  be  adjudged  to  be  due  process  of  law;  but  if 
found  to  be  arbitrary,  oppressive  and  unjust,  it  may  be  declared  to  be 
not  due  process  of  law.  Such  an  examination  may  be  made,  he  con- 
cluded, without  interfering  with  that  large  discretion  which  every  legis- 
lative power  has  of  making  wide  modifications  in  the  forms  of  procedure 
in  each  case,  according  as  the  laws,  habits,  customs  and  preferences  of 
the  people  of  the  particular  State  may  require. 

2  County  of  Santa  Clara  v.  So.  Pac.  R.  R.  Co.,  18  Fed.  p.  409. 
3Hagar  v.  Reclamation  District,  111  U.  S.  701,  28  L.  Ed.  569  (1884). 


356  DUE   PROCESS   OP   LAW    IN    TAXATION    PROCEDURE.  §    341 

given  to  the  taxpayer,  nor  would  notice  be  of  any  possible  ad- 
vantage to  him,  such  as  poll  taxes,  license  taxes  (not  depend- 
ent upon  the  extent  of  his  business)  and  generally  specific 
taxes  on  things,  or  persons,  or  occupations.  In  such  cases  the 
legislature,  in  authorizing  the  tax,  fixes  its  amount,  and  that 
is  the  end  of  the  matter. 

"If  the  tax  be  not  paid,  the  property  of  the  delinquent  may 
be  sold,  and  he  be  thus  deprived  of  his  property.  Yet  there 
can  be  no  question,  that  the  proceeding  is  due  process  of  law, 
as  there  is  no  injury  into  the  weight  of  evidence,  or  other  ele- 
ment of  a  judicial  nature,  and  nothing  could  be  changed  by 
hearing  the  taxpayer.  No  right  of  his  is,  therefore,  invaded. 
Thus,  if  the  tax  on  animals  be  a  fixed  sum  per  head,  or  on 
articles  a  fixed  sum  per  yard,  or  bushel,  or  gallon,  there  is 
nothing  the  owner  can  do  which  can  affect  the  amount  to  be 
collected  from  him.  So,  if  a  person  wishes  a  license  to  do  busi- 
ness of  a  particular  kind,  or  at  a  particular  place,  such  as  keep- 
ing a  hotel  or  a  restaurant,  or  selling  liquors,  or  cigars,  or 
clothes,  he  has  only  to  pay  the  amount  required  by  the  law 
and  go  into  the  business.  There  is  no  need  in  such  cases  for 
notice  or  hearing.  So  also,  if  taxes  are  imposed  in  the  shape 
of  licenses  for  privileges,  such  as  those  on  foreign  corpora- 
tions for  doing  business  in  the  State,  or  on  domestic  corpora- 
tions for  franchises,  if  the  parties  desire  the  privilege,  they 
have  only  to  pay  the  amount  required.  In  such  cases  there  is 
no  necessity  for  notice  or  hearing.  The  amount  of  the  tax 
would  not  be  changed  by  it. 

"But  where  a  tax  is  levied  on  property  not  specifically,  but 
according  to  its  value,  to  be  ascertained  by  assessors  appointed 
for  that  purpose  upon  such  evidence  as  they  may  obtain,  a  dif- 
ferent principle  comes  in.  The  officers  in  estimating  the  value 
act  judicially ;  and  in  most  of  the  States  provision  is  made  for 
the  correction  of  errors  committed  by  them,  through  boards  of 
revision  or  equalization,  sitting  at  designated  periods  provided 
by  law  to  hear  complaints  respecting  the  justice  of  the  assess- 
ments. The  law,  in  prescribing  the  time  when  such  complaints 
will  be  heard,  gives  all  the  notice  required,  and  the  proceeding 
by  which  the  valuation  is  determined,  though  it  may  be  fol- 
lowed, if  the  tax  be  not  paid,  by  a  sale  of  the  delinquent's  prop- 
erty, is  due  process  of  law. 

"In  some  States,  instead  of  a  board  of  revision  or  equaliza- 
tion, the  assessment  may  be  revised  by  proceedings  in  the 
courts  and  be  there  corrected  if  erroneous,  or  set  aside  if  in- 
valid; or  objections  to  the  validity  or  amount  of  the  assess- 
ment may  be  taken  when  the  attempt  is  made  to  enforce  it. 


§    843  DUE   PROCESS    OP   LAW   IN   TAXATION   PROCEDURE.  357 

In  such  cases  all  the  opportunity  is  given  to  the  taxpayer  to  be 
heard  respecting  the  assessment  which  can  be  deemed  essen- 
tial to  render  the  proceedings  due  proess  of  law." 

§  342.  Hearing*  Not  Required  Where  Valuation  is  Fixed  by 
Taxpayer. — The  principle,  that  due  process  of  law  in  taxation 
does  not  require  a  hearing,  where  from  the  nature  of  the  case  it 
can  be  of  no  service,  was  applied  by  the  United  States  Circuit 
Court  in  Virginia  to  the  case  of  an  assessment  of  shares  in  na- 
tional banks.  Under  the  act  the  assessment  was  made  upon  the 
market  value  of  the  shares  as  reported  to  the  assessor  by  the 
bank,  and  the  act  itself  fixed  the  amount  of  the  tax  upon  this 
market  value,  so  that  the  tax  bills  were  self-executing  and  en- 
forceable by  levy.  The  court  said  that,  as  the  bank  itself  fixed 
the  market  value  and  the  statute  the  amount  of  the  tax,  the  as^ 
sessor's  duty  was  a  mere  ministerial  one,  and  therefore  the  case 
was  within  the  principle  declared  by  the  Supreme  Court  in 
Hagar  v.  Reclamation  District,  supra,  Sec.  341.^ 

^  §  343.  Where  Amount  of  Tax  is  Dependent  on  Valuation, 
Hearing  is  Required. — ^But  the  court  said  in  the  California 
Drainage  Case  that,  where  a  tax  is  levied  on  property,  not  speci- 
fically but  according  to  its  value,  to  be  ascertained  by  assessors 
upon  such  evidence  as  they  may  obtain,  a  different  principle  ap- 
plies, and  hearing  at  some  stage  is  required.  The  legislature 
may  prescribe  the  kind  of  notice,  and  the  mode  in  which  it  shall 
be  given,  but  it  cannot  dispense  with  it  altogether.  In  some  trib- 
unal, or  before  some  official  authorized  to  correct  errors,  the 
owner  must  be  afforded  an  opportunity  to  be  heard  in  respect  to 
the  proceedings  under  which  his  property  is  to  be  taken  or  bur- 
dened, and  this  must  be  at  some  time  before  the  tax  or  assess- 
ment becomes  final  or  effectual,  in  order  to  constitute  such  pro- 
cedure due  process  of  law.^ 

While  the  imposition  of  taxes  is  in  its  nature  administrative 


1  People's  National  Bank  v.  Marye,  107  Fed.  571,  1.  c.  580. 

2  A  leading  case  is  Stuart  v.  Palmer,  74  N.  Y.  183.  See  also  Jackson, 
J.,  in  Scott  v.  Toledo,  supra,  and  Field,  J.,  in  Santa  Clara  Co.  v.  So. 
Pac.  R.  R.,  supra;  Gatch.  v.  Des  Moines,  63  Iowa  718. 


358  DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  §    343 

and  not  judicial^  assessors  exercise  quasi  judicial  power  in 
arriving  at  the  value,  and  opportunity  to  be  heard  as  to  value 
should  be  given  and  is  given  under  all  just  sj^stems  of  taxa- 
tion. 1 

The  Supreme  Court  held  that  due  process  was  not  afforded 
under  the  law  of  Georgia  whereunder  the  valuation  of  property 
not  returned  for  taxation  by  the  taxpayer  was  made  by  the  as- 
sessing authorities  without  notice  or  opportunity  for  hearing, 
and  was  conclusive  upon  the  taxpayer,  unless  he  could  show 
bad  faith,  even  where  he  may  have  failed  to  return  the  property 
upon  reasonable  grounds  and  upon  the  honest  belief  that  it 
was  not  taxable. 2  The  tax  in  this  case  was  upon  the  corporate 
stock  of  a  railroad  of  another  State  held  by  the  Georgia  cor- 
poration. The  court  said  that  this  class  of  property  had  been 
regarded  as  non-taxable  in  Georgia,  but  the  stock  liad  been  held 
taxable  in  195  U.  S.  219.     The  court  concluded  its  opinion; 

''Eeluctant  as  we  are  to  interfere  with  the  enforcement  of 
the  tax  laws  of  the  State,  we  are  constrained  to  the  conclusion 
that  this  system  does  not  afford  that  due  process  of  law,  which 
adjudges  upon  notice  and  opportunity  to  be  heard,  which  it 
was  the  intention  of  the  Fourteenth  Amendment  to  protect 
against  imj^airment  by  State  action." 

In  several  cases  the  State  courts  have  declared  tax  procedure 
void  undei*  the  Fourteenth  Amendment  as  wanting  in  this  par- 
ticular. Thus,  in  Virginia,3  a  city  charter  providing  for  an 
assessment  for  the  city  tax  distinct  from  the  assessment  for  the 
State  tax  and  making  no  provision  for  correction  or  review  of 
the  city  assessment,  and  a  statute  of  Maryland,^  requiring  dis- 
tillers and  warehousemen  to  report  spirits  on  hand,  which  were 
then  valued  by  the  official,  but  allowing  no  hearing  or  appeal, 
were  both  held  void  under  the  Fourteenth  Amendment  as  want- 


1  Palmer  v.  MacMahon,  133  U.  S.  660,  669,  33  L.  Ed.  772  (1890),  affirm- 
ing 102  N.  Y.  176. 

2  Central  of  Ga.  R.  Co.  v.  Wright,  207  U.  S.  127,  52  L.  Ed.  134  (1907), 
reversing  125  Ga.  589,  617,  and  124  Ga.  596,  630. 

3  Heth  V.  Radford,  96  Va.  272;  Evans  v.  Fall  River  Co.,  9  So.  Dak.  130. 

4  Monticello  Distilling  Co.  v.  Baltimore,  90  Md.  417. 


§    345         DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  359 

ing  in  due  process  of  law.  A  statute  of  Ohio,  providing  for  the 
summary  seizure  and  killing  of  unlicensed  dogs,  was  also  held 
void  as  authorizing  the  taking  of  property  without  due  pro- 
cess of  law.i 

§  344.    Notice  and  Hearing  in  Inheritance  Taxes. — It  was 

held  in  Iowa,2  that,  as  realty  passing  by  will  or  inheritance 
vests  immediately  in  the  heir  or  devisee  on  the  death  of  the  owner, 
a  law  providing  that  real  estate  subject  to  an  inheritance  tax 
should  be  appraised  after  the  appointment  of  an  executor  or  ad- 
ministrator and  the  tax  calculated  on  the  appraised  value,  the 
property  to  be  sold  in  the  event  of  the  tax  not  being  paid  by 
the  person  entitled  to  the  estate,  was  unconstitutional  as  depriv- 
ing the  heir  or  devisee  of  property  without  due  process  of  law, 
in  that  it  authorized  the  fixing  of  the  appraisement  for  taxa- 
tion without  notice  or  opportunity  to  be  heard. 

But  the  inheritance  tax  law  of  New  York  was  held  not  open 
to  this  objection,  as  it  made  sufficient  provision  for  notice  and 
hearing  in  determining  the  value  of  the  estate. 

§  345.  Actual  Notice  and  Hearing  Held  Sufficient  in  Ab- 
sence of  Statute. — The  failure  of  a  Kentucky  statute  to  re- 
quire notice  to  be  given  of  a  special  assessment  for  back  taxes 
on  omitted  property,  made  by  the  regular  assessor  under  Ken- 
tucky statute.  Sec.  3179,  and  the  time  provided  by  law  for  the 
making  of  the  general  assessment,  does  not  deprive  the  taxpayer 
of  his  property  without  due  process  of  law,  where  the  State 
court  has  afforded  him  full  opportunity  to  be  heard  on  the 
question  of  the  validity  and  the  amount  of  the  tax  and  on  such 
hearing  has  reduced  the  tax.3  The  court  said  that  the  State 
court  had  held  that  the  taxpayer  was  entitled  to  a  hearing  a"nd 
had  granted  and  enforced  such  right  and  on  the  trial  had  re- 
duced the  tax.  It  did  not  assume  the  legislative  function  of 
making  an  assessment,  and   merely  reduced  at  a  full  hearing 


1  Fagin  v.  Ohio  Humane  Society,  C  Nisi  Prius  357. 

2  Ferry  v.  Campbell,  110  Iowa  290. 

3  Security  Trust  Co.  v.  Lexington,  203  U.  S.  323,  51  L.  Ed.  204  (1906), 
aflarming  27  Ky.  Law  591. 


360  DUE   PROCESS   OP   LAW   IN   TAXATION    PROCEDURE.  §    346 

the  amount  of  an  assessment  made  by  the  assessor  under  color 
at  least  of  legislative  authority. 

Thus  where  the  amount  of  the  tax  is  fixed  by  law  as  for 
cigarette  selling  and  the  tax  is  made  a  lien  upon  the  real  estate, 
there  being  no  discretion  as  to  the  amount  of  the  tax,  sufficient 
provision  for  notice  and  hearing  to  constitute  due  process  of 
law  was  afforded  the  owner  of  the  real  property  by  permitting 
him  to  make  application  to  the  Board  of  Supervisors  to  remit 
the  tax,  and  in  case  of  a  denial  of  his  petition,  to  appeal  to  the 
District  Court  for  a  judicial  determination  of  his  liability,  i 

Under  the  same  reasoning  where  the  owner  has  actual  notice 
of  an  erroneous  or  inaccurate  description  of  his  property  in  the 
assessment  he  is  not  deprived  of  his  property  without  due  proc- 
ess of  law,  where  he  not  only  has  notice  from  the  record  but 
notice  in  fact  that  the  property  was  listed  and  assessed  for 
taxes.  It  was  therefore  adjudged  that  the  foreclosure  proceed- 
ing was  valid  and  the  decision  in  faVor  of  plaintiff  in  an  action 
to  quiet  title  was  affirmed.2 

"Where  a  board  provided  an  impossible  date  for  hearing,  that 
is,  a  date  before  the  act  authorizing  the  Board  to  value  the 
property  of  public  service  corporations  went  into  effect,  the 
assessment  was  not  valid,  though  there  w^  no  final  notice  when 
it  affirmatively  appeared  that  the  company  had  notice  and  did 
appear  and  was  heard.3 

§  346.  Rehearing  or  Appeal  to  Courts  Not  Required  in  Val- 
uation.— In  some  States,  as  in  New  York,  the  proceedings  of  a 
board  of  assessors  or  board  of  review  in  the  valuation  of  prop- 
erty may  be  judicially  reviewed  by  certiorari  or  other  form  of 
procedure.  The  absence  of  such  an  opportunity  however  does 
not  constitute  want  of  due  process  of  law.  The  taxpayer  is 
deemed  to  have  his  day  in  court  in  the  matter  of  the  valuation 
of  his  property,  if  he  is  allowed  an  opportunity  for  hearing  at 


1  Hodge  V.  Muscatine  County,  195  U.  S.  276,  49  L.  Ed.  477    (1905), 
affirming  121  la.  482. 

2  Ontario  Land  Co.  v.  Yordy,  202  U.  S.  152,  53  L.  Ed.   449    (1909), 
affirming  44  Washington  239. 

3  Western  Union  Teleg.  Co.  v.  Trapp,  186  Fed.  114,  C.  C.  A.  8th  Cir. 


§    347  DUE   PROCESS   OP   LAW   IN   TAXATION'  PROCEDURE.  361 

any  stage  before  the  tax  becomes  final,  whether  before  a  qtiasi 
judicial  board,  or  before  any  other  tribunal  provided  by  the 
State  for  the  determination  of  such  questions.  It  is  no  objection 
that  the  procedure  is  summary. 

Neither  does  due  process  of  law  require  any  rehearing  or  re- 
trial.    The  Supreme  Court  said  in  the  Indiana  railroad  eases  :^ 

'*A  hearing  before  judgment,  with  full  opportunity  to  pre- 
sent all  the  evidence  and  the  arguments  which  the  party  deems 
important,  is  all  that  can  be  adjudged  vital.  Rehearings,  new 
trials,  are  not  essential  in  due  process  of  law,  either  in  judicial 
or  administrative  proceedings.  One  hearing,  if  ample,  before 
judgment,  satisfies  the  demand  of  the  Constitution  in  this  re- 
spect." 

It  was  contended  in  this  case  that  the  valuation  fixed  by  the 
board  was  not  announced  until  shortly  before  adjournment,  and 
that  no  notice  was  given  of  such  valuation  in  time  to  take  any 
steps  for  the  correction  of  errors,  but  the  court  said  that  was 
immaterial,  as  one  hearing  before  judgment  was  all  that  could 
be  asked. 

§  347.  Ruling  of  State  Court  That  Hearing  Is  Required  Is 
Conclusive. — While  a  party  is  entitled  to  a  hearing  as  of  right, 
that  is,  it  must  be  given  him  as  a  matter  of  law,  and  not  as  a 
matter  of  favor,  the  construction  by  the  State  court  of  the 
State  statute  that  such  hearing  is  allowed  by  the  statute  is  con- 
clusive upon  the  Supreme  Court. ^  In  this,  as  in  other  cases,  it 
is  the  statute  as  construed  by  the  State  court  which  must  deny 
due  process  of  law.  Even  where  the  statute  itself  makes  no 
provision  for  a  hearing,  and  the  State  courts  hold  that  the  tax- 
payer is  entitled  to  it  by  virtue  of  the  Constitution  construed 
with  the  statute,  the  statute  and  the  Constitution  will  be  con- 
strued together,  and  there  will  be  no  denial  of  due  process  of 
law.  3 


1 154  U.  S.  426,  supra;  McLeod  v.  Receveur,  71  Fed.  455. 

2  See  Indiana  Railroad  Cases,  supra. 

3  Kentucky  Railroad  Tax  Cases,  115  U.  S.  1.  c.  334,  29  L.  Ed.  414 
(1885). 


862  DUE   PROCESS   OF   LAW   IN    TAXATION    PROCEDURE.  §    348 

§  348.  Personal  Notice  of  Fixed  Public  Sessions  of  Revi- 
sion Boards  Not  Required. — The  requisite  notice  need  not 
however  be  personal.  It  is  sufficient  that  the  board  of  review 
or  other  revising  authority  holds  its  sessions  at  stated  times, 
when  parties  so  desiring  can  be  heard  in  relation  to  their  as- 
sessments. Thus  the  court  said  in  the  Kentucky  Railroad  Cases/ 
that  the  meetings  of  the  board  of  equalization  were  public  and 
not  secret.  The  time  and  place  of  holding  them  were  fixed  by 
law,  and  therefore  there  was  in  law  both  notice  and  hear- 
ing. 

In  another  ease,  involving  assessments  of  national  bank  share- 
holders, the  court  said  :2 

''It  is  true  the  statute  contemplates  no  personal  notice  to 
the  shareholders,  but  that  has  never  been  considered  an  essen- 
tial to  due  process  in  respect  to  taxation.  The  statute  defines 
the  time  w^hen  the  bank  shall  make  its  report  to  the  auditor  gen- 
eral, and  it  specifically  directs  him  to  hear  any  stockholder  who 
may  desire  to  be  heard.  The  statute,  therefore,  fixes  the  time 
and  place,  for  official  proceedings  are  always,  in  the  absence 
of  express  provision  to  the  contrary,  to  be  had  at  the  office  of 
the  officer  charged  with  the  duties,  and  a  notice  to  all  prop- 
erty holders  of  the  time  and  place  of  W'hich  the  assessment  is 
to  be  made,  is  all  that  due  process  requires  in  respect  to  the 
matter  of  notice  in  tax  proceedings. ' ' 

It  was  further  said  that  "the  law  in  prescribing  the  time 
when  such  complaints  wiU  be  heard,  gives  all  the  notice  re- 
quired ;  and  the  proceeding  by  which  the  valuation  is  deter- 
mined, though  it  may  be  followed,  if  the  tax  be  not  paid,  by  a 
sale  of  the  delinquent's  property,  is  due  process  of  law. "3 

This  principle  was  applied  where  the  Supreme  Court  reversed 


1  Kentucky  Railroad  Tax  Cases,  115  U.  S.  321;  see  also  State  Railroad 
Tax  Cases,  92  U.  S.  575,  1.  c.  609,  23  L.  Ed.  663  (1876). 

2  Merchants'  Bank  v.  Pennsylvania,  167  U.  S.  461,  supra;  Palmer  v. 
McMahon,  133  U.  S.  660,  supra;  Hagar  v.  Reclamation  District,  111  U. 
S.  701,  supra;  American  Transit  Co.  v.  Thomas  (Colo.),  63  Pac.  410; 
Streight  v.  Durham,  10  Ok.  361. 

3  In  re  Fuller's  Estate,  71  N.  Y.  Supp.  40;  see  also  Union  Trust  Co.  v. 
Wayne  Probate  Judge,  125  Mich.  487. 


§    348         DUE   PROCESS   OP   LAW   IN    TAXATION    PROCEDURE.  363 

the  Circuit  Court  of  Appeals,  Sixth  Circuit/  and  held  that 
notice  of  the  time  and  the  place  of  the  first  meeting  of  the  State 
board  for  the  equalization  of  assessments  of  bank  shares  under 
the  Ohio  law  was  sufficient  notice  to  any  banks  which  might  be 
affected  by  its  action,  although  such  action  should  be  taken  at 
a  meeting  of  the  board  after  it  had  adjourned  %\dthout  fixing  a 
date  for  a  subsequent  meeting.  It  seems  that  in  this  case  the 
bank  rested  on  the  evidence  it  had  returned  to  the  Auditor.  The 
board  met  and  adjourned  on  Sept.  20,  without  fixing  a  date  of 
meeting,  and  at  a  subsequent  called  meeting,  held  on  Dec.  4,  with- 
out notice  to  the  bank,  raised  the  assessment  of  its  shares.  The 
court  said: 

''The  board  was  a  public  tribunal,  open  to  be  invoked,  and 
charged  with  duties,  and  necessarily  subject  to  adjourmnents. 
What  it  had  done  the  bank  could  easily  have  ascertained  and 
.  as  easily  what  it  contemplated  doing.  An  inquiry  would  have 
ascertained  both.  By  the  exertion  of  a  very  trifling  trouble 
the  bank  would  have  been  informed  of  every  meeting  of  the 
board." 

The  effect  of  this  ruling  is  to  charge  taxpayers  with  notice, 
not  only  of  the  regular  and  stated  meetings  of  revising  boards, 
but  also  of  called  meetings  held  at  any  time  before  their  final 
adjournment.  He  must  take  notice  that  the  board  may  increase 
his  assessment  at  any  such  meeting,  and  is  not  bound  to  give 
him  any  notice  that  it  contemplates  any  such  action,  that  is, 
such  increase  does  not  violate  the  due  process  of  law  guaranteed 
by  the  Federal  Constitution.  As  State  revising  boards  usually 
meet  at  the  State  capital,  this  ruling  in  practical  operation  may 
deprive  parties  of  the  opportunity  of  showing  that  a  proposed 
increase  in  assessments  is  unwarranted,  as  it  seems  that  such 
increase  may  be  made  at  a  called  meeting,  when  they  have  no 
opportunity  of  knowing  that  the  meeting  is  to  be  held  or  that 
any  increase  in  their  assessments  is  contemplated. 

This  ruling  was  followed  in  sustaining  the  action  of  the  Colo- 


1  Lander  v.  Mercantile  National  Bank  of  Cleveland,  186  U.  S.  458, 
46  L.  Ed.  1247  (1902),  reversing  Mercantile  National  Bank  v.  Hubbard, 
45  C.  C.  A.  66. 


364  DUE   PROCESS   OP   LAW   IN    TAXATION   PROCEDURE.  §    349 

rado  Tax  Commission  and  the  Board  of  Equalization  making  a 
40%  increase  in  the  assessed  valuation  of  all  taxable  property 
in  the  County  of  Denver,  which  was  held  not  to  be  wanting  in 
due  process  of  law,  because  no  opportunity  to  be  heard  was 
given  to  the  individual  taxpayers,  or  to  any  city  or  county  of- 
ficial, as  they  were  all  held  to  have  notice  by  reason  of  the  fact 
that  the  time  of  meeting  of  these  boards  was  fixed  by  law. 

This  ruling  has  been  enforced  also  in  cases  involving  the 
validity  of  tax  deeds.^ 

§  349.  Provision  for  Notice  May  be  Implied. — It  is  not  nec- 
essary that  a  statute  or  ordinance  should  make  express  pro- 
vision for  notice  to  taxpayers,  for  what  is  implied  in  a  statute 
is  as  much  a  part  of  it  as  that  which  is  expressed.  Accordingly 
where  a  statute  or  an  ordinance  provides  for  stated  meetings 
of  a  board,  designates  the  place  at  which  the  meetings  are  to 
be  held  and  directs  that  all  persons  interested  in  the  matter 
may  be  heard  before  it,  it  is  implied  thereby  that  suitable  notice 
shall  be  given  to  the  parties  interested.^ 

The  court,  after  saying  that  seemingly  the  final  construction 
placed  by  the  State  Supreme  Court  was  to  the  effect  that  the 
charter  required  notice,  added,  1.  c.  page  38 : 

"But  were  it  otherwise,  while  not  questioning  that  notice 
to  the  taxpayer  in  some  form  must  be  given  before  an  assess- 
ment for  the  construction  of  a  sewer  can  be  sustained,  as  in 
any  other  demand  upon  the  individual  for  a  portion  of  his 
property,  we  do  not  think  it  essential  to  the  validity  of  a  sec- 
tion in  the  charter  of  a  city  granting  power  to  construct  sew- 
ers that  there  should  in  terms  be  expressed  either  the  neces- 
sity for  or  the  time  or  manner  of  notice.  The  city  is  a  minia- 
ture State,  the  council  is  its  legislature,  and  the  charter  is  its 
constitution ;  and  it  is  enough  if,  in  that,  the  power  is  granted 
in  general  terms,  for  when  granted,  it  must  necessarily  be  ex- 
ercised   subject    to    all    limitations    imposed    by    constitutional 


iLrongyear  v.  Toolan,  209  U.  S.  414,  52  L.  Ed.  859  (1908),  affirming 
144  Mich.  55  (1908).  See  also  Jackson  Lumber  Co.  v.  McCrimmon,  164 
Fed.  759. 

2  Paulsen  v.  Portland,  149  U.  S.  30,  37  L.  Ed.  637  (1893). 


§   351         DUE  PROCESS  OF   LAW   IN   TAXATION   PROCEDURE.  365 

provisions,  and  the  power  to  prescribe  the  -mode  of  its  exercise 
is,  except  as  restricted,  subject  to  the  legislative  discretion  of 
the  council." 

§  350.  Distinction  Between  Assessments  for  General  and 
Special  Taxation. — There  is  a  distinction  to  be  observed  be- 
tween assessments  for  the  regularly  recurring  general  taxation 
and  those  specially  made  for  local  improvements.  The  former 
are  reviewed  by  a  board  of  equalization  which  sits  regularly  at 
stated  intervals,  and  of  these  sessions  the  taxpayer  is  bound  to 
take  notice,  so  that  no  special  notice  is  required.  Special  as- 
sessments, on  the  other  hand,  are  not  made  at  regular  intervals, 
but  whenever  the  public  necessity  or  convenience  requires.  The 
taxpayer  therefore  can  not  be  charged  with  constructive  notice 
of  such  proceedings,  and  he  must  have  some  specific  notice  of 
the  proposed  charge  against  his  property.  This  notice  need 
not  be  personal,  but  may  be  sufficiently  made  by  publication.^ 

§  351.  Notice  by  Publication. — In  service  by  publication, 
which  is  sufficient  in  case  of  special  assessments  requiring  no- 
tice in  some  form,  the  notice  must  be  sufficiently  full  and  clear 
to  disclose  to  the  taxpayer,  supposing  him  to  have  ordinary  in- 
telligence, in  a  general  way  what  is  proposed.  The  time  and 
place  appointed  must  be  such  that  with  reasonable  effort  he  will 
be  able  to  attend  and  present  his  objections. 

Thus,2  it  was  held  that  ten  days'  notice  given  by  publication 
for  three  successive  days  was  sufficient.  The  court  said  that 
perhaps  the  authority  of  the  legislature  to  prescribe  the  length 
of  time  of  notice  is  not  absolutely  beyond  review,  but  it  is  cer- 
tain that  only  in  a  clear  case  will  a  notice  authorized  by  the 
legislature  be  set  aside  as  being  ineffectual  on  account  of  the 
shortness  of  the  time.  How  many  days,  it  was  asked,  can  the 
court  fix  as  a  minimum?  It  seems  that  in  this  case  there  had 
been  a  prior  assessment  which  had  been  set  aside,  and  the  court 


iLent  V.  Tillson,  140  U.  S.  316,  35  L.  Ed.  419  (1891);  see  infra,  Ch. 
XIII,  "Ass.essments  for  Local  Improvements." 

zBellinKham  Bay,  Etc.,  Co.  v.  New  Whatcom,  172  U.  S.  314,  43  L. 
Ed.  460  (1899). 


366  DUE   PROCESS   OF   LAW   IN    TAXATION    PROCEDURE.  §    352 

said  tliat,  as  the  facts  were  known,  ten  days'  time  did  not  seem 
unreasonably  short  for  presenting  objections  to  a  reassessment. 
Notice  had  been  published  in  the  official  paper,  which  the  court 
said  was  proper,  as  the  party  interested  would  naturally  look 
there  for  information. 

In  Lent  v.  Tillson,  supra,  the  point  was  made  that  the  notices 
were  not  published  a  sufficient  number  of  days,  because  on  some 
of  the  days  they  appeared  in  the  supplement  of  some  of  the 
newspapers,  rather  than  in  the  body  where  reading  matter  is 
usually  found.  But  this  objection  the  court  said  did  not  de- 
serve serious  consideration. 

Non-resident  owners  of  land  within  the  levee  district  created 
by  Arkansas  Act  of  February  15,  1893,  were  not  denied  the 
equal  protection  of  the  laws  or  the  privileges  and  immunities 
of  citizens  of  the  United  States  because  Sec.  11  of  that  act  as 
amended  in  1895,  while  requiring  personal  service  of  summons 
upon  resident  owners  or  occupants  at  least  twenty  days  before 
rendering  a  decree  of  sale  for  unpaid  levee  taxes,  provides  for 
constructive  service  by  publication  upon  non-resident  owners 
of  only  four  weeks. i 

§  352.  Due  Process  Satisfied  by  Opportunity  for  Hearingf 
at  Any  Stage  of  the  Proceeding-. — It  is  immaterial  when  in  the 
proceedings,  whether  by  way  of  reviewing  the  assessment,  or 
in  the  collection  of  the  taxes,  hearing  is  allowed,  provided  it  is 
allowed  at  some  stage.  Thus  if  the  tax  can  only  be  collected  by 
suit,  and  any  defense  can  be  pleaded  as  to  the  illegality  or 
error  in  the  assessment,  this  will  be  sufficient.  But  it  will  not 
be  sufficient,  if  the  defenses  are  limited  by  statute,  so  that  the 
question  of  error  in  the  assessment  cannot  be  considered.  It 
was  said  by  the  Supreme  Court  however  that  as  a  matter  of 
general  jurisprudence,  in  the  absence  of  any  contrary  provision 


1  Ballard  v.  Hunter,  204  U.  S.  241,  51  L.  Ed.  461  (1907),  affirmmg 
74  Ark.  174. 

Leigh  V.  Green,  193  U.  S.  79,  48  L.  Ed.  623,  affirming  62  Neb.  344,  64 
Neb.  533,  holding  invalid  the  Nebraska  statute  providing  for  service  by 
publication  upon  unknown  owners. 

e  Vanceburg  &  S.  L.  Turnpike  Co.  v.  Maysville,  63  S.  W.  Rep.  749. 


§    354         DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  867 

in  the  statute,  any  defense  would  be  admissible  in  tlie  suit  for 
collection  which  would  establish  the  illegality  of  the  assessment. 

It  would  seem  however  that  an  assessment  that  is  unequal  or 
excessive  might  be  erroneous,  when  it  would  not  be  illegal,  and 
that  due  process  of  law  would  require  that  the  taxpayer  should 
have  his  opportunity  for  hearing  on  the  question  of  error  in, 
that  is,  as  to  the  amount  of  his  assessment. 

It  was  stated  in  a  ease  from  Louisiana  that,  where  the  statute 
gives  the  person  against  whom  taxes  are  assessed  a  right  to 
enjoin  their  collection  and  have  their  validity  judicially  deter- 
mined, this  is  due  process  of  law,  although  he  is  required,  as  are 
plaintiffs  in  other  injunction  cases,  to  give  security  in  advance. 
This  however  was  a  case  of  a  license  tax  fixed  by  law  upon  the 
business  of  a  liquor  seller,  and  there  seems  to  have  been  no  oc- 
casion for  any  hearing  for  valuation. 

§  353.    Collection  of  Taxes  Through  Summary  Proceedings. 

— The  collection  of  taxes  belongs  to  the  executive  branch  of 
the  government,  and  the  summary  methods  for  enforcing  such 
collections  sanctioned  by  long  experience  constitute  due  process 
of  law.  The  reasonable  exercise  by  the  legislature  of  a  right 
of  classification,  to  provide  a  summary  process  for  the  sale 
of  property  for  delinquent  taxes  amounting  to  less  than  a  stated 
amount  does  not  deprive  the  taxpayer  of  due  process  of  law.3 
Distress  warrants  for  the  collection  of  personal  property  taxes 
without  prior  notice  or  an  opportunity  to  be  heard  are  consistent 
with  due  process  of  law,  as  they  were  always  known  to  the 
common  law. 4 

§  354.     Collection  of  Taxes  Through  Distraint  and  Seizure. 

— Distraint  and  seizure  of  person  for  the  collection  of  delin- 
quent taxes  are  also  consistent  with  due  process  of  law.  This 
was  illustrated  in  a  decision  sustaining  the  New  York  statute, 


1  Kentucky  Railroad  Tax  Case,  supra. 

sMcMillen  v.  Anderson,  95  U.  S.  37,  24  L.  Ed.  335  (1876);  Oskamp  v. 
Lewis,  103  Fed.  906. 

3  Sawyer  v.  Dooley,  21  Nev.  390. 

♦  Nelson  Lumber  Co.  v.  McKinnon,  61  Minn.  219. 


368  DUE   PROCESS   OP   LAW   IN    TAXATION    PROCEDURE.  §    355 

according  to  which  the  party  failing  to  pay  taxes  on  personalty 
was  subject  not  only  to  distraint  and  sale  of  his  personal  prop- 
erty, but  also  to  fine  for  misconduct.  A  national  bank  stock- 
holder was  prosecuted  and  convicted  under  this  law,  and  ordered 
to  stand  committed  until  he  paid  the  amount  of  the  tax  with 
interest  and  costs,  unless  the  court  should  see  fit  sooner  to  dis- 
charge him.  The  Supreme.  Court  affirmed  the  judgment i  and 
said,  page  669 : 

"Collection  by  distress  and  seizure  of  person  is  of  very 
ancient  date,  Murray's  Lessee  v.  Hoboken  Land  Co.,  18  How. 
272 ;  and  counsel  for  defendant  in  error  cites  many  English 
statutes,  commencing  with  the  twelfth  year  of  Henry  VII,  c. 
13,  which  in  their  essential  features  resemble  the  New  York 
law  upon  the  subject,  one  in  6  Henry  VIII,  c.  26,  being  strik- 
ingly like  it.  2  Statutes  of  the  Realm  644 ;  3  lb.  156,  230,  516, 
812 ;  4  lb.  176,  334,  385,  744,  991,  1108,  1247 ;  5  lb.  9,  700 ;  7  lb. 
567.  Under  the  act  of  1843  commitment  is  not  resorted  to 
until  other  means  of  collection  have  failed  and  then  only  upon 
a  showing  of  property  possessed,  not  accessible  by  levy,  but 
enabling  the  owner  to  pay  if  he  chooses,  this  constituting  such 
misconduct  as  justifies  the  order.  That  law  had  been  in  exist- 
ence for  more  than  forty  years  at  the  time  of  this  proceeding. 
We  do  not  regard  the  collection  in  this  way,  founded  on  neces- 
sity and  so  long  recognized  in  the  State  of  New  York  as  to  be 
justifiably  resorted  to  under  the  circumstances  detailed  in  the 
act,  and  operating  alike  on  all  persons  and  property  similarly 
situated,  as  within  the  inhibitions  of  the  Fourteenth  Amend- 
ment. '  * 

§  355.  Legislative  Discretion  in  Imposing  Penalties  on  De- 
linquents.— The  infliction  of  penalties  on  delinquents  is  a  usual 
and  legitimate  mode  of  compelling  the  prompt  payment  of  taxes 
and  is  consistent  with  due  process  of  law.  The  same  principle  of 
classification  allowed  to  legislative  discretion  in  the  imposition 
of  taxes,  see  infra,  Chapter  XV,  is  allowed  in  the  enactment  of 
penalties,,  and  the  amount  of  the  penalties  is  a  matter  for  the 
legislature  to  determine.  This  principle  was  applied  by  the 
Supreme  Courts  in  sustaining  a  statute  of  Indiana  imposing  a 

1  Palmer  v.  McMahon,  133  U.  S.  660,  supra,  affirming  102  N.  Y.  176. 

2  Western  Union  Telegraph  Co.  v.  Indiana,  165  U.  S.  304,  41  L.  Ed. 
725  (1897),  affirming  44  N.  E.  Rep.  793.    But  in  United  States  Trust 


§   356         DUE   PROCESS   OP   LAW   IN   TAXATION    PROCEDURE.  369 

penalty  of  fifty  per  cent  of  the  amount  of  taxes  unpaid  upon 
telegraph,  telephone,  express  and  fast  freight  associations,  while 
the  general  law  of  the  State  only  imposed  ten  per  cent  for  the 
first  six  months  of  delinquency  and  an  additional  six  per  cent 
for  the  second  six  months.  The  court  said  that  the  legislature 
might  well  have  concluded  that  the  ordinary  remedies  for  the 
collection  of  taxes,  distraint  and  sale,  in  the  case  of  such  com- 
panies would  be  open  to  the  objection  of  interfering  with  the 
exercise  of  their  functions,  and  this  furnished  a  sufficient  ground 
for  the  adoption  of  another  mode  of  enforcing  collections. 
Moreover  the  company,  if  it  wished  to  contest  the  legality  of 
taxes,  could  have  paid  them  under  protest  and  brought  suit  to 
recover  back  the  money  so  paid.^ 

§  356.  Plenary  Power  of  State  in  Assessments  and  Re-as- 
sessments.— In  the  assesment  of  property  for  taxation,  the 
State  may  make  the  ownership  subject  to  taxation  relate  to  any 
day  or  days  or  period  of  the  year  which  it  may  think  proper,  and 
the  selection  of  a  particular  day,  on  which  returns  are  to  be  made 
by  the  taxpayers  of  their  property  for  the  purposes  of  assess- 
ment, does  not  necessarily  preclude  the  making  of  assessments  as 
of  other  periods  of  the  year.  This  was  illustrated  in  a  case  from 
Ohio  already  cited,-  where  the  statute  provided  for  the  assess- 
ment for  taxation  of  the  monthly  average  amount  or  value  of  the 
property  or  goods  in  which  taxpayers  were  dealing.  The  Su- 
preme 'Court  said : 

"Of  the  right  of  the  State  of  Ohio'to  make  this  provision  we 
have  no  doubt.    We  know  of  no  principle  which  forbids  that 


Co.  V.  New  Mexico,  183  U.  S.  535,  46  L.  Ed.  315  (1902),  affirming  62 
Pac.  Rep.  987,  the  court  refused  to  enforce  a  penalty  imposed  by  the 
laws  of  the  Territory  of  New  Mexico,  for  the  non-payment  of  taxes 
levied  upon  railroad  property  in  a  foreclosure  proceeding,  on  the 
ground  that  it  was  inequitable  to  charge  interest  or  penalty  until  there 
was  an  identification  of  the  property  subject  to  taxation  and  a  de- 
termination of  the  amount  due.  See  also  Litchfield  v.  County  of  Web- 
ster, 101  U.  S.  773,  25  L.  Ed.  925  (1880),  where  statutory  interest  in  na- 
ture of  penalty  was  denied  on  equitable  grounds. 

1  Justices  Harlan  and  White  dissenting. 

2  Shotwell  V.  Moore,  supra. 


370  DUE   PROCESS   OF   LAW   IN    TAXATION    PROCEDURE.  §    356 

State  from  taking  the  Avhole  period  of  a  business  year  already 
passed  as  the  best  means  of  ascertaining  how  much  the  tax- 
payer shall  be  required  to  pay  on  property  which  is  admitted 
to  be  taxable,  and  how  much  he  shall  deduct  for  the  non-tax- 
able securities  of  the  State  and  of  the  United  States." 

If  property  real  or  personal  has  been  omitted  from  the  as- 
sessment in  any  year,  or  if  that  actually  assessed  has  been  grossly 
undervalued  in  the  assessment,  the  State  has  the  right  to  have  it 
assessed  or  re-assessed,  as  the  case  may  be,  and  such  action  does 
not  impair  the  constitutional  rights  of  the  property  owner.^ 

In  another  ease  from  Ohio  the  Supreme  Court  enforced  a 
statute  which  empowered  county  auditors  to  issue  compulsory 
process  to  bring  before  them  persons  who,  they  had  reason  to  be- 
lieve, were  making  false  returns  of  property  for  the  purposes 
of  taxation,  and  to  examine  them  under  oath,  and  which  author- 
ized them  also  to  extend  their  inquiries  into  returns  of  property 
for  a  period  of  four  years  next  before  that  in  which  the  in- 
quiry was  made.2  The  court  said  that  a  taxpayer  has  no  vested 
right  in  the  fruits  of  false  returns,  and  that  the  act  simply 
gave  a  new  remedy  to  the  State  for  enforcing  a  right  which  it 
already  possessed. 


1  Douglas  County  v.  Commonwealth,  97  Va.  397. 

2  Sturges  v.  Carter,  114  U.  S.  511,  29  L.  Ed.  240  (1885).  This  case  was 
brought  up  on  writ  or  error  to  the  United  States  Circuit  Court  and  no 
Federal  question  seems  to  have  been  raised;  but  the  act  was  claimed 
to  be  in  violation  of  the  Ohio  constitution  which  prohibited  the  passage 
of  retroactive  laws.  In  Co-operative  Building  &  Loan  Association  v. 
State,  156  Ind.  463,  the  Supreme  Court  of  Indiana  sustained  a  statute 
giving  tax  officials  the  right  to  examine  books  and  papers  of  taxpayers 
for  the  purpose  of  properly  listing  and  assessing  property  for  taxation, 
and  issued  a  writ  of  mandamus  against  a  Building  and  Loan  Associa- 
tion to  examine  its  books  for  evidence  of  property  omitted  from  the  tax 
list.  The  court  said  that  the  Fourth  Amendment  to  the  Federal  Con- 
stitution against  unreasonable  searches  and  seizures  operates  upon  the 
national  government  alone,  and  that  the  similar  provision  in  the  State 
statute  was  not  violated,  as  there  was  nothing  unreasonable  in  the  re- 
quirement. "If  the  omission  was  accidental,  the  owner  ought  not  to 
complain,  and  if  intentional,  he  ought  not  to  be  heard  except  as  to  the 
proof  of  the  supposed  discoveries." 


§   356         DUE   PROCESS   OF   LAW   IN   TAXATION    PROCEDURE.  871 

Thus  a  statute  of  Minnesota  was  sustained  by  the  Supreme 
Court^  which  authorized  the  governor,  when  it  should  be  made 
to  appear  that  there  had  been  any  gross  undervaluation  of 
taxable  property  by  the  assessors  for  any  county  in  the  State,  to 
appoint  a  board  to  revalue  and  reassess  it.  This  board  should, 
after  examination,  prepare  a  list  of  all  such  property  for  the  year 
or  years  for  which  it  was  undervalued,  the  amount  of  the  as- 
sessment and  the  actual  and  true  value  at  which  it  should  have 
been  assessed.  The  statute  further  provided  for  the  recovery 
of  the  tax  upon  this  new  assessment.  It  was  claimed  that  this 
law  gave  the  executive  the  power  of  setting  aside  the  assess- 
ment without  notice  or  opportunity  to  be  heard.  But  this  con- 
tention was  not  well  founded,  for  the  governor  did  not  act 
judicially,  but  only  started  the  inquiry,  and  the  land-owner  was 
allowed  a  defense  before  his  land  could  be  sold  for  taxes,  be- 
cause the  tax  was  collected  by  suit.  The  only  grounds  of  de- 
fense open  to  him  in  the  suit  were  that  the  special  facts  author- 
izing the  reassessment  for  past  years  did  not  exist  and  that  the 
property  had  been  reassessed  partially,  unfairly  or  unequally. 
The  court  held  that  this  constituted  due  process  of  law,  saying  at 
page  558 : 

"If  an  officer  omits  to  assess  property  or  grossly  underval- 
ues it  he  violates  his  duty,  and  the  property  and  its  owners 
escape  their  just  share  of  the  public  burdens.  In  Stanley  v. 
Supervisors  of  Albany,  121  U.  S.  535,  30  L.  Ed.  1000  (1887), 
we  held  that  against  an  excessive  valuation  of  property  its 
owner  had  a  remedy  in  equity  to  prevent  the  collection  of  an 
illegal  excess.  It  would  be  very  strange  if  the  State,  against 
a  gross  undervaluation  of  property,  could  not  in  the  exercise 
of  its  sovereignty  give  itself  a  remedy  for  the  illegal  defi- 
ciency. ' ' 

In  another  ease  under  the  Minnesota  statute,  it  was  helds 
to  be  immaterial  that  the  legislature  did  not  provide  at  the 
same  time  for  the  assessment  of  back  taxes  on  personal  property. 


iWeyerhauser  v.  Minnesota,  176  U.  S.  550,  44  L.  Ed.  583  (1900), 
affirming  72  Minn.  519  and  68  Minn.  353. 

e  Winona  &  St.  Peter  Land  Co.  v.  Minnesota,  159  U.  S.  526.  See  also 
State  V.  Weyerliauser,  68  Minn.  353. 


372      DUE  PROCESS  OP  LAW  IN  TAXATION  PROCEDURE.    §  356 

The  legislature  might  well  determine,  in  view  of  the  stationary 
character  of  real  estate  and  the  probability  of  change  in  the  title 
of  personal  property,  that  it  was  impracticable  to  proceed  for 
back  taxes  in  the  ease  of  the  latter. 

A  statute  of  Indiana  for  the  collection  of  back  taxes  on  per- 
sonal property  was  also  sustained  by  the  court.i  The  statute 
authorized  the  county  auditor,  when  he  had  reason  to  believe 
that  any  real  or  personal  property  had  been  omitted  from  the 
assessment  book,  to  correct  the  tax  duplicate  and  add  such  prop- 
erty thereto.  It  was  made  the  duty  of  every  administrator  or 
executor  to  pay  the  taxes  due  upon  the  property  of  the  estate  in 
his  hands,  and  if  he  neglected  to  do  so,  having  sufficient  money 
on  hand,  it  then  became  the  duty  of  the  county  treasurer  to  pre- 
sent this  matter  to  the  court.  An  executor,  who  resided  in  New 
Hampshire  and  was  visiting  Indianapolis  in  the  settlement  of 
the  estate,  was  served  with  notice  by  the  auditor  of  an  assess- 
ment for  back  taxes,  amounting  to  over  $60,000.  The  treasurer 
thereupon  filed  suit  against  him.  The  executor  claimed  that 
the  statute  was  in  violation  of  the  Fourteenth  Amendment,  as 
he  was  a  non-resident,  that  he  was  deprived  of  the  property 
without  due  process  of  law,  and  that  the  court  had  no  jurisdic- 
tion. The  Supreme  Court  of  Indiana  held  that  he  was  an  offi- 
cial resident  at  the  time  suit  was  commenced  and  therefore  was 
within  the  statute.2  The  Supreme  Court  said  that  the  method 
followed  by  the  auditor  in  assessing  the  additional  taxes  was 
perhaps  open  to  criticism,  but  that,  as  it  was  approved  by  the 
State  courts,  there  was  no  question  over  which  that  court  had 
jurisdiction.  It  is  the  settled  law,  the  court  declared,  that,  when 
it  is  asked  to  review  taxation  proceedings  of  the  State  courts,  it 
must  hold  due  process  of  law  to  have  been  afforded  litigants,  if 
they  have  had  an  opportunity  to  question  the  validity  or  amount 
of  the  assessment  or  charge  before  the  amount  was  determined, 
or  at  any  subsequent  proceedings  to  enforce  its  collection,  or  at 
any  time  before  final  judgment  is  rendered.     As  the  executor 


1  Gallup  V.  Schmidt,  183  U.  S.  300,  46  L.  Ed.  207   (1902),  40  L.  Ed. 
247  (1895),  affirming  40  Minn.  512. 

2  154  Ind.  196. 


§    357         DUE   PROCESS   OF    LAW   IN   TAXATION    PROCEDURE.  373 

had  his  day  in  court  in  the  suit  to  collect  the  tax,  there  had 
been  due  process  of  law. 

§  357.  The  Equalization  of  Assessments. — In  nearly  all  the 
States  there  are  so-called  boards  of  equalization,  and  the  term 
''equalization"  as  used  in  Revenue  Statutes,  has  for  its  general 
purpose  the  bringing  together  and  equalizing  of  the  local  as- 
sessments of  different  districts  so  as  to  prevent  inequalities  in 
bearing  the  common  burden.  Local  boards  of  equalization  per- 
form this  duty  with  reference  to  the  different  parts  of  a  county 
or  other  local  districts ;  while  the  State  boards  perform  such  duty 
with  reference  to  all  the  taxing  districts  of  the  State  where  there 
is,  as  in  nearly  all  the  States,  a  State  tax  upon  all  the  prop- 
erty in  the  State.  The  statutes  imposing  this  duty  upon  the 
State  board  under  the  constitutional  requirement  of  uniformity, 
require  that  this  equalization  shall  be  accomplished  by  taking 
the  abstracts  or  returns  of  the  county  and  city  assessors  as  the 
basis,  and  adding  or  deducting  therefrom  enough  to  secure  the 
equalized  valuation  of  the  taxing  districts. 

In  such  a  case  from  Missouri  it  y^s  held  that  the  Board 
had  no  discretion  to  divide  the  counties  into  several  groups  and 
equalize  the  different  classes  of  property  within  such  groups ; 
and  hence  mandamus  was  maintainable  to  compel  the  members 
of  the  Board  to  equalize  the  assessment  throughout  the  State. 
The  court  said  that  such  a  proceeding  for  mandamus  was  not 
a  suit  against  the  State  and  did  not  interfere  with  the  discre- 
tion of  the  Board  to  compel  them  to  perform  their  duty  under 
the  law.  The  court  excepted  the  governor,  who  was  an  ex- 
officio  member  of  the  Board,  from  the  writ,  but  made  it  run 
against  the  other  members  of  the  Board. ^ 


iHuidekoper  v.  Hadley,  et  al.  C.  C.  A.  &th  Circuit  (1910),  177  Fed. 
1,  reversing  171  Fed.  118.  It  was  held  by  the  same  court  in  Payne 
V.  Germantown  Trust  Company,  C.  C.  A.  8th  Circuit,  136  Fed.  52 
(1905),  that  the  ruling  by  the  Supreme  Court  of  North  Dakota  that  its 
Board  of  Equalization  was  entitled  to  levy  taxes  in  percentages  under 
the  statutes  of  that  State  instead  of  in  specific  amounts,  would  be  fol- 
lowed in  the  Federal  court  with  respect  to  lands  located  in  that  State 
and  sold  for  taxes  there  assessed. 

For  cases  where  mandamus,  at  the  instance  of  judgment  creditors. 


374  DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  §    358 

Notice  of  the  time  and  place  of  the  first  meeting  of  the  State 
Board  of  Equalization  of  the  shares  of  incorporated  banks  given 
by  the  provision  of  Ohio  R.  S.  2808,  designating  the  time  and 
place  for  such  meeting  was  held  sufficient  notice  to  any  bank 
which  may  be  affected  by  its  action,  although  such  action  may 
be  taken  at  a  meeting  of  the  board  held  after  it  has  adjourned 
without  fijxing  a  date  for  a  subsequent  meeting,^  the  court  saying : 

"The  board  was  a  public  tribunal,  open  to  be  invoked  and 
charged  with  duties  and  necessarily  subject  to  adjournments. 
What  it  has  done  the  bank  could  have  easily  ascertained,  and 
as  easily  what  it  contemplated  doing.  An  inquiry  would  have 
ascertained  both.  By  the  exertion  of  a  very  trifling  trouble 
the  bank  would  have  been  informed  of  any  meeting  of  the 
board." 

§  358.  Assessment  in  Its  Relation  to  Tax  Titles. — The  word 
"assessment,"  as  used  in  taxation,  does  not  mean  merely  the 
valuation  of  the  property  for  taxation,  but  includes  the  whole 
statutory  mode  of  imposing  the  tax  and  all  the  proceedings  for 
raising  money  for  the  exercise  of  the  power  of  taxation,  from 
their  inception  to  their  conclusion.s 

A  mere  irregularity  in  an  assessment  will  not  authorize  a 
court  of  equity  to  enjoin  its  collection,  nor  will  it  impair  the 
tax  title  thereafter  based  upon  such  assessment.  An  assess- 
ment is  void  where  the  description  is  wholly  insufficient,  as 
where  it  contained  no  range,  or  government  survey,  or  town- 
ship number;  and  such  an  assessment  is  insufficient  to  support  a 


was    sustained    to    compel    assessment    at    full    value    in    the    place    of 
"equalized"  value,  see  infra,  Sec.  552. 

For  illustration  of  enforcement,  through  certiorari,  of  valuation  of 
St.  Louis  bank  stocks  by  State  Board,  quashing  valuation  by  City 
Board,  in  excess  of  said  valuation  by  State  Board,  see  State  ex  rel. 
V.  Schramm,  269  Mo.  489   (1916). 

1  Lander  v.  Mercantile  National  Bank  of  Cleveland,  186  U.  S.  458,  46 
L.  Ed.  1247,  reversing  105  Fed.  809.  This  case  was  followed  in  Idaho 
Ry.  Light  &  Power  Co.  v.  Monk,  218  Fed.  682  (S.  Dist.  of  Idaho). 

As  to  procedure  before  Board  of  Equalization  of  Utah,  see  Bassett 
County  Treasurer  v.  Utah.  County  Copper  Co.,  219  Fed.  811,  C.  C.  A. 
8th  Cir.    (1914). 

2  Jackson  Lumber  Co.  v.  McCrimmon,  C.  C.  (1908),  164  Fed.  759. 


§    360         DUE   PROCESS   OP   LAW   IN    TAXATION    PROCEDURE.  375 

sale.  1  So  also  a  joint  and  unapportioned  assessment  of  taxable 
and  non-taxable  property  is  void  in  toto. 

The  right  to  assess  includes  the  right  to  re-assess  or  make 
special  provision  under  legislative  authority  for  the  collection  of 
taxes  which  have  been  omitted  or  in  arrearages.2 

A  statute  of  New  Jersey,  authorizing  the  legislative  body  of 
any  city  to  apply  to  the  Circuit  Court  for  the  appointment  of 
commissioners  to  adjust  arrearages  of  taxes,  was  held  not  to 
deny  due  process  of  law.3 

§  359.    Assessment  by  Boards  of  Railroad  Commissioners. — 

In  some  States  the  Board  of  State  Equalization  is  vested,  not 
only  with  the  power  of  equalization,  but  also  with  the  power  to 
make  original  assessments  of  certain  classes  of  properties,  such 
as  railroads  and  other  public  utilities.  In  some  States  these 
powers  of  assessment,  and  sometimes  also  equalization,  are  given 
to  Boards  of  Railroad  Commissioners ;  and  the  same  considera- 
tions apply  to  the  assessments  or  orders  of  such  boards  as  apply  to 
those  of  assessors  or  boards  of  equalization.  Thus,  in  Arkansas, 
the  Board  of  Railroad  Commissioners  is  authorized  to  assess  rail- 
road property  for  taxation,  and  they  shall  hold  their  annual  meet- 
ings on  the  first  Monday  in  June  of  each  year ;  and  the  governor 
shall  have  the  right  to  convene  the  board  in  a  special  session 
at  any  time.  It  was  held  that  the  making  of  such  an  assess- 
ment by  such  a  board,  at  its  regular  meeting,  did  not  exhaust 
its  power,  but  that  the  board  was  a  continuous  body,  and  that 
therefore,  having  made  an  assessment,  it  had  the  power  of  modi- 
fying the  same  for  the  purpose  of  compromising  litigation.  The 
property  of  such  an  order,  in  the  absence  of  fraud  or  other  im- 
proper conduct,  was  held  conclusive  on  the  courts.4 

§  360.    State   Boards    of   Equalization    in    Taxation   Pro- 
cedure.— While     State     boards     of    equalization    have     been 


t  Paine  v.  Germantown  Trust  Co.,  C.  C.  A.  8th  Cir.   (1905),  n6  Fed. 
527. 

2  Western  Assurance  Co.  of  Toronto  v.  Halliday  (1903),  127  Fed.  830. 

3  Leary  v.  Jersey  City,  C.  C.  A.  3rd  Cir.,  208  Fed.  854,  affirming  189 
Fed.  419. 

*  R.  R.  Taxes  Cases,  Circuit  Court  (1905),  136  Fed.  233. 


376  DUE   PROCESS   OF   LAW   IN    TAXATION    PROCEDURE.  §    361 

termed  quasi-judicial  bodies  in  that  their  findings  partake  of  the 
nature  of  judgments  and  cannot  be  collaterally  attacked  if  made 
within  their  jurisdiction,  it  would  be  inaccurate  to  say  that 
they  are  vested  with  any  part  of  the  judicial  power  of  the 
State.  Thus,  the  State  Board  of  Equalization  of  Tennessee, 
the  decisions  whereof  were  not  reviewable  by  writ  of 
certiorari  from  the  Supreme  Court  of  the  State,  was  to  be 
considered  as  an  administrative  body  rather  than  a  part  of  the 
judicial  system  of  the  State.  The  court  said  that  the  findings 
of  such  a  board  might  be  for  any  purpose  and  to  a  large  ex- 
tent conclusive,  and  yet  be  very  far  from  constituting  a  judicial 
decision  upon  which  alone  the  claim  of  res  judicata  could  be 
based.  1 

The  court  therefore  held  that  the  finding  of  this  State  Board 
could  be  attacked  by  suit  in  equity  on  the  ground  that  the 
board  acted  without  jurisdiction,  where  the  question  of  its  power 
to  tax  property  permanently  located  outside  of  the  State  was 
involved.  2 

§  361.  Estoppel  of  Taxpayer  by  His  Return  for  Assess- 
ment.— The  ordinary  tax  procedure  begins  with  the  return 
made  by  the  taxpayer,  whether  individual  or  corporate,  in  the 
form  furnished  by  the  assessor,  setting  forth  the  nature,  title, 
and  value  of  his  property.  The  rule  is  well  established  that  the 
taxpayer  is  bound  and  estopped  by  his  own  statement  as  to  the 
nature,  title,  and  value  of  his  property  made  in  the  list  which 
he  returns  for  taxation,  although,  of  course,  the  public  is  not 
bound,  and  no  one  else  could  be  prejudiced  by  the  listing  of 
property  which  he  does  not  own;  nor  does  the  taxpayer  make 
such  list  a  covenant  for  a  title.3 


1  Tamble  v.  Pullman  County,  C.  C.  A.  6th  Cir.  (1913),  207  Fed.  30. 

2  As  to  jurisdiction  of  equity  over  such  Boards  in  enforcing  equality 
of  valuation  of  interstate  railroads,  see  in-fra.  Sees.  546,  547. 

3  R.  R.  Tax  Cases,  Circuit  Court  (1905),  136  Fed.  233.  See  Udell  v. 
Le  Fevre,  E.  D.  Wash.,  N.  D.,  222  Fed.  471.  In  this  case  this  rule  was 
applied  for  the  improvements  made  upon  the  smelting  site  on  an  In- 
dian reservation. 


§    363         DUE   PROCESS   OP    LAW   IN   TAXATION    PROCEDURE.  377 

§  362.  A  Joint  and  Unapportioned  Assessment  of  Taxable 
and  Non-taxable  Property  Void  in  Toto. — This  general  prin- 
ciple applies  to  any  assessment  by  public  authority,  whether 
local  or  State.  It  was  said  by  the  Supreme  Court i  with  refer- 
ence to  the  assessment  by  the  State  Board  in  California,  that  if 
the  State  Board  includes  in  its  assessment  any  more  of  the  rail- 
road property  than  it  is  authorized  to  do,  the  assessment  will  be 
pro  tanto  illegal  and  void.  If  the  unlawful  part  can  be  separat- 
ed from  that  which  is  lawful,  the  former  may  be  declared  void 
and  the  latter  may  stand ;  but  if  the  different  parts,  lawful  and 
unlawful,  are  blended  together  in  one  indivisible  assessment,  it 
makes  the  entire  assessment  illegal.  This  case  was  decided  with 
reference  to  the  Constitution  of  California,  the  court  saying  that 
it  was  unnecessary  to  express  any  opinion  on  the  application  of 
the  Fourteenth  Amendment.2 

§  363.    Legislative   Legalization   of   Defective   Assessment 

Held  Void. — While  the  State  may  re-assess  property  which  has 
been  defectively  assessed,  it  can  only  do  so  through  valuation, 
subject  to  the  right  of  the  taxpayer  to  a  hearing,  where  hearing 
is  required.  A  re-assessment  cannot  be  made  directly  by  legis- 
lative enactment.  Thus  in  the  State  of  New  York,  where  the 
statute  for  the  taxation  of  national  bank  shares  had  been  de- 
clared illegal,  the  legislature  passed  an  act  attempting  to  vali- 
date the  illegal  assessments.  It  was  held  by  the  United  States 
Circuit  Court  that  the  act  was  void.3  The  court  said  that  the 
legislature  could  not  **  sanction  retroactively  such  proceedings 
in  the  assessment  of  a  tax  as  it  could  not  have  sanctioned  in  ad- 
vance."  The  act  permitted  a  review  by  certiorari  upon  the  sin- 
gle ground  that  the  assessment  was  at  a  higher  proportionate 
value  than  other  property  on  the  same  assessment  roll  assessed 


1  California  v.  Central  Pac.  Co.,  127  U.  S.  1,  32  L.  Ed.  265  (1888). 

2  The  same  rule  was  applied  in  Clearwater  Timber  Co.  v.  Shoshone 
County,  Idaho,  Dist.  Ct.  of  Idaho,  155  Fed.  612  (1907),  where  the  as- 
sessment included  unsurveyed  public  lands  of  the  United  States  which 
were  not  taxable,  and  decree  was  granted  to  vacate  and  annul  the  same 
and  the  tax  sales  of  real  estate. 

8  Albany  City  National  Bank  v.  Maher,  9  Fed.  884. 


378  DUE   PROCESS   OP    LAW   IN   TAXATION    PROCEDURE.  §    364 

by  the  same  officers.  But  the  court  said  that  the  act  was  defec- 
tive because  it  did  not  allow  hearing  upon  the  other  grounds 
which  are  open  to  taxpayers  generally,  and  that  it  was,  in 
effect,  a  legislative  assessment  of  a  tax  upon  a  body  of  individ- 
uals selected  out  of  a  general  class,  without  apportionment  or 
equality  between  them  and  the  general  class,  or  between  them- 
selves, and  without  giving  them  any  opportunity  to  be  heard. 

A  subsequent  curative  act  however  was  held  valid,  as  it  was 
made  subject  to  the  right  of  the  parties  interested  to  a  hearing. 
It  was  held  to  be  competent  for  the  legislature  to  validate  re- 
troactively any  tax  proceedings  which  it  could  have  authorized 
in  advance.  It  is  not  necessary  in  such  case  that  the  hearing 
be  secured  before  the  assessment  or  collection  of  the  tax.  It  is 
sufficient  if  reasonable  provision  is  made  for  a  hearing  after- 
wards, so  that  there  may  be  a  correction  of  errors  or  a  resti- 
tution of  the  taxes  or  the  part  of  the  tax  unjustly  imposed.^ 

An  act  of  South  Dakota,  purporting  to  legalize  retroactively 
an  assessment  in  the  taxation  of  all  property  within  a  certain 
county  during  certain  years,  was  held  unconstitutional,  in  so  far 
as  the  legislature  attempted  to  dispense  with  statutory  notice 
to  the  taxpayer  by  a  meeting  of  the  board  of  equalization  at 
the  designated  time  and  place  and  in  the  manner  required  by 
statute,  since  an  opportunity  to  be  heard  at  some  stage  of  the 
proceedings  is  a  condition  precedent  to  the  authorized  seizure 
and  sale  of  property  for  delinquent  taxes.^ 

§  364.  Forfeiture  of  Lands  for  Taxes. — The  forfeiture  to 
the  State  and  subsequent  sale  of  lands  for  non-payment  of  taxes, 
with  liberty  to  the  owner  upon  due  notice  of  the  proceeding  to 
intervene  by  petition  and  secure  a  redemption  of  his  lands  from 
the  forfeiture  by  paying  the  taxes  and  charges,  is  not  inconsist- 
ent with  due  process  of  law.  The  system  established  by  "West 
Virginia,  which  had  been  in  force  for  many  years  before  the 
organization  of  that  State  in  Virginia,  provided  that  lands  liable 
to  taxation  should  be  forfeited  to  the  State,  if  the  owner  should 


1  Exchange  Bank  Tax  Cases,  21  Fed.  99. 

2  Evans  v.  Fall  River  County,  9  S.  Dak.  130. 


§    364  DUE   PROCESS    OF    LAW   IN    TAXATION    PROCEDURE.  379 

not  have  them  placed  in  the  proper  land  books  for  taxation  and 
have  himself  charged  with  the  taxes  thereon  for  five  consecutive 
years.  The  land,  on  petition  filed  by  the  representative  of  the 
State  with  the  Circuit  Court,  was  to  be  sold  for  the  benefit  of 
the  school  fund.  This  was  adjudged  to  be  due  process  of 
law.^  It  was  urged  that  the  landowner  would  be  without  remedy 
if  the  State  should  fail  to  institute  proceedings  for  sale.  But 
the  court  said  that  it  could  not  be  presumed  that  the  commis- 
sioner would  neglect  to  discharge  a  duty  expressly  imposed 
upon  him,  or  that  the  courts  were  powerless  to  compel  him  to  act 
when  his  action  was  necessary  for  the  protection  of  the  rights  of 
the  landowTier.  The  argument  of  the  plaintiff,  the  court  said, 
proceeded  upon  the  erroneous  theory  that  all  the  principles  in- 
volved in  due  process  of  law,  as  applied  to  proceedings  strictly 
judicial  in  their  nature,  apply  equally  to  proceedings  for  the 
collection  of  public  revenue  by  taxation.  On  the  contrary,  it  is 
well  settled  that  very  summary  remedies  may  be  used  in  the 
collection  of  taxes  that  could  not  be  applied  in  eases  of  a  judicial 
character.  The  judiciary  should  be  very  reluctant  to  interfere 
with  the  taxing  system  of  a  State,  and  should  never  do  so  unless 
that  which  the  State  attempts  is  a  palpable  violation  of  the  con- 
stitutional rights  of  the  property  owners. 

But  a  statute  of  Maine,  requiring  owners  of  lands  sold  for 
the  non-payment  of  taxes  to  deposit  with  the  clerk  of  the  court 
the  amount  of  all  the  taxes,  interest  and  costs  accrued  up  to  that 
time,  before  they  could  be  admitted  to  contest  the  validity  of  the 
tax  or  sale,  was  held  void  by  the  Supreme  Court  of  Maine,  as 
depriving  them  of  their  property  without  due  process  of  law.  2 
It  was  held  in  New  York  that  whe-re  the  defect  in  the  original 
imposition  of  the  tax  is  of  so  jurisdictional  a  character  as  to  be 


iKlng  V.  Mullins,  171  U.  S.  404,  43  L.  Ed.  214  (1898);  see  also  State 
V.  Sponaugle,  45  W.  Va.  415,  and  43  L.  R.  A.  727;  State  v.  Cheney,  45 
W.  Va.  478. 

This  ruling  was  followed  in  Fay  v.  Crosier,  217  U.  S.  455,  54  L.  Ed. 
837  (1910),  dismissing  writ  of  error  from  156  Fed.  496,  and  in  King  v. 
W.  Va.,  216  U.  S.  92,  54  L.  Ed.  396  (1910),  where  writ  of  error  was  also 
dismissed  from  64  W.  Va.  545,  546  and  610. 

2  Bennett  v.  Davis,  90  Me.  102. 


380  DUE   PROCESS   OP   LAW   IN    TAXATION   PROCEDURE.  §    365 

beyond  the  reach  of  a  curative  legislative  act,  as  where  a  tax  levy- 
was  void  because  the  sum  was  assessed  in  the  name  of  one  who 
was  not  the  owner  or  occupant  of  the  land,  the  original  owner  is 
not  precluded  from  asserting  his  title  by  a  statute  making  the 
deeds  of  a  comptroller  upon  the  tax  sale,  after  the  lapse  of  a 
certain  time,  conclusive  evidence  of  the  sales,  and  all  proceed- 
ings prior  thereto  valid,  i 

§  365.  Rights  of  Adverse  Claimants  in  Kentucky  Tax  For- 
feitures.— There  was  no  denial  of  due  process  of  law  in  the 
provisions  of  the  Kentucky  statute  under  which  the  forfeiture 
of  land  titles  to  the  State  as  the  result  of  proper  proceedings, 
and  after  due  notice  to  the  owner  of  the  title,  who  was  in  default 
for  payment  of  taxes,  inured  to  the  benefit  of  adverse  claimants 
occupying  and  paying  taxes  upon  the  land  and  not  in  default.  2 
The  court  in  this  case  sustained  the  statute  of  Kentucky  for- 
feiting certain  land  titles  to  the  State  for  failure  to  list  and  pay 
taxes  thereon  for  certain  specified  years.  The  tracts  in  question 
were  formerly  a  part  of  the  State  of  Virginia ;  and  prior  to  1794, 
when  Kentucky  was  admitted  to  the  Union,  the  State  of  Vir- 
ginia had  granted  large  tracts  of  land  in  th'at  part  of  the  terri- 
tory, which  was  now  eastern  Kentucky.  The  old  grants  were 
outstanding  and  afforded  no  revenue  to  the  State  of  Kentucky; 
and  it  was  sought  by  this  act  to  subject  the  land  to  taxation  and 
to  forfeit  these  old  titles  which  had  not  been  effectually  sub- 
jected to  the  taxing  laws  of  the  State,  and  to  make  the  forfeited 
titles  inure  to  the  occupying  claimants,  who  had  paid  the  taxes 
thereon  in  the  manner  provided  by  the  law.  The  Court  of  Ap- 
peals of  Kentucky  had  construed  the  act  by  stripping  it  of  the 
requirement  to  pay  interest  and  penalties  as  a  condition  of 
saving  the  lands  from  forfeiture.  The  court  said  the  act  was  not 
ex  post  facto,  because  the  claimant  was  given  time  to  pay  his 
back  taxes ;  and  the  retroactive  features  did  not  impair  any  vested 
rights,  and  were  not  forbidden  by  the  Constitution. 


1  Hagner  v.  Hall,  10  App.  Div.  N.  Y.  581. 

2  Kentucky  Union  Co.  v.  Kentucky,  219  U.  S.,  p.  140,  53  L.  Ed.  137, 
affirming  128  Ky.  610,  127  Ky.  667. 


§    366         DUB   PROCESS   OP   LAW   IN    TAXATION    PROCEDURE.  381 

It  was  also  held  that  there  was  no  violation  of  the  Virginia 
compact  of  1789,  which  the  court  had  held  to  be  a  binding  con- 
tract between  the  States.  When  the  lands  passed  under  the 
dominion  of  a  new  State  which  would  require  revenues  for  its 
support,  it  was  not  intended  that  such  land  should  be  immune 
from  constitutional  laws,  having  the  effect  to  subject  such  lands 
to  the  taxing  power  of  the  new  sovereignty. 

§  366.  New  Remedies  for  Collection  of  Taxes  May  be 
Adopted. — The  State  may  adopt  new  remedies  for  the  collec- 
tion of  taxes  and  apply  them  to  taxes  already  overdue  without  a 
violation  of  the  Federal  Constitution.  The  delinquent  taxpayer 
has  no  vested  right  in  any  existing  mode  of  collecting  taxes, 
and  there  is  no  contract  between  him  and  the  State  that  the 
latter  will  not  vary  the  mode  of  collection.  This  principle  was 
applied  by  the  Supreme  Court,  to  the  Texas  act  of  1897  for 
the  collection,  by  judicial  proceedings,  of  taxes  on  real  es- 
tate.^ The  lands  in  this  case  had  been  purchased  by 
the  State  under  the  laws  then  in  force.  Whether  the  title  ac- 
quired by  the  sale  was  conditional  or  absolute,  the  State  could 
waive  the  rights  conveyed  by  such  sale  and  prescribe  terms  upon 
which  it  would  waive  them,  and  the  taxpayer  could  not  complain 
because  he  was  charged  with  the  ordinary  fees  and  expenses  of 
the  lawsuit.  The  State  could  moreover  provide  that  taxes,  which 
had  already  become  delinquent,  should  bear  interest  from  the 
time  that  the  delinquency  commenced.  Such  a  provision  did  not 
come  in  conflict  with  the  Federal  Constitution  merely  because 
it  was  retroactive,  for  the  State  can  enact  retroactive  laws,  pro- 
vided they  are  not  ex  post  facto  in  a  technical  sense  and  do  not 
impair  the  obligation  of  a  contract.  The  Fourteenth  Amend- 
ment has  not  changed  the  rule  in  that  respect.  As  the  State 
can  in  the  first  instance  enact  that  taxes  shall  bear  interest  from 
the  time  they  become  due,  so,  without  conflicting  with  any 
provision  of  the  Federal  Constitution,  it  may  in  like  manner  pro- 
vide that  the  taxes  which  have  already  become  due  shall  bear 


1  League  v.  Texas,  184  U.  S.  156,  46  L.  Ed.  478   (1902),  affirming  93 
Texas  553. 


382  DUE   PROCESS   OF   LAW   IN   TAXATION    PROCEDURE.  §    367 

interest  from  the  time  the  delinquency  commenced.  This  is  add- 
ing no  extraordinary  penalty,  for  interest  is  the  ordinary  penalty 
for  non-payment  of  obligations. 

§  367.    Effect  of  Statutory  Conclusiveness  of  Tax  Deeds. — 

The  very  strong  disposition  of  the  Supreme  Court  to  sustain 
the  tax  procedure  of  the  States  is  evidenced  by  its  rulings  in 
cases  where  title  has  been  claimed  under  tax  deeds,  when  it  has 
followed  the  decisions  of  the  State  courts  as  to  the  construction 
of  the  State  statutes.  Thus,  in  affirming  a  judgment  of  the 
United  States  Circuit  Court  of  Oregon  in  an  ejectment  suit,^ 
it  held  that  a  State  legislature  might  competently  declare  that  a 
tax  deed  should  be  prima  facie  evidence  both  of  the  regularity 
of  the  sale,  and  also  of  all  prior  proceedings  and  of  title  in  the 
purchaser,  but  that  the  legislature  cannot  deprive  one  of  his 
property  by  making  his  adversary's  claim  to  it,  whatever  that 
may  be,  conclusive  of  its  own  validity,  and  cannot  therefore 
make  the  tax  deed  conclusive  evidence  of  the  holder's  title  to 
the  land.^ 

In  a  later  case  involving  a  tax  title  in  Louisiana,  where  the 
act  made  the  tax  deed  conclusive  of  the  sufficiency  of  the  assess- 
ment, it  was  claimed  that,  under  the  decision  in  Marx  v.  Han- 
thorn,  this  was  a  want  of  due  process  of  law.  But  the  court 
declared^  that  Marx  v.  Hanthorn  came  up  from  the  Circuit 
Court  of  the  United  States,  which  followed  the  construction 
given  to  the  tax  laws  of  the  State  from  which  the  case  came  by 
the  Supreme  Court  thereof ;  and  that  it  was  not  enough  to  make 
a  Federal  question  in  a  case  brought  up  from  the  State  Supreme 
Court  to  show  that  that  court  proceeded  on  a  statutory  conclu- 
sive presumption.  The  party  must  go  farther,  and  show  that  he 
was  actually  deprived  of  his  property  by  means  of  that  presump- 


iMarx  V.  Hanthorn,  148  U.  S.  172,  37  L.  Ed.  410  (1893),  affirming  30 
Fed.  579. 

2  Citing  Cooley  on  Taxation,  521,  2nd  Ed.  1886.  See  also  Bannon  v. 
Burnes,  39  Fed.  892  and  Ball  v.  Ridge  Copper  Co.,  118  Mich.  7.  As  to 
the  conclusiveness  of  recitals  in  bonds  issued  for  public  improvements, 
see  Ramish  v.  Hartwell,  126  Cal.  443. 

3  Castillo  v.  McConnico,  168  U.  S.  674,  supra. 


§    ?,6S    ■      DUE   PROCESS   OF    LAW   IN    TAXATION    PROCEDURE.  883 

tioii,  that  is,  the  party  complaining  of  it  must  show  that  if  the 
presumption  had  not  been  entertained  the  assessment  would 
have  been  shown  to  be  invalid;  for  complainant's  right  was 
limited  to  the  single  inquiry  whether  in  the  case  which  he  pre- 
sented the  effect  of  applying  the  statute  was  to  deprive  him  of 
his  property  without  due  process  of  law.  The  court  therefore 
looked  into  the  alleged  defects,  disregarding  the  statutory  pre- 
sumption, and  held  that  without  it  the  defects  were  insufficient 
to  sustain  the  claim  of  want  of  due  process. 

A  statute  making  a  tax  deed  prima  facie  evidence  of  certain 
matters  therein  specified  and  providing  that  a  judgment  for  a 
tax  deed  should  be  conclusive  evidence  of  its  regularity  and 
validity  in  collateral  proceedings,  excepting  in  cases  where  the 
taxes  had  been  paid  or  the  real  estate  was  not  liable,  was  held 
valid  by  the  Supreme  Court  of  Washington  as  a  proper  exer- 
cise of  legislative  power  and  not  amounting  to  a  taking  of 
property  without  due  process  of  law.  The  court  decided  also  that 
when  a  property  owner  has  notice  and  an  opportunity  to  defend 
before  his  title  is  actually  divested  by  the  delivery  of  a  tax  deed, 
the  issuance  without  notice  to  him  of  a  tax  certificate,  which  the 
statute  declares  shall  have  the  same  force  and  effect  as  a  judg- 
ment, execution  and  sale,  will  not  constitute  the  taking  of  prop- 
erty without  due  process  of  law.^ 

§  368.  Essentials  Only  Considered  in  Reference  to  Due 
Process  of  Law. — It  has  been  uniforndy  declared  by  the  Su- 
preme Court  that  substance,  and  not  form,  essentials,  and  not 
non-essentials  are  to  be  considered  in  determining  whether 
there  is  due  process  of  law  in  tax  procedure.  This  applies  when 
such  procedure  has  resulted  in  tax  sales  and  in  the  adjudication 
upon  tax  titles.  It  applies  as  well  to  special  taxes  and  to  the 
validity  of  titles  based  upon  tax  sales  tliereon  as  in  other  cases.- 

The  court  said  in  the  case  cited  that  the  laws  of  the  State  come 
under  the  prohibition  of  the  Fourteenth  Amendment  only  when 
they  infringe  fundamental  rights,  and  that  an  erroneous  judg- 


1  state  V.  Whittlesey,  17  Wash.  447. 

2  Hupra,  p.  — . 


384  DUE   PROCESS   OP   LAW   IN   TAXATION   PROCEDURE.  §    368 

ment  as  to  cost,  or.  a  mistake  in  ascribing  the  ownership  of  the 
land,  which  did  not  increase  the  taxation  or  which  cast  that 
which  should  have  been  paid  by  one  tract  of  land  upon  another 
tract  of  land,  did  not  involve  any  want  of  due  process  of  law. 
The  principle  was  illustrated  in  Castillo  v.  McConnico,i  in  a 
tax  sale  for  general  taxes.  The  court  there  held  that  the  defects 
complained  of  were  all  non-essential.  Adding  to  the  name  of 
the  masculine  owner  in  the  advertisement  the  words  "or  her 
estate  and  heirs"  did  not  destroy  the  efficacy  of  the  advertise- 
ment, and  the  State  had  the  power,  without  violating  the  re- 
quirement of  due  process  of  law,  to  dispense  with  the  name  in 
the  assessment,  substituting  any  such  description  and  method 
as  would  have  been  legally  adequate  to  convey  either  actual 
or  constructive  notice  to  the  owner.    It  added : 

"The  vice  which  underlies  the  entire  argument  of  the  plain- 
tiff in  error  arises  from  a  failure  to  distinguish  between  the 
essentials  of  due  process  of  law  under  the  Fourteenth  Amend- 
ment, and  matters  which  may  or  may  not  be  essential  under  the 
terms  of  a  State  assessing  or  taxing  law.  The  two  are  neither 
correlative  nor  coterminous.  The  first,  due  process  of  law, 
must  be  found  in  the  State  statute,  and  cannot  be  departed 
from  without  violating  the  Constitution  of  the  United  States. 
The  other  depends  on  the  law-making  power  of  the  State,  and 
as  it  is  solely  the  result  of  such  authority  may  vary  or  change 
as  the  legislative  will  of  the  State  sees  fit  to  ordain.  It  fol- 
lows that,  to  determine  the  existence  of  the  one,  due  process 
of  law,  is  the  final  province  of  this  court,  whilst  the  ascertain- 
ment of  the  other,  that  is,  what  is  merely  essential  under  the 
State  statute,  is  a  State  question  within  the  final  jurisdiction 
of  courts  of  last  resort  of  the  several  States.  When,  then,  a 
State  court  decides  that  a  particular  formality  was  or  was  not 
essential  under  the  State  statute,  such  decision  presents  no 
Federal  question,  providing  always  the  statute  as  thus  con- 
strued does  not  violate  the  Constitution  of  the  United  States, 
by  depriving  of  property  without  due  process  of  law.  This 
paramount  requirement  being  fulfilled,  as  to  other  matters  the 
State  interpretation  of  its  own  law  is  controlling  and  deci- 
sive. "2 


1 168  U.  S.  674,  42  L.  Ed.  622  (1898). 

2  As  to  the  distinction  between  essentials  and  non-essentials,  see  also 
Lent  V.  Tillson,  140  U.  S.  333,  334,  supra. 


§    369  DUE   PROCESS   OF    LAW   IN   TAXATION   PROCEDURE. 


385 


The  judgment  of  the  highest  State  court,  in  determining  that 
due  process  of  law  is  not  violated  by  its  tax  procedure,  is  now 
reviewable  by  the  Supreme  Court  in  the  exercise  of  its  discre- 
tion, by  writs  of  certiorari.^ 

§  369.  Limitation  and  Curative  Statutes. — The  State  has 
the  constitutional  power  to  enact  statutes  of  limitation  relating 
to  tax  titles  as  well  as  an  any  other  matter,  provided  that,  as  to 
existing  rights  of  action,  the  limitation  gives  the  claimant  a  rea- 
sonable opportunity  to  enforce  his  rights  by  suit.^ 

Thus  a  statute  of  New  York  provided  that  deeds  from  the 
Comptroller  of  the  State  for  lands  in  the  forest  reservation  sold 
for  the  non-pa>Tnent  of  taxes  should,  after  being  recorded  for 
two  years,  in  any  'action  brought  more  than  six  months  after  the 
act  took  effect,  be  conclusive  evidence  that  there  was  no  irregu- 
larity in  the  assessment  of  the  taxes.  This  was  a  statute  of  lim- 
itations, and  did  not  deprive  the  former  owner  of  his  property 
without  due  process  of  law.s 

It  was  held  in  Virginia  that  a  law  enacted  to  give  purchasers 
confidence  in  the  sufficiency  of  tax  titles  and  thereby  to  promote 
the  most  efficient  means  to  collect  the  delinquent  taxes,  and  which 
gave  to  the  land-owner  the  absolute  right  of  redemption  for  two 
years  after  his  land  had  been  sold  for  the  taxes,  could  not  be  said 
to  be  in  contravention  of  the  Fourteenth  Amendment,  because 
it  cut  off  all  defenses,  except  that  the  taxes  were  not  chargeable 
or  had  been  paid. 

A  statute  of  Iowa,  providing  that  a  claimant  under  a  tax 
deed  should  be  barred  if  he  did  not  sue  for  or  take  possession  of 
the  land  within  five  years  after  the  deed  was  executed  and  re- 
recorded, was  held  valid.s 

But  a  limitation  statute,  providing  that  no  action  for  recovery 


1  See  supra.  Sec.  336. 

2  Wheeler  v.  Jackson,  137  U.  S.  245,  257,  34  L.  Ed.  659  (1890). 

3  Saranac  Land  &  Timber  Co.  v.  Comptroller  of  New  York,  177  U.  S. 
318,  44  L.  Ed.  786  (1900),  affirming  83  Fed.  436.  Following  Turner  v. 
New  York,  168  U.  S.  90,  42  L.  Ed.  392  (1897),  affirming  145  N.  Y.  451. 

4  Virginia  Coal  Co.  v.  Thomas,  97  Va.  527. 

0  Barrett  v.  Holmes,  102  U.  S.  651,  26  L.  Ed.  291  (1881). 


386  DUE   PROCESS   OF   LAW   IN    TAXATION    PROCEDURE.  §    370 

of  land  sold  for  taxes  shall  be  maintained  unless  the  plaintiff 
or  his  predecessor  in  title  was  possessed  of  the  lands  within  two 
years  next  preceding  the  commencement  of  the  action,  if  con- 
strued to  bar  a  suit  when  the  tax  sale  appears  on  the  face  of  the 
proceedings  to  have  been  void  and  made  without  authority  of 
law,  is  not  consistent  with  due  process  of  law.i  This  was  the 
ruling  of  the  United  States  Circuit  Court  of  Appeals,  in  refer- 
ence to  the  statute  of  Arkansas,  which  the  court  construed  how- 
ever as  not  depriving  the  owner  of  his  right  to  recover  possession 
where  the  tax  proceedings  were  void.  The  court  said  (41  C.  C. 
A.  1.  c.  page  233)  : 

''It  is  undoubtedly  competent  for  the  legislative  department 
to  enact  reasonable  statutes  of  limitation,  to  provide  that  the 
adverse  possession  of  lands  for  a  reasonable  time  under  a  tax  or 
judicial  sale  shall  cure  the  mere  irregularities  in  the  proceedings 
upon  which  it  rests.  But  a  provision  that  the  possession  of  land 
for  the  limited  term  of  two  years  under  a  purchase  at  a  tax  sale, 
which  clearlj^  appeared  upon  its  face  to  be  void,  because  the  officer 
who  made  it  had  no  jurisdiction  or  authority  to  effect  it,  and 
because  it  was  made  for  taxes  levied  in  excess  of  the  limit  pres- 
cribed by  the  law,  is  not  process  of  law,  but  is  a  mere  legislative 
fiat  and  in  violation  of  the  fundamental  principle  of  our  juris- 
prudence. If  this  was  the  purpose  and  intent  of  the  legislature 
of  Arkansas  in  the  passage  of  this  act  of  limitation,  the  law  could 
not  be  sustained.  "2 

§  370.  Jurisdiction  of  United  States  Courts  in  Enforcing 
Collection  of  State  Taxes. — The  equitable  jurisdiction  of  a 
Federal  District  Court  does  not  extend  to  the  appointment  of  its 
own  officers  to  apportion  and  collect  a  tax  to  satisfy  its  judgment 
on  county  bonds  issued  in  aid  of  railway  construction,  unless 
the  State  has  authorized  such  a  proceeding;  and  this  is  true,  al- 
though the  remedy  at  law  by  mandamus  to  compel  the  proper 
county  officials  to  levy  and  collect  the  tax  in  conformity  with 


1  Alexander  v.  Gordon,  U.  S.  Cir.  Ct.  of  App.,  8th  Cir.,  101  Fed.  92, 
and  41  C.  C.  A.  228. 

2  For  opinion  of  the  Supreme  Court  of  Arkansas  on  the  same  statute 
see  Woolfork  v.  Buckner,  60  Ark.  163,  167. 


§  371    DUE  PROCESS  OP  LAW  IN  TAXATION  PROCEDURE.      387 

the  State  law,  has  proved  ineffectual.^  The  court  said  that  the 
plaintiff,  by  bringing  suit  in  the  United  States  courts,  acquired 
no  greater  rights  than  were  given  to  it  by  the  local  statutes ;  and 
that  the  Missouri  statute  giving  authority  to  the  Circuit  Court  to 
enforce,  by  mandamus  or  otherwise,  an  order  of  the  County 
court  to  have  a  tax  assessed,  could  be  construed,  in  the  absence 
of  a  decision  of  the  Missouri  Supreme  Court  to  the  contrary,  as 
not  a  power  in  the  Circuit  Court  to  collect  a  tax,  but  only  allow- 
ing a  resort  to  other  means  besides  mandamus  to  compel  the 
County  court  so  to  do. 

Mandamus  to  compel  the  county  authorities  through  whom 
taxes  are  assessed  and  collected,  to  levy  a  tax  to  pay  a  judgment 
on  township  bonds,  is  a  remedy  which  cannot  be  denied  on  the 
theory  that  because  the  legislature  might,  under  the  Constitution 
of  the  State  (S.  C,  Art.  9,  Sec.  8),  have  vested  in  the  township 
authorities  the  power  to  assess  and  collect  taxes  for  corporate 
purposes,  it  could  not  vest  such  power  in  county  officers.  The 
court  said  this  remedy  could  not  be  denied  although  the  corpor- 
ate existence  of  the  township  had  been  abolished  by  the  State 
Constitution,  and  the  corporate  agents  removed.^ 

The  levy  and  collection  of  taxes  by  the  city  of  New  Orleans 
to  satisfy  outstanding  indebtedness  of  the  Metropolitan  Police 
Board,  contracted  on  the  faith  of  the  exercise  of  the  taxing 
power  for  its  payment,  did  not  exhaust  the  city's  power  in  the 
premises,  where  the  city  had  applied  the  taxes  to  other  purposes 
and  had  failed  to  turn  them  over,  upon  demand,  to  the  Board  or 
its  representative.^ 

§  371.  No  Want  of  Due  Process  of  Law  When  Tax  Sale  Is 
Subject  to  Right  of  Redemption. — There  was  no  want  of  due 
process  of  law  in  the  proceeding  under  California  Political  Code 
Sec.  3897,  by  which  land  was  forfeited  for  non-payment  of  taxes, 
where  the  State,  having  become  vested  with  the  title  to  land 


1  Yost  v.  Dallas  County,  236  U.  S.  50,  59  L.  Ed.  460. 

2  Graham  v.  Folsom,  200  U.  S.  248,  50  L.  Ed.  464    (1906),  affirming 
131  Fed.  406. 

3  Louisiana  ex  rel.  Hubert  v.  New  Orleans,  215  U.  S.  170,  54  L.  Ed. 
144  (1909).  reversing  119  La.  625. 


388  DUE   PROCESS   OF   LAW   IN   TAXATION   PROCEDURE.  §    372 

worth  $500  by  the  lapse  of  five  years  with  no  offer  to  redeem 
following  a  sale  to  the  State  for  the  unpaid  tax,  sold  the  land 
for  $166,  all  of  which  went  to  the  State  to  satisfy  a  tax,  which, 
with  penalties  and  costs,  amounting  to  but  $16.19  ;  the  owner  hav- 
ing been  afforded  an  opportunity  to  be  heard  as  to  the  fairness  of 
the  original  assessment,  and  given  notice  of  the  time  and  place 
at  which  the  property  would  be  sold  to  the  State  subject  to  his 
right  to  redeem  within  five  years,  and  having  also  been  given 
notice  of  the  second  sale  by  mail  and  publication,  his  right  to 
redeem  continuing  up  to  the  time  when  the  State  actually  en- 
tered or  sold.^ 

If  a  tax  title  is  taken  subject  to  redemption,  it  cannot  be  said 
to  be  divested  without  due  process  of  law,  if  redemption  was  ex- 
ercised according  to  law,  where  the  highest  State  court  holds  that 
whatever  title  the  State  held,  it  sold  only  an  interest  which  was 
subject  to  redemption.  There  was  no  denial  of  due  process  of 
law.^ 

§  372.  Due  Process  in  Assessment  of  Trustees. — Due  proc- 
ess of  law  is  not  violated  by  proceedings  taken  in  conformity 
with  the  statute  of  Massachusetts,  providing  that  personal  prop- 
erty held  in  trust  shall  be  assessed  to  the  trustees  which  re- 
quires the  assessors  to  give  public  notice  to  the  inhabitants  to  re- 
turn a  list  of  their  personal  estates,  and  in  case  of  failure  to 
make  such  return  to  ascertain  as  nearly  as  possible  the  particu- 
lars of  the  estate,  and  estimate  its  just  value  which  shall  be 
conclusive  upon  the  owner,  unless  he  can  show  a  reasonable 
excuse  for  omitting  to  make  his  return,  and  which  makes  provi- 
sion for  an  application  to  the  assessors  for  an  abatement  of  taxes 
and  for  an  appeal  to  the  County  Commissioners  in  case  of  a  re- 
fusal of  the  assessors  to  abate  the  tax.s  In  this  case  which  was 
an  assessment  for  the  ordinary  annual  tax  upon  personal  prop- 
erty, it  was  ascertained  by  the  assessors  that  the  defendant  was 


1  Chapman  v.  Zobelein,  237  U.  S.  135,  59  L.  Ed.  874,  affirming  19  Cal. 
App.  132. 

2  Rush  V.  Land  &  Mining  Co.,  211  U.  S.  25,  53  L.  Ed.  312  (1909). 

3  Glidden  v.  Harrington,  189  U.  S.  255,  47  L.  Ed.  798  (1903),  affirming 
179  Mass.  486. 


§    873  DUE   PROCESS   OP   LAW   IN   TAXATION   PROCEDURE.  389 

a  trustee  in  a  foreign  corporation  and  the  ten  directors  were 
assessed  witli  the  sum  of  $160,000  each  as  trustees.  The  court 
held  that  there  was  no  denial  of  due  process  of  law  in  making 
this  assessment  against  him  as  trustee  as  he  had  an  opportunity 
to  apply  for  abatement  and  he  made  such  application  which 
was  denied.  It  seems  that  in  this  case  the  statute  provided  that 
parties  should  produce  a  list  of  their  personal  estates  including 
the  estates  held  by  them  in  trust.  The  suit  was  brought  to  recover 
this  tax  and  the  court  held  that  due  process  of  law  was  not  denied 
in  the  proceeding. 

§  373.  Discretionary  and  Mandatory  Statutory  Require- 
ments Distinguished. — Discretionary  and  mandatory  require- 
ments in  State  procedure  for  the  assessment  of  taxes  and  enforce- 
ment of  their  collection  have  been  carefully  distinguished,  and  the 
ruling  of  the  State  courts  as  to  what  are  mandatory  as  a  rule  is 
followed  in  the  Federal  Courts.  Thus  a  filing  of  a  complaint  in  a 
proceeding  to  foreclose  the  lien  for  delinquent  taxes  before  publi- 
cation of  summons  was  held  not  jurisdictional,  although  the  stat- 
ute provided  that  the  publication  of  summons  shall  not  be  had 
until  the  filing  of  the  complaint.^ 

Nor  was  a  judgment  to  foreclose  the  lien  of  a  county  void  for 
failure  to  file  the  application  for  payment  until  the  day  of  entry.^ 

Nor  is  due  process  of  law  wanting  in  making  sales  of  land  for 
unpaid  taxes,  even  if  it  does  not  recjuire  that  the  observance  of  all 
the  steps  prescribed  by  statutes  should  be  made  matter  of  record, 
and  much  less  that  it  should  be  made  a  matter  of  particular 
record  such  as  the  return  of  the  sheriff  of  the  sale  of  the  lands.^ 
In  this  ease  the  court  said  that  it  may  well  be  doubted  whether  due 
process  of  law  within  the  meaning  of  the  Fourteenth  Amendment 
required  a  punctilious  conformity  with  the  statutory  procedure 
preceding  and  accompanying  the  sale,  and  adding: 

"Whether  all  the  steps  required  by  law  were  actually  taken 
in  a  particular  case  and  whether  the  failure  to  take  such  steps 


1  Ontario  Land  Co.  v.  Wilfong,  223  U.  S.  543,  56  L.  Ed.  544    (1912), 
affirming  171  Fed.  51. 

^  Ontario  Land  Co.  v.  Wilfong,  supra. 

3  Turpin  v.  Lemon,  187  U.  S.  52,  47  L.  Ed.  70  (1902). 


390  DUE   PROCESS   OF   LAW   IN    TAXATION   PROCEDURE.  §    374 

would  invalidate  the  sale,  would  seem  to  be  a  matter  of  the 
State  court  rather  than  this  court  to  decide ;  and  it  would  ap- 
pear that  the  ^Fourteenth  Amendment  would  be  satisfied  by- 
showing  that  the  usual  course  prescribed  by  the  State  laws 
required  notice  to  the  taxpayer  and  was  in  conformity  with 
natural  justice." 

The  statute  in  this  case  provided  that  the  title  to  the  land  should 
be  vested  in  the  purchaser,  notwithstanding  any  irregularity 
unless  such  irregularity  appeared  upon  the  face  of  the  proceed- 
ings. Plaintiff  offered  no  evidence  of  a  failure  to  observe  the  steps: 
prescribed  by  the  statute,  and  the  court  said  that  his  position  did 
not  entitle  him  to  any  relief,  i 

§  374.    Enforcement  of  Tax  Lien  by  Plenary  Civil  Action. — 

The  State  of  Missouri  provided  for  collection  of  taxes  upon  real 
estate  by  civil  actions  against  the  owners  of  property  to  the  end 
that  a  lien  be  charged  upon  the  land  for  the  taxes  which  had  been 
delinquent  and  the  lien  foreclosed.  This  is  in  effect  the  enforce- 
ment of  the  State 's  lien  by  an  ordinary  civil  action,  the  title  of  the 
owner  and  of  all  interested  in  the  title  being  foreclosed  by  the 
plenary  judicial  proceeding  in  which  everyone  interested  must  be 
duly  served  by  ordinary  process  if  resident  or  by  publication  in 
other  cases  if  non-resident.  In  Missouri  it  has  been  decided  that 
no  personal  judgments  shall  be  rendered  in  the  proceeding  against 
the  owner  of  the  property,  or  any  execution  issued  except  upon 
the  property  charged  with  the  tax.  The  judgment  enforces  the 
lien,  and  is  valid  only  as  to  those  who  are  parties  to  the  proceed- 
ing, s 

This  statute  was  adopted  by  the  territory  of  Arizona,  and  the 
Supreme  Court  of  that  territory  held  that  the  construction  of  the 
statute  by  the  court  of  last  resort  of  'Missouri  was  binding  upon 
it.^  The  Supreme  Court  affirmed  the  judgment  of  the  Supreme 
Court  of  Arizona  in  refusing  to  enforce  a  tax  lien  upon  certain 


1  National  B.  &  L.  Assn.  v.  Gilman,  C.  C.  128  Fed.  293  (1904). 

2  See  the  Author's  Taxation  in  Mo.,  p.  225. 

3  State  ex  rel.  Rosenblatt  v.  Sargeant,  76  Mo.  557;  State  ex  rel.  Hayes 
V.  Snyder,  139  Mo.  549. 

4  Arizona  ex  rel.  Gaines  v.  Copper  Queen  Cons.  Min.  Co.,  13  Ariz.  198. 


§    375         DUE   PROCESS   OF   LAW    IN    TAXATION    PROCEDURE.  891 

mining  claims,  the  tax  being  assessed  upon  an  increased  valua- 
tion of  certain  of  the  claims  made  by  the  Board  of  Supervisors 
of  the  county.  The  Supreme  Court  said  that  it  would  seem  to  be 
elementary  that  such  an  enforcement  of  collection  by  suit  must 
depend  upon  a  valid  assessment  as  the  basis.i 

§  375.  Due  Process  in  Michigan  Railroad  Taxation. — In  af- 
firming the  judgment  of  the  United  States  Court  sustainin-g  the 
validity  of  the  system  of  railroad  taxation  adopted  in  Michigan 
under  the  constitutional  amendment  of  1900,  the  Supreme  Court 
said  that  the  Federal  courts  were  reluctant  to  adjudge  that  a 
State  statute  was  in  conflict  with  the  State  constitution  before 
that  question  had  been  considered  by  the  State  tribunals,  and  this 
was  especially  true  when  the  statute  was  one  affecting  the  rev- 
enues of  the  State  and  therefore  of  general  public  interest.  This 
reluctance,  said  the  court,  became  more  imperative  when  the  stat- 
ute had  been  before  the  highest  court  of  the  State  and  its  validity 
had  been  assumed,  though  not  directly  decided.  The  court  held 
that  there  was  no  violation  of  due  process  of  law  in  singling  out 
railroad  and  other  corporate  property,  and  taxing  it  for  State 
purposes  in  a  manner  and  at  a  rate  different  from  that  applicable 
to  other  property,  when  the  statute  named  the  time  and  place  for 
the  sessions  of  the  assessing  board,  and  gave  to  any  person  or 
company  interested  the  right  to  be  heard,  and  authorized  the 
board  to  correct  the  valuation.  Neither  was  there  any  violation  of 
due  process  of  law  in  taxing  railroads  and  certain  other  corpor- 
ate property  at  an  average  rate  of  taxation  imposed  on  all  other 
property  in  the  State  subject  to  ad  valorem  taxes,  and  such  aver- 
age rate  was  ascertained  by  the  State  board  of  assessors  by  di- 
viding the  total  tax  levied  on  such  other  property  by  the  value 
of  such  property,  as  returned  by  the  local  assessors  and  State 
board  of  commissioners. 


1  Arizona  ex  rel.  Gaines  v.  Copper  Queen  Cons.  Min.  Co.,  233  U.  S.  87, 
58  L.  Ed.  863   (1914),  affirming  13  Ariz.  198. 

2  Michigan  Cen.  R.  Co.  v.  Powers,  201  U.  S.  245,  50  L.  Ed.  744,  affirm- 
ing 138  Fed.  223. 


CHAPTER  XII. 

DUE  PROCESS  OF  LAW  AND  THE  PUBLIC  PURPOSE  OF 
TAXATION. 

§  376.  Public  purpose  essential  in  taxation. 

377.  Loan  Association  v.  Topeka. 

378.  Municipal  bonds  held  invalid  for  want  of  public  purpose. 

379.  Public  purpose  of  taxation  under  Fourteenth  Amendment. 

380.  Supreme  Court  on  Loan  Association  v.  Topeka. 

381.  City  taxation  of  annexed  farming  lands  sustained. 

382.  What  is  public  purpose  for  taxation? 

383.  Conflicting  judicial  opinions  as  to  public  purpose  necessary  for 

taxation. 

384.  Erection  of  public  sorghum  mills  not  public  purpose. 

385.  Elimination  of  grade  crossings  and  a  union  railway  station  a 

lawful  public  purpose. 

386.  Inspiration  of  patriotism  lawful  public  purpose. 

387.  Taxation  for  public  ownership. 

388.  Public  purpose  in  eminent  domain, 

389.  Any  proceeding  dependent  upon  taxation  for  private  purpose 

invalid. 

390.  Railroad  aid  bonds. 

391.  Purpose  of  taxation  must  not  only  be  public  but  pertain  to  dir- 

trict  taxed. 

§  376.  Public  Purpose  Essential  in  Taxation. — Due  pro- 
cess of  law  in  taxation  requires  more  than  customary  tax  proced- 
ure. A  tax  has  been  defined  as  a  contribution  enforced  by  the 
sovereign  authority  of  the  State,  according  to  some  rule  of  appor- 
tionment, upon  persons  and  property  within  its  jurisdiction,  for 
the  support  of  government  or  other  public  needs.  Due  process  of 
law  in  State  taxation  therefore  requires  that  the  tax  shall  be  levied 
for  a  public  purpose  and  upon  persons  or  property  within  the 
jurisdiction  of  the  State.  This  conception  of  a  tax  was  not 
created  by  the  Fourteenth  Amendment  but  inheres  in  the  nature 
of  a  tax,  as  it  is  understood  in  the  jurisprudence  of  the  political 
communities  which  make  up  our  political  system.  As  to  the  Four- 
teenth Amendment  in  relation  to  these  fundamental  principles, 

(392) 


§    376  THE    PUBLIC    PURPOSE   ESSENTIAL    IN    TAXATION.  393 

the  Supreme  Court  has  said^  that  due  process  of  law  refers  to  that 
law  of  the  land  in  each  State  which  derives  its  authority  from  the 
inherent  and  reserve  powers  of  the  State,  exerted  within  the  limits 
of  those  fundamental  principles  of  liberty  and  justice,  which  lie 
at  the  basis  of  all  our  civil  and  political  institutions,  and  the 
greatest  security  for  which  rests  in  the  right  of  the  people  to  make 
their  own  laws  and  alter  them  at  pleasure.  But  it  is  not  to  be  sup- 
posed that  these  legislative  powers  are  absolute  and  despotic,  and 
that  the  amendment  prescribing  due  process  of  law  is  to  be  too 
vague  and  indefinite  to  act  as  a  practical  restraint.  It  is  not 
every  act  legislative  in  form  that  is  law.  Law  is  something  more 
than  mere  will  exerted  as  an  active  power.  Arbitrary  power  en- 
forcing its  edicts  to  the  injury  of  the  persons  and  property  of  its 
subjects  is  not  law. 

As  taxation  belongs  to  the  legislative  power,  the  determination 
of  the  public  purpose  for  which  taxes  shall  be  levied  is  primarily 
a  matter  for  the  legislature,  but  this  power  is  not  unlimited.  The 
fundamental  principle  that  taxes  can  be  levied  only  for  public 
purposes  had  been  declared  in  the  State  courts  long  before  the 
adoption  of  the  Fourteenth  Amendment  and  irrespective  of  any 
express  constitutional  declaration.  The  constitutions  of  some  of 
the  States  provide  in  express  terms  that  taxes  shall  be  levied  for  a 
public  purpose  only,  but  such  declaration  is  unnecessary,  as  a 
public  purpose  is  implied  in  the  conception  of  a  tax.^ 

That  a  public  purpose  is  inherent  in  a  tax  is  further  illustrated 
by  the  fact  that  the  leading  case  in  the  Supreme  Court,  and 
indeed  in  our  jurisprudence,  on  the  subject  of  the  public  purpose 
essential  in  taxation,  to-wit,  that  of  Loan  Association  v.  Topeka, 
was  not  considered  or  decided  with  reference  to  the  Fourteenth 


iHurtado  v.  California,  110  U.  S.  516,  1.  c.  p.  535,  28  L.  Ed.  232 
(1884). 

2  In  some  early  cases  this  implied  limitation  upon  the  power  of 
taxation  was  based  upon  the  constitutional  provision  prohibiting  the 
taking  of  private  property  for  public  use  without  just  compensation, 
see  Cheaney  v.  Hoosier,  9  B.  Monroe  330,  p.  341,  cited  and  followed  in 
Wells  V.  Weston,  22  Mo.  384,  389,  see  infra,  Sec.  381n;  City  of  Covington 
V.  Southgate,  15  B.  Monroe  491. 

3  20  Wallace  655,  22  L.  Ed.  455  (1875). 


394  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  §    377 

Amendment,  but  on  principles  of  general  constitutional  law.  That 
decision  was  rendered  by  the  court  in  the  exercise  of  its  appellate 
jurisdiction  over  the  Circuit  Courts,  in  a  suit  brought  before  the 
Circuit  Court  for  the  District  of  Kansas  on  bonds  issued  to  an 
iron  works  company  by  the  city  of  Topeka  to  aid  in  their  estab- 
lishing bridge  shops  in  that  city. 

§  377.  Loan  Association  v.  Topeka. — The  bonds  were  is- 
sued under  authority  of  an  act  of  the  legislature,  authorizing  cer- 
tain cities  ' '  to  encourage  the  establishment  of  manufacturers  and 
such  other  enterprises  as  may  tend  to  develop  or  improve  the  city, 
either  by  direct  appropriation  from  the  general  funds,  or  by  the 
issuance  of  the  bonds  of  such  city."  A  majority  vote  at  an 
election  was  required.  It  seems  that  all  the  steps  were  taken,  in- 
cluding the  election,  the  bonds  were  issued  and  the  first  interest 
coupon  paid.  In  a  suit  upon  the  coupons  in  the  United  States  Cir- 
cuit Court  of  Kansas,  the  defense  demurred  on  the  grounds,  first, 
that  the  statute  violated  the  constitution  of  Kansas,  and  second, 
that  the  act  authorized  the  towns  to  take  the  property  of  the 
citizens  under  the  guise  of  taxation,  in  aid  of  enterprises  which 
were  not  of  a  public  nature.  The  Circuit  Court  sustained  the 
demurrer,  and  the  judgment  was  affirmed  by  the  Supreme 
Court,  in  a  notable  opinion  by  Justice  Miller. 

The  court  declined  to  pass  upon  the  first  point,  as  to  whether 
the  statute  was  authorized  by  the  constitution  of  the  State,  saying 
that,  as  it  found  ample  ground  to  sustain  the  demurrer  on  the  sec- 
ond, it  preferred  to  base  its  decision  upon  that.  As  the  con- 
tract could  only  be  fulfilled  by  resorting  to  taxation,  its  validity 
necessarily  depended  on  the  power  to  levy  the  tax.  The  court 
referred  to  the  judicial  conflict  over  railroad  aid  bonds,  and  said 
that  such  bonds  had  been  sustained  on  the  ground  that  the  pur- 
pose was  in  effect  a  public  one.  A  law  authorizing  a  tax  for  a 
purely  private  purpose  is  an  unauthorized  invasion  of  private 
rights. 

The  court  said  that  a  government,  which  did  not  recognize  that 
certain  rights  of  citizens  were  beyond  the  control  of  the  State,  was 
a  despotism,  and  none  the  less  a  despotism  because  it  was  one  ex- 
ercised by  many  instead  of  by  one.  The  theory  of  our  government 


§    378  THE   PUBLIC    PURPOSE   ESSENTIAL    IN    TAXATION.  395 

was  opposed  to  the  deposit  of  unlimited  powers  everyivhere.  Th© 
power  to  tax  was  the  strongest  and  most  prevailing  of  all  the 
powers  of  government  reaching  directly  or  indirectly  to  all  classes 
of  the  people,  and  said  : 

"To  lay  with  one  hand  the  power  of  the  government  on  the 
property  of  the  citizen,  and  with  the  other  to  bestow  it  upon 
favored  individuals  to  aid  private  enterprises  .and  build  up 
private  fortunes,  is  none  the  less  a  robbery  because  it  is  done 
under  the  forms  of  law  and  is  called  taxation.  This  is  not  leg- 
islation.   It  is  a  decree  under  legislative  forms." 

After  conceding  that  it  is  not  easy  to  decide  in  all  cases  what  is 
a  public  purpose,  and  that  the  courts  are  justified  in  interposing 
only  where  the  case  is  clear,  it  was  said : 

"In  deciding  whether,  in  the  given  case,  the  object  for  which 
the  taxes  w^ere  assessed  falls  upon  the  one  side  or  the  other  of 
this  line,  they  must  be  governed  mainly  by  the  course  and 
usage  of  the  government,  the  objects  for  which  taxes  have 
been  customarily  and  by  long  course  of  legislation  levied,  what 
objects  or  purposes  have  been  considered  necessary  to  the  sup- 
port and  for  the  proper  use  of  the  government,  whether  State 
or  municipal.  Whatever  lawfully  pertains  to  this  and  is  sanc- 
tioned by  time  and  the  acquiescence  of  the  people  may  well  be 
held  to  belong  to  the  public  use,  and  proper  for  the  maintenance 
of  good  government,  though  this  may  not  be  the  only  criterion 
of  rightful  taxation," 

But  it  was  said  that,  in  the  ease  at  bar,  no  line  could  be  drawn 
in  favor  of  the  manufacturer,  which  would  not  open  the  coffers 
of  the  public  treasury  to  the  importunities  of  two-thirds  of  the 
business  men  of  the  city  or  town.^ 

§  378.  Municipal  Bonds  Held  Invalid  for  Want  of  Public 
Purpose. — This  case  was  followed  in  others  from  the  Circuit 
Courts,  none  of  them  however  making  any  reference  to  the  Four- 


1  Justice  Clifford  dissented  on  the  .ground  that  the  courts  had  no 
power  to  declare  an  act  of  the  State  Legislature  void  if  it  was  not  re- 
pugnant to  the  constitution  of  the  State  or  the  Constitution  of  the 
United  States,  and  could  not  declare  it  void  on  the  vague  ground  that 
they  thought  it  opposed  to  the  general  spirit  supposed  to  underlie  the 
Constitution. 


396  THE    PUBLIC    PURPOSE    ESSEXTLVL    IX    TAXATION.  §    378 

teenth.  Amendment.  Thus  in  Cole  v.  LaGrange/  a  suit  on  bonds 
issued  to  a  manufacturing  eompanv  in  Missouri,  ttie  court  said 
that  the  general  grant  of  legislative  power  in  the  constitution  of 
the  State  did  not  enable  the  legislatui'e.  in  the  exercise  either  of 
the  right  of  eminent  domain  or  of  the  right  of  taxation,  to  take 
private  property  without  the  owner's  consent  for  any  but  a  public 
purpose ;  nor  can  the  legislature  authorize  municipal  corporations 
to  contract,  for  private  objects,  debts  which  must  be  paid  by  taxa- 
tion. These  limits  of  legislative  power  were  too  firmly  established 
by  judicial  decisions  to  require  extended  argument  and  citations.- 

Bonds  however,  issued  under  a  statute  of  Kansas  to  aid  in  the 
subscription  to  a  custom  grist  mill  were  held  valid. ^  on  the  ground 
that  a  grist  miU.  run  by  water  was  a  public  use,  as  declared  under 
the  laws  of  Kansas.* 

But  in  a  later  case  from  Nebraska.^  the  court  held  that  the  act 
of  Nebraska  did  not  authorize  the  issue  of  bonds  for  the  benefit  of 
a  steam  grist  mill,  and  the  bonds  were  held  void.s 


1113  U.  S.  1,  28  L.  Ed.  896  (1885). 

2  See  also  Parkersburg  v.  Brown,  106  U,  S.  487,  27  L.  Ed.  238  (1883). 

3  Burlington  Township  v.  Beasley,  94  U.  S.  310,  24  L.  Ed.  161  (1877), 
Justice  Field  dissenting. 

4  The  court  said  in  this  case  at  p.  313:  "A  mill  run  by  water  is  de- 
clared to  be  an  internal  improvement  by  the  statute  we  are  considering. 
It  would  require  a  great  nicety  of  reasoning  to  give  a  definition  of  the 
expression  'internal  improvement'  which  would  include  a  grist  mill 
run  by  water  and  exclude  one  operated  by  steam,  or  which  would  show 
that  the  means  of  transportation  were  more  valuable  to  the  people  of 
Kansas  than  the  means  of  obtaining  bread.  It  would  be  poor  consola- 
tion to  the  people  of  this  town  to  give  them  the  power  of  going  in  and 
out  of  the  town  by  railroad,  while  they  were  refused  the  means  of 
grinding  their  wheat;"  citing  County  v.  Miller,  7  Kansas  479.  See  also 
Blair  v.  Cuming  Co.,  Ill  U.  S.  363,  28  L.  Ed.  4.57  (1884). 

5  Osborne  v.  Adams  County,  106  U.  S.  181,  27  L.  Ed.  129  (1882). 

6  The  Supreme  Court  of  Nebraska  in  Traver  v.  Merrick  County,  14 
Neb.  327,  held  that  there  was  a  distinction  between  aiding  in  the  de- 
velopment of  the  water  power  of  the  State  through  the  assistance  of 
mills  run  by  water  power,  and  aiding  the  mills  propelled  by  steam 
which  could  at  any  time  be  moved  to  another  locality.  See  also  Os- 
borne V.  Adams  County,  109  U.  S.  1,  27  L.  Ed.  835  (1883),  on  motion 
for  rehearing.  ^ 


§    379  THE   PUBLIC   PURPOSE   ESSENTIAL   IX   T.\:XATION.  397 

The  above  were  all  suits  upon  municipal  bonds  brought  in  the 
United  States  Court,,  and  decided  with  no  reference  to  the  Four- 
teenth Amendment.  In  nearly  all,  the  decisions  were  based  upon 
the  rulings  of  the  State  courts.  Justice  Miller  in  Davidson  v.  New 
Orleans,  supra,i  speaks  of  the  decision  in  Loan  Association  v. 
Topeka  as  decided  upon  ''principles  of  general  constitutional 
law"  of  which  the  court  could  take  jurisdiction  when  sitting  in 
review  of  a  Circuit  Court  of  the  United  States,  but  of  which  it 
could  not  take  jurisdiction  in  reviewing  upon  a  writ  of  error  a 
judgment  of  a  State  Supreme  Court. 

§  379.    Public    Purpose    of    Taxation    Under    Fourteenth 

Amendment.— Later  decisions  of  the  court  however  have  dis- 
tinctlv  referred  the  basis  of  the  decision  in  Loan  Association  v. 
Topeka  to  the  ''due  process  of  law"  secured  by  the  Fourteenth 
Amendment,  and  have  questioned  the  power  of  the  court  to  in- 
validate on  any  other  ground  a  State  tax  as  wanting  in  a  public 
purpose,  when  held  valid  by  the  State  courts.2 

Thus  in  Hurtado  v.  California,  where  Justice  Matthews  for 
the  coui't,  in  an  exhaustive  opinion  and  discussion  of  the  mean- 
ing of  due  process  of  law  and  the  Fourteenth  Amendment,  holds 
that  it  does  not  necessarily  require  an  indictment  by  a  grand  jury 
m  a  State  prosecution  for  murder,  that  learned  Justice  cites 
and  quotes  from  the  opinion  in  Loan  Association  v.  Topeka  as 
illustrative  of  "the  law  of  the  land,"  which  is  guaranteed  by 
"due  process  of  law,"  and  which  there  constituted  a  protection 
against  arbitrary  power. 

Li  Missouri  Pacific  Railroad  Company  v.  Nebraska,  the  court, 
at  page  417,  cites  Loan  Association  v.  Topeka  in  support  of  the 
proposition  that  "the  taking  by  a  State  of  the  private  property 
of  one  person  or  corporation  without  the  owner's  consent,  for  the 
private  use  of  another,  is  not  due  process  of  law,  and  is  a  viola- 

1  96  U.  S.  97,  1.  c.  105. 

2 Hurtado  v.  California,  110  U.  S.  516.  28  L.  Ed.  232  (1884) ;  Mavnard 
V.  Hill.  125  U.  S.  205.  31  L.  Ed.  654  (1888);  Fallbrook  Irrigation  Dis- 
trict V.  Bradley,  164  U.  S.  155.  41  L.  Ed.  369  (1896).  reversing  68  Fed. 
948;  Missouri  Pacific  R.  R.  Co.  v.  Nebraska.  164  U.  S.  403. 


398  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  §    380 

tion  of  the  Fourteenth  Article  of  Amendment  of  the  Constitu- 
tion of  the  United  States. ' ' 

§  380.    Supreme  Court  on  Loan  Asociation  v.  Topeka. — In 

the  California  irrigation  case/  the  Supreme  Court  of  California 
had  adjudged  that  the  purpose  of  the  assessment  was  public. 
But  it  was  contended  that  the  United  States  Supreme  Court  was 
not  concluded  by  this  and  had  the  power  ' '  under  general  consti- 
tutional law"  to  determine  whether  the  purpose  was  public  or 
private.  The  court  held  however,  that  it  could  only  review  the 
decision  of  the  State  court  on  this  question,  to  determine  whether 
the  assessment  was  valid  under  the  Fourteenth  Amendment,  and 
that  it  could  not  overrule  the  State  court  on  principles  of  gen- 
eral constitutional  law,  saying,  at  page  155 : 

**We  should  not  be  justified  in  holding  the  act  to  be  in  vio- 
lation of  the  State  constitution  in  the  face  of  clear  and  re- 
peated decisions  of  the  highest  court  of  the  State  to  the  con- 
trary, under  the  pretext  that  he  were  deciding  principles  of 
general  constitutional  law.  If  the  act  violate  any  provision, 
expressed  or  properly  implied,  of  the  Federal  Constitution,  it 
is  our  duty  to  so  declare  it ;  but  if  it  do  not,  there  is  no  justifi- 
cation for  the  Federal  courts  to  run  counter  to  the  decisions 
of  the  highest  State  court  upon  questions  involving  the  con- 
struction of  State  statutes  or  constitutions,  on  any  alleged 
ground  that  such  decisions  are  in  conflict  with  sound  principles 
of  general  constitutional  law.  The  contrary  has  not  been 
held  in  this  court  by  the  case  of  Loan  Association  v.  Topeka, 
20  Wall.  655.  In  that  case  a  statute  of  Kansas  was  held  in- 
valid because  by  its  provisions  the  property  of  the  citizen  un- 
der the  guise  of  taxation  would  be  taken  in  aid  of  a  private  en- 
terprise, which  was  a  perversion  of  the  power  of  taxation.  The 
case  was  brought  in  the  United  States  Circuit  Court  for  the 
District  of  Kansas,  and  was  decided  by  that  court  in  favor  of 
the  city.  There  had  been  no  decision  of  the  highest  State 
court  upon  the  question  whether  the  act  violated  the  constitu- 
tion of  Kansas,  and  consequently  there  was  none  to  be  followed 
by  the  Federal  court  upon  that  question.  This  court  held  that 
a  law  taxing  the  citizen  for  the  use  of  a  private  enterprise  con- 
ducted by  other  citizens  was  an  unauthorized  invasion  of  pri- 
vate rights.  Mr.  Justice  Miller  said  that  there  were  such 
rights  in  every  free  government  which  were  beyond  the  con- 


1  Pallbrook  Irrigation  District  v.  Bradley,  supra. 


§    381  THE   PUBLIC    PURPOSE   ESSENTIAL   IN   TAXATION.  399 

trol  of  the  State.  The  ground  of  the  decision  was  as  stated, 
that  the  act  took  the  propert}^  of  the  citizen  for  a  private  pur- 
pose, although  under  the  forms  of  taxation.  In  thus  holding, 
there  was  no  overruling  or  refusing  to  follow  the  decisions  of 
the  highest  court  of  the  State  respecting  the  constitution  of 
its  own  State. 

"We  are,  therefore,  practically  confined  in  this  case  to  the 
inquiry  whether  the  act  in  question,  as  it  has  been  construed 
by  the  State  courts,  violates  the  Federal  Constitution." 

It  was  held  that  the  assessment  was  for  a  public  purpose  suffi- 
cient to  constitute  due  process  of  law. 

§  381.  City  Taxation  of  Annexed  Farming-  Lands  Sus- 
tained.— The  doctrine  of  Loan  Association  v.  Topeka  was  un- 
successfully invoked  in  the  case  of  Kelly  v.  Pittsburgh,^  where  the 
defendant  had  extended  its  boundaries  under  authority  of  an 
act  of  the  legislature  of  Pennsylvania,  by  the  annexation  of  ad- 
jacent territory.  There  was  included  a  tract  used  exclusively 
for  farm  purposes,  and  which,  on  account  of  its  distance  from  the 
built-up  portion  of  the  city,  was  not  within  the  reach  of  the 
water,  fire,  police  or  other  departments  of  the  municipal  govern- 
ment. The  plaintiff  complained  that  the  estimate  of  his  land  for 
taxation  was  greatly  in  excess  of  its  true  value,  and  that  the  city 
tax  was  almost  destructive  of  his  interest  in  the  property.  The 
Supreme  Court  of  Pennsylvania  sustained  the  validity  of  this 
tax,2  and  their  judgment  was  affirmed  by  the  Supreme  Court  of 
the  United  States.  Justice  Miller,  delivering  the  opinion,  said 
that  the  cases  cited  from  Kentucky  and  Iowa,  where  it  had  been 
held  that  farm  lands  in  a  city  were  not  subject  to  ordinary  city 
taxes,  were  not  applicable  and  afforded  no  rule  for  construing  the 
Constitution  of  the  United  States.  It  might  be  true  that  the 
plaintiff  did  not  receive  the  same  amount  of  benefit  from  some 
of  these  taxes  as  citizens  living  in  the  heart  of  the  city,  and  pro- 
bably his  tax  bore  a  very  unjust  relation  to  the  benefits  received. 
The  court  however,  added : 


1104  U.  S.  78,  26  L.  Ed.  658  (1881). 

2  A  strong  dissenting  opinion  was  filed  in  Pennsylvania  by  Agnew, 
Ch.  J.,  85  Pa.  180,  27  American  Reports  633. 


400  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION,  §    381 

"But  who  can  adjust  with  precise  accuracy  the  amount  which 
each  individual  in  an  organized  civil  community  shall  contrib- 
ute to  sustain  it,  or  can  insure  in  this  respect  absolute  equality 
of  burdens,  and  fairness  in  their  distribution  among  those  who 
must  bear  them? 

"We  cannot  say  judicially  that  Kelly  received  no  benefit 
from  the  city  organization.  These  streets,  if  they  do  not  pen- 
etrate his  farm,  lead  to  it.  The  water-works  will  probably 
reach  him  some  day,  and  may  be  near  enough  to  him  now  to 
serve  him  on  some  occasion.  The  schools  may  receive  his 
children,  and  in  this  regard  he  can  be  in  no  worse  condition 
than  those  living  in  the  city  who  have  no  children,  and  yet 
who  pay  for  the  support  of  the  schools.  Every  man  in  a 
county,  a  town,  a  city,  or  a  State,  is  deeply  interested  in  the 
education  of  the  children  of  the  community,  because  his  peace 
and  quiet,  his  happiness  and  prosperity,  are  largely  dependent 
upon  the  intelligence  and  moral  training  which  it  is  the  ob- 
ject of  the  public  schools  to  supply  to  the  children  of  his 
neighbors  and  associates  if  he  has  none  himself. 

"The  officers  whose  duty  it  is  to  punish  and  prevent  crime 
are  paid  out  of  the  taxes.  Has  he  no  interest  in  maintaining 
them,  because  he  lives  further  from  the  court  house  and  police 
station  than  some  others? 

"Clearly,  however,  these  are  matters  of  detail  within  the 
discretion,  and  therefore  the  power,  of  the  law-making  body 
within  whose  jurisdiction  the  parties  live.  This  court  cannot 
say  in  such  cases,  however  great  the  hardship  or  unequal  the 
burden,  that  the  tax  collected  for  such  purposes  is  taking  the 
property  of  the  taxpayer  without  due  process  of  law."^ 


1  See  also  Taggart  v.  Claypool,  145  Ind.  596,  and  32  L.  R.  A.  586,  fol- 
lowing and  applying  Kelly  v.  Pittsburgh.  The  rulings  in  the  State 
courts  upon  this  difficult  question  of  the  power  of  the  State  legisla- 
tures in  the  absence  of  constitutional  restriction  to  annex  and  subject 
farming  lands  to  ordinary  municipal  taxation,  are  collated  by  Judge 
Dillon,  2  Mun.  Corp.,  4th  Ed.,  Sec.  795.  He  says:  "It  must  be  ad- 
mitted that  in  the  absence  of  specific  constitutional  restrictions  the 
difficulties  in  the  way  of  pronouncing  such  legislation  unconstitutional 
or  of  affording  judicial  relief  in  such  cases  are  almost  insurmountable." 
See  also  cases  collected  in  note  to  State  ex  rel.  Richards  v.  Cincinnati 
(Ohio),  27  L.  R.  A.  737. 

The  Supreme  Court  of  Missouri  held  in  1856  that  the  legislature 
could  not  authorize  a  municipal  corporation  to  tax  for  its  own  local 
purposes  lands  lying  beyond  its  corporate  limits,  Wells  v.  Weston,  22 
Mo,  385. 


§    382  THE   PUBLIC   PURPOSE   ESSENTIAL   IN   TAXATION.  401 

§  382.  What  Is  Public  Purpose  for  Taxation? — While  the 
declaration  of  the  legislature  that  a  tax  is  laid  for  a  public  pur- 
pose must  necessarily  be  given  great  weight,  as  taxation  is  essen- 
tially a  legislative  power,  such  declaration  is  not  conclusive.  It 
is  the  universal  holding  however,  that  courts  are  justified  in 
interposing  only  when  it  clearly  appears  that  the  supreme  law 
governing  both  the  legislature  and  the  judiciary  would  be  violat- 
ed by  the  enforcement  of  the  legislative  purpose.  In  determin- 
ing what  is  a  public  purpose,  as  was  said  in  the  Topeka  case,  the 
courts  are  governed  mainly  by  the  course  and  usages  of  the  gov- 
ernment, the  objects  for  which  taxes  have  been  customarily  and 
by  long  course  of  legislation  levied,  and  what  objects  and  pur- 
poses have  been  considered  necessary  for  the  support  and  proper 
use  of  the  government,  whether  State  or  municipal.  "Whatever 
lawfully  pertains  to  this,  and  is  sanctioned  by  time  and  acquies- 
cence of  the  people  may  well  be  held  to  belong  to  the  public 
use  and  proper  for  the  maintenance  of  good  government,  though 
this  may  not  be  the  only  criterion  of  rightful  taxation."^ 

In  the  language  of  the  Supreme  Court  of  Michigan,^  the  pub- 
lic purpose  of  taxation  does  not  relate  to  the  urgency  of  the  pub- 
lic need,  or  to  the  extent  of  the  public  benefit,  but  the  term  is 
used  to  distinguish  the  objects  for  which,  according  to  settled 
usage,  the  government  is  to  provide,  from  those  which,  by  the 
like  usage,  are  left  to  private  inclination,  interest  or  liberality. 

The  public  purpose  which  will  warrant  the  exercise  of  the 
taxing  power  is  that  which  is  sustained  by  the  prevailing  and 
controlling  public  opinion  of  the  time ;  not  the  public  opinion  in 
the  popular  sense,  which  is  conclusively  reflected  in  the  expres- 
sion of  the  legislative  will,  but  the  trained  and  thoughtful  judi- 
cial opinion.  The  public  opinion  of  one  age  or  generation  how- 
ever, as  reflected  in  judicial  opinions  concerning  the  proper 
scope  of  governmental  activity,  or  as  to  what  are  the  public  pur- 
poses of  taxation,  is  not  the  public  opinion  of  another  age  or  of 
another  generation.     Upon  these  questions  our  juristic  concep- 


1  Quoted  by  the  Supreme  Court  of  Missouri  in  State  ex  rel.  v.  Switz- 
ler,  143  Mo.  317. 

2  People  V.  Salem,  20  Mich.  452,  1.  c.  p.  485. 


402  THE   PUBLIC   PURPOSE   ESSENTIAL   IN    TAXATION.  §    383 

tions  must  tend  to  harmonize  with  the  well-settled,  all-powerful 
influences  of  public  opinion  in  a  popular  sense.  In  the  words  of 
Mr.  Lowell,  "our  written  constitutions  are  an  obstacle  to  the 
whim,  but  not  to  the  will  of  the  people." 

The  development  of  judicial  opinion  upon  this  subject  may 
be  illustrated  by  selections  from  a  few  of  the  more  notable 'opin- 
ions of  the  many  that  have  been  announced  in  the  courts. 

§  383.  Conflicting  Judicial  Opinions  as  to  Public  Purpose 
Necessary  for  Taxation. — It  was  held  in  1875,  by  the  Supreme 
Court  of  Kansas,  opinion  by  Judge  Brewer,  now  of  the  United 
States  Supreme  Court,^  that  a. statute  of  that  State  enacted  after 
a  crop  failure,  authorizing  the  issue  of  bonds  to  raise  money  for 
the  purchase  of  seed  corn  to  be  given  to  the  farmers,  was  invalid 
as  authorizing  taxation  for  a  purpose  which  was  not  public.  The 
provision  of  the  State  Constitution  authorizing  appropriations 
for  the  support  of  the  poor  was  held  to  be  limited  to  giving  aid 
to  paupers.  The  argument  that  the  prevention  of  pauperism  is 
a  public  purpose  w^as  dangerous  and  unsound,  and  the  securing 
of  loans  to  persons  temporarily  embarrassed  is  not  a  public  pur- 
pose. 

But  the  Supreme  Court  of  North  Dakota  in  1890  held  a  similar 
statute  was  valid,2  declining  to  follow  the  Kansas  ease  and  say- 
ing 1,  c,  p.  97 : 

"In  our  view  it  is  not  certain  or  even  probable,  in  the  light 
of  subsequent  experience  in  the  west,'  that  the  court  of  last  resort 
in  the  State  of  Kansas  would  enunciate  the  doctrine  of  that  case 
at  the  present  day.  The  decision  was  made  fifteen  years  ago. 
While  the  fundamental  principles  which  underlie  legislation  and 
taxation  have  not  changed  in  the  interval,  it  is  also  true  that  the 
development  of  the  western  States  has  been  attended  with  diffi- 
culties and  adverse  conditions  which  have  made  it  necessary  to 
broaden  the  application  of  fundamental  principles  to  meet  the 
new  necessities  of  those  States." 

After  reviewing  the  legislation  of  Minnesota  on  the  same  sub- 
ject, the  court  continued,  at  page  99 : 


1  State  V.  Osawkee  Township,  14  Kansas  418. 

2  North  Dakota  v.  Nelson  County,  1  N.  Dak.  88. 


§    383  THE   PUBLIC   PURPOSE   ESSENTIAL   IN    TAXATION.  403 

''This  review  of  legislation  in  aid  of  destitute  farmers  will 
serve  to  illustrate  the  well-known  fact  that  legislation  under  the 
pressure  of  public  sentiment,  born  of  stern  necessity,  will  adapt 
itself  to  new  exigencies,  even  if  in  doing  so  a  sanction  is  given 
to  a  broader  application  of  elementary  principles  of  government 
than  has  before  been  recognized  and  applied  by  the  court  in 
adjudicated  cases.  It  is  the  boast  of  the  common  law  that  it  is 
elastic,  and  can  be  adjusted  to  the  development  of  new  social  and 
business  conditions.  Can  a  statute  enacted  for  such  broadly  hu- 
mane and  charitable  purposes  be  annulled  by  another  branch  of 
the  government  as  an  abuse  of  legislative  discretion?  We  think 
otherwise. ' ' 

The  court  lays  stress  upon  the  language  of  the  State  constitu- 
tion permitting  the  legislature  to  lend  aid  "for  the  necessary 
support  of  the  poor,"  and  upon  the  fact  that  this  peculiar  lan- 
guage was  introduced  into  the  constitutions  of  North  and  South 
Dakota,  although  nothing  of  the  kind  appeared  in  analogous  sec- 
tions of  other  State  constitutions.  It  found  a  reason  for  this  in 
the  peculiar  and  alarming  conditions  of  the  people  of  the  Dakota 
Territory  in  1889  when  their  constitutions  were  formed.  The 
seed  grain  statute  was  therefore  declared  to  be  a  valid  enact- 
ment. 

A  decision  by  the  Supreme  Court  of  Missouri  in  1898  en- 
forces the  limitation  of  the  power  of  taxation  with  reference  to 
the  higher  education.  A  tax  levied  under  an  act  entitled  "For 
the  Endowment  of  the  State  University,"  the  proceeds  whereof 
were  to  be  applied  in  defraying  the  expenses  at  the  University  of 
students  without  means,  who  should  be  awarded  scholarships  of 
merit  through  competitive  examinations,  was  held  to  be  invalid 
as  levying  a  tax  for  private  persons  and  not  for  a  public  pur- 
pose.^ The  constitution  of  Missouri  directs  the  maintenance  of 
the  State  University,  and  it  was  urged  that,  as  scholarships  are 
a  recognized  and  historic  incident  of  University  endowment,  this 
method  of  maintenance  of  the  University  and  making  it  servicea- 
ble in  the  education  of  the  talent  of  the  State  is  within  the  dis- 
cretion of  the  legislature  which  cannot  be  reviewed  by  the  judi- 
ciary.    There  is  no  difference  in  principle;  it  was  contended,  be- 


1  State  ex  rel.  v.  Switzler,  143  Mo.  287. 


404  THE   PUBLIC   PURPOSE   ESSENTIAL   IN   TAXATION.  §    384 

tween  building  dormitories  for  students  to  live  in  and  paying 
professors  to  teach  them,  as  is  done  under  existing  law,  and  en- 
dowing scholarships  so  that  deserving  students  without  means 
can  have  the  benefit  of  the  instruction.  But  the  court  said  that 
the  act  "endowed  the  students,  not  the  University,"  and  was 
therefore  a  paternalistic  gift  of  public  money  to  private  individ- 
uals; and  that  it  could  find  no  warrant  for  this  endowment  of 
scholarships,  either  in  the  organic  law  of  the  State,  or  in  the 
character  of  our  government. 

On  the  other  hand,  it  has  been  held  that  the  maintenance  not 
only  of  public^  and  high  schools,^  but  also  of  Normal  schools,^ 
is  a  public  purpose  for  which  the  power  of  taxation  -may  be  in- 
voked, but  the  contrary  is  true  of  mere  private  schools.^  In  the 
language  of  Judge  Cooley^  in  the  Supreme  Court  of  Michigan: 

"Necessity  alone  is  not  the  test  by  which  the  limits  of  the 
State's  authority  in  this  direction  are  to  be  defined,  but  a  wise 
statesmanship  must  look  beyond  the  expenditures  which  are  ab- 
solutely needful  to  continue  the  existence  of  organized  govern- 
ment, and  embrace  those  which  may  tend  to  make  that  govern- 
ment subserve  the  general  well-being  of  society  and  advance  the 
present  and  prospective  happiness  and  prosperity  of  the  people. 

§  384.  Erection  of  Public  Sorghum  Mills  Not  Public  Pur- 
pose.— In  a  later  decision  the  United  States  Circuit  Court  of 
Appeals  of  the  Eighth  Circuit,  in  an  exhaustive  opinion  by  Judge 
Sanborn,''  decided  that  bonds  authorized  by  the  legislature  of 
Kansas,  upon  vote  of  the  electors  of  the  township,  issued  to  pay 
a  subscription  to  the  capital  stock  of  a  corporation  organized  to 
erect  public  sorghum  mills,  were  invalid,  and  that  the  tax  re- 
quired was  not  for  a  public  purpose.  In  this  case  the  act  declared 
that  all  mills  that  received  the  aid  were  public  mills  and  should 
manufacture  sugar  or  syrup  for  customers.    The  court  said  that 

1  Commonwealth  v.  Hartman,  17  Pa.  118. 

2  Richards  v.  Raymond,  92  111.  612. 
sBriggs  V.  Johnson  County,  4  Dillon  148. 

4  Curtis  V.  Whipple,  24  Wis.  350. 

5  People  V.  Salem,  20  Mich.  452. 

6  Dodge  V.  Mission  Township,  46  C.  C.  A.  661,  8th  Cir.,  107  Fed.  827, 
54  L.  R.  A.  242,  decided  April,  1901. 


§    384  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  405 

the  limits  of  the  power  to  tax  are  by  no  means  the  limits  of 
the  police  power  of  the  State,  and  added  at  page  668: 

"Many  private  occupations,  as  the  sale  of  intoxicants,  the 
driving  of  carriages  for  hire  and  the  construction  of  private 
buildings  along  the  streets  of  a  city,  bear  such  a  relation  to  the 
public  welfare  that  they  may  be  regulated  under  the  police 
power  of  a  State,  when  there  is  an  entire  absence  of  power  in 
its  legislature  to  tax  the  property  of  its  citizens  to  promote  or 
maintain  these  enterprises." 

The  court  in  this  case  distinguished  the  decision  of  the  Su- 
preme Court  in  Burlington  Township  v.  Beasley,  supra,  Sec.  342, 
which  held  that  the  erection  of  custom  grist  mills  was  a  public 
purpose,  saying  that  the  bonds  in  that  case  did  not  show  on  their 
face  for  which  of  the  purposes  named  in  the  act  they  were  issued. 
On  the  question  whether  a  custom  grist  mill  operated  by  steam 
is  a  work  of  internal  improvement,  the  court  declared  that  on 
this  point  the  Burlington  Township  case  illustrates,  not  the  gen- 
eral rule,  but  an  exception  thereto,  and  said : 

"This  decision  is  the  outgrowth  of  a  more  primitive  state  of 
society  when  there  were  no  railroads  and  few  good  highways,  and 
when  custom  grist  mills  in  the  immediate  neighborhoods  of  pro- 
ductive fields  to  grind  grain  for  bread  for  the  people  and  for 
food  for  the  cattle  were  a  public  necessity.  In  this  state  of  af- 
fairs a  line  of  decisions  was  developed  to  the  effect  that  aid  in  the 
construction  and  maintenance  of  custom  gi'ist  mills  driven  by 
water,  and  the  development  of  the  necessary  water  power  to 
propel  them,  was  a  public  object,  for  which  taxes  might  be  law- 
fullv  levied  upon  the  property  of  all  the  citizens.  Guernsey  v. 
Burlington  Township,  4  Dill.  375,  Fed.  Cas.  No.  5,855 ;  Harding 
V.  Funk,  8  Kan.  315.  The  Burlington  Tp.  Case,  perhaps,  ad- 
vanced another  step,  for  the  decision  was  that  the  promotion  of 
a  grist  mill  propelled  by  steam,  as  well  as  one  propelled  by  water, 
was  a  public  purpose.  This  proposition,  however,  together  with 
the  entire  line  of  decisions  upon  which  it  rests,  forms  an  excep- 
tion to  the  general  rule  upon  this  subject,  is  inapplicable  to  the 
public  needs  and  purposes  of  this  day,  and  ought  not  to  be  en- 
larged."^ 


1  The  payment  of  a  sugar  bounty  for  the  encouragement  of  the  in- 
dustry was  held  void,  Michigan  Sugar  Co.  v.  Auditor  General,  124 
Mich.  674. 


406  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  §    385 

After  citing  the  later  decisions  of  the  Supreme  Court  noted 
above,  the  court  said : 

"These  decisions  show  the  narrow  limits  and  sharp  lines  which 
confine  this  exception  to  the  general  rule." 

§  385.  Elimination  of  Grade  Crossings  and  a  Union  Rail- 
way Station  a  Lawful  Public  Purpose. — The  elimination  of 
grade  crossings  and  the  construction  of  a  union  railway  station 
in  the  city  of  Washington,  was  held  a  lawful  public  purpose  in 
the  Acts  of  Congress  of  February  12,  1901,  and  February  28, 
1903,  providing  for  the  payment  to  the  railway  companies  of  a 
sum  of  money  to  be  raised  by  levy  on  the  taxable  property  in  the 
district  in  consideration  for  the  removal  of  railroads  from  their 
present  locations  and  the  large  expenditure  of  money  by  the 
companies  and  the  surrender  by  them  of  substantial  rights.2 


1  The  opinion  in  this  case  contains  a  valuable  review  of  the  decisions 
upon  this  subject.  See  Deal  v.  Mississippi  County,  107  Mo.  464,  and  14 
L.  R.  A.  622,  holding  invalid  a  bounty  for  planting  forest  trees.  As 
there  was  no  right  in  the  public  to  the  trees  or  their  use  and  control, 
the  act  was  held  void. 

In  Lowell  v.  Boston,  111  Mass.  454,  an  issue  of  bonds  for  $20,000,000 
for  the  purpose  of  loaning  money  to  the  owners  of  land  burned  over  in 
the  great  fire  of  1872  conditioned  upon  their  rebuilding  within  a  year, 
the  loans  to  be  secured  by  mortgage,  was  enjoined  as  not  for  a  public 
purpose. 

Allen  V.  Jay,  60  Me.  124,  held  that  the  loan  of  credit  for  removing  a 
steam  saw  mill,  box  factory  and  grist  mill  to  the  village  was  not  for  a 
public  purpose.  No  distinction  apparently  was  made  between  a  saw 
mill  and  a  grist  mill,  both  being  industries  pursued  for  private  gain 
and  emolument. 

In  Weismer  v.  Douglas,  64  N.  Y.  91,  bonds  issued  for  the  purpose  of 
paying  a  subscription  to  stock  of  a  lumber  factory,  which,  it  was 
claimed,  would  increase  the  value  of  adjacent  property  and  promote 
business  by  cleaning  out  the  channel  of  the  river  and  constructing  piers, 
were  held  void.  See  also  Martha  v.  Ottawa,  114  111.  59;  Coates  v.  Camp- 
bell, 37  Minn.  498;  Geneseo  v.  Geneseo  Company,  55  Kan.  358. 

2  United  States  v.  Gettysburg  Electric  R.  Co.,  160  U.  S.  668. 
Millard  v.  Roberts,  202  U.  S.   429,  50  L.  Ed.   1090    (1906),  affirming 

App.  D.  C.  221. 

The  court  also  decided  that  the  bill  was  not  a  revenue  bill  which, 
under  the  Constitution,  Art.  1,  Sec.  7,  must  originate  in  the  House  of 
Representatives. 


§    386  THE   PUBLIC   PURPOSE    ESSENTIAL   IN   TAXATION.  407 

The  Supreme  Court  in  this  case  affirmed  the  Court  of  Appeals 
of  the  District  of  Columbia,  which  had  approved  the  dismissal  of 
a  bill  to  enjoin  the  Treasurer  of  the  United  States  from  devoting 
public  funds  to  these  purposes.  The  court  said  that  they  assumed 
that  the  appellant  could  raise  these  questions,  but  that. the  pur- 
poses were  obviously  of  public  benefit.  They  were  for  the  con- 
struction of  a  work  of  great  magnitude,  greater,  perhaps,  than 
the  needs  of  the  district  required ;  but  Congress  deemed  that  they 
were  demanded  by  the  interest  of  the  national  capitol  and  the 
public  at  large. 

§  386.    Inspiration  of  Patriotism  Lawful  Public  Purpose. — 

Whatever  legitimately  tends  to  inspire  patriotic  sentiments,  and 
to  enhance  the  respect  of  citizens  for  the  institutions  of  their 
country,  and  incites  them  to  contribute  to  its  defense  in  time  of 
war,  has  been  held  to  be  a  lawful  public  purpose,  such  as  will 
justify  the  exercise  either  of  the  power  of  taxation  or  of  the 
power  of  eminent  domain,  i  On  this  ground  and  for  the  further 
reason  that  the  public  taste  is  educated  thereby,  the  expenditure 
of  public  moneys  for  the  promotion  of  State  exhibits  at  World's 
Fairs  has  been  sustained.2 

A  tax  for  raising  money  to  pay  bounties  to  soldiers  in  order 
to  encourage  enlistments  in  time  of  war  is  valid,  but  a  tax  for 
the  payment  of  substitutes  for  individuals  to  enable  them  to 
escape  conscriptions  and  for  the  payment  of  bounties  to  soldiers 
after  the  war,  as  a  testimonial  of  the  public  appreciation  of  their 
services,  were  held  to  be  without  consideration  and  void.^ 

1  United  States  v.  Gettysburg  Electric  R.  Co.,  160  U.  S.  668,  40  L.  Ed. 
576  (1896). 

2  Daggett  V.  Colgan,  92  Cal.  53,  and  14  L.  R.  A.  475,  where  the  note 
contains  an  Interesting  collation  of  the  State  decisions  on  this  subject. 
Justice  Sanborn,  in  the  United  States  Circuit  Court  of  Appeals, 
July,  1902,  in  chambers  at  St.  Paul,  denied  an  injunction  against  con- 
demnation proceedings  for  the  World's  Fair  in  St.  Louis  for  the  cele- 
bration of  the  Louisiana  Purchase  Centennial  in  1904. 

3  Freeland  v.  Hastings,  10  Allen  570. 

■*See  Booth  v.  Woodbury,  32  Conn.  118;  Mead  v.  Acton,  139  Mass. 
341.  The  conduct  of  an  agricultural  exhibition  and  the  payment  of 
premiums  therein  constitute  a  lawful  purpose  for  taxation.  State  ex 
rel.  V.  Robinson,  35  Neb.  401,  and  17  L.  R.  A.  383. 


408  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  §   387 

The  public  purpose  however,  to  warrant  the  exercise  of  the 
power  of  taxation  must  be  one  which  appeals  to  all  the  people 
and  is  not  in  any  sense  partisan.  This  distinction  was  forcibly 
illustrated  in  a  recent  Massachusetts  case.  An  act  of  the  legisla- 
ture authorized  the  city  of  Brockton  to  erect  a  Memorial  Hall  to 
the  memory  of  the  soldiers  and  sailors  of  the  Civil  War.  This 
was  held  to  be  a  valid  statute,  because  the  education  of  the  public 
taste  and  inspiring  sentiments  of  patriotism  in  the  public  mind 
serve  to  promote  the  general  welfare,  i  The  city  council  however, 
under  authority  of  the  statute,  passed  an  ordinance  appropriat- 
ing money  for  a  Memorial  Hall  and  Library  building  to  be  used 
*in  part  by  a  Gr.  A.  E.  Post.  The  court  held  with  regard  to  this 
appropriation  that  it  was  not  for  a  public  purpose,  and  that  there 
is  no  definition  of  a  public  purpose  and  use  which  includes  the 
support  and  maintenance  of  a  Grand  Army  Post,  saying  (11  L. 
R.  A.  1.  c,  125)  : 

''If  once  the  principle  is  adopted  that  a  city  or  town  may 
be  authorized  to  raise  money  by  taxation  for  conferring  benefits 
on  individuals  merely  because  in  the  past  they  have  rendered  im- 
portant and  valuable  services  for  the  benefit  of  the  general  pub- 
lic, occasions  will  not  be  wanting  which  will  appeal  strongly  to 
the  popular  sense  of  gratitude  or  to  the  popular  emotion  and  the 
interests  and  just  rights  of  minorities  will  be  in  danger  of  being 
disregarded. ' ' 

§  387.  Taxation  for  Public  Ownership. — The  asociation  of 
the  legal  view  as  to  what  constitutes  a  public  purpose  in  taxation 
with  the  prevailing  public  opinion  as  to  the  scope  of  govern- 
mental activity  was  forcibly  illustrated  in  1890  in  Massachu- 
setts, in  the  opinions  of  the  Justices  of  the  Supreme  Court  ren- 
dered to  the  House  of  Representatives  of  the  legislature,  under 
provision  of  the  State  constitution  authorizing  the  justices  to  be 
thus  interrogated  as  to  the  lawful  powers  of  the  legislature.  The 
question  was  submitted,  whether  the  legislature  under  the  State 
constitution  could  authorize  cities  and  towns  to  manufacture  and 
distribute  gas  and  electricity  for  use  in  their  public  streets  and 


4  Kingman  v.  Brockton,  153  Mass.  255,  and  11  L.  R.  A.  123. 


§    387  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  409 

buildings   and   for   sale  to   the   inhabitants.      The   justices   an- 
swered :^ 

"If  the  legislature  is  of  opinion  that  the  common  convenience 
and  welfare  of  the  inhabitants  will  be  promoted  by  conferring 
upon  the  municipalities  the  power  of  manufacturing  and  dis- 
tributing gas  or  electricity  for  the  purpose  of  furnishing  light  to 
their  inhabitants,  we  think  the  legislature  can  confer  the  power. ' ' 

But  subsequently  the  House  of  Representatives  submitted 
to  the  justices  the  further  question  whether  power  could  be  con- 
ferred by  the  legislature  upon  cities  and  towns  to  buy  and  sell 
coal  and  wood  for  fuel  for  their  inhabitants.  Five  of  the  seven 
judges  concurred  in  the  answer,  that  such  a  power  could  not  be 
lawfully  conferred  by  the  legislature,  as  it  was  not  a  public  serv- 
ice within  the  meaning  of  the  rule  that  taxes  can  be  laid  only  for 
public  purposes.  The  opinion  quoted  the  preamble  of  the  State 
constitution  declaring  that  "the  end  of  the  institution,  mainten- 
ance, and  administration  of  government  is  to  secure  the  exist- 
ence of  the  body  politic  ;  to  protect  it,  and  furnish  the  individuals 
who  compose  it  with  the  power  of  enjoying  in  safety  and  tran- 
quillity their  natural  rights,  and  the  blessings  of  life."  "That 
all  men  are  born  free  and  equal,  and  have  certain  natural,  essen- 
tial, and  inalienable  rights,  among  which  may  be  reckoned  the 
rights  of  enjoying  and  defending  their  lives  and  liberties;  that 
of  acquiring,  possessing,  and  protecting  property;  in  fine,  that 
of  seeking  and  obtaining  their  safety  and  happiness."  And  the 
opinion  continued  (15  L.  R.  A.,  p.  810)  : 

"Constitutional  questions  concerning  the  power  of  taxation, 
necessarily  are  largely  historical  questions.  The  Constitution 
must  be  interpreted  as  any  other  instrument,  with  reference  to 
the  circumstances  under  which  it  was  framed  and  adopted.  It  is 
not  necessary  to  show  that  the  men  who  framed  it  or  adopted  it 
had  in  mind  everything  which  by  construction  may  be  found  in 
it,  but  some  regard  must  be  had  to  the  modes  of  thought  and 
action  on  political  subjects  then  prevailing;  to  the  discussions 
upon  the  nature  of  the  government  to  be  established ;  to  the 
meaning  of  the  language  used,  as  then  understood;  and  to  the 
grounds  on  which  the  adoption  or  rejection  of  the  Constitution 


1  Opinion  of  Justices,  150  Mass.  592,  8  L.  R.  A.  487. 


410  THE   PUBLIC   PURPOSE   ESSENTIAL   IN    TAXATION.  §    388 

was  advocated  before  the  people.  We  know  of  nothing  in  the 
history  of  the  adoption  of  the  Constitution  that  gives  any  coun- 
tenance to  the  theory  that  the  buying  and  selling  of  such  articles 
as  coal  and  wood  for  the  use  of  the  inhabitants  was  regarded  at 
that  time  as  one  of  the  ordinary  functions  of  the  government 
which  was  to  be  established. ' ' 

The  court  said  that  there  was  nowhere  in  the  Constitution  any 
provision  which  tended  to  show  that  the  government  was  estab- 
lished for  the  purpose  of  carrying  on  the  buying  and  selling  of 
such  merchandise,  as,  at  the  time  when  the  Constitution  was 
adopted,  was  usually  bought  and  sold  by  individuals  and  with 
which  individuals  were  able  to  supply  the  community,  no  matter 
how  essential  the  business  might  be  to  the  welfare  of  the  in- 
habitants. After  reviewing  the  precedents  in  the  State  from  col- 
onial times,  the  opinion  concluded: 

"If  there  be  any  advantage  to  the  inhabitants  in  buying 
and  selling  coal  and  wood  for  fuel  at  the  risk  of  the  community 
on  a  large  scale,  and  on  what  has  been  called  the  'co-operative 
plan,'  we  are  of  the  opinion  that  the  Constitution  does  not  eon- 
template  this  as  one  of  the  ends  for  which  the  government  was 
established,  or  as  a  public  service  for  which  cities  and  towns  may 
be  authorized  to  tax  their  inhabitants.  We  therefore  answer  the 
question  in  the  negative."^ 

§  388.  Public  Purpose  in  Eminent  Domain. — The  public 
purpose  necessary  in  the  condemnation  of  private  property  is 


1  Opinion  of  the  Justices,  155  Mass.  598,  and  15  L.  R.  A.  809.  In  this 
case  Judge  Holmes,  now  of  the  Supreme  Court  of  the  United  States, 
dissented,  saying:  "I  am  of  opinion  that  when  money  is  taken  to  enable 
a  public  body  to  offer  to  the  public  without  discrimination  an  article  of 
general  necessity,  the  purpose  is  no  less  public  when  that  article  is 
wood  or  coal  than  when  it  is  water  or  gas  or  electricity  or  education, 
to  say  nothing  of  cases  like  the  support  of  paupers  or  the  taking  of 
land  for  railroads  or  public  markets.  I  see  no  ground  for  denying  the 
power  of  the  legislature  to  enact  the  laws  mentioned  in  the  questions 
proposed.  The  need  of  expediency  of  such  legislation  is  not  for  us  to 
consider." 

Judge  Barker  answered:  "My  answer  to  the  question  propounded  is 
therefore,  'Yes,  if  the  necessities  of  society  as  now  organized  can  be 
met  only  by  the  adoption  of  such  measures,'  and  'No,  if  there  is  no  such 
necessity,  but  merely  an  expediency  for  the  trial  of  an  experiment.'  " 


§    388  THE   PUBLIC   PURPOSE   ESSENTIAL   IN   TAXATION.  411 

analogous  to  that  required  in  taxation.  In  both  cases  the  legis- 
lative determination  will  be  respected  by  the  court  but  will  not 
be  conclusive.  A  distinction  however,  has  been  made  by  high 
authority^  between  the  public  purpose  in  condemnation  and  that 
in  taxation,  to  the  effect  that  a  more  liberal  construction  of  pub- 
lic purposes  is  allowed  in  the  former  than  in  the  latter.- 

This  distinction  was  thus  summarized  by  the  Supreme  Court 
of  Massachusetts  in  the  opinion  of  the  Justices  upon  the  power 
of  the  legislature  to  manufacture  gas  and  electricity,  supra,  Sec. 
387: 

"The  extent  of  the  right  of  taxation  is  not  necessarily  to  be 
measured  by  that  of  the  right  of  eminent  domain,  but  the  rights 
are  analogous.  Private  property  can  be  taken  without  the  con- 
sent of  the  owner  only  for  public  uses,  and  the  owner  must  be 
paid  full  compensation  therefor ;  otherwise  he  would  contribute 
more  than  his  proportionate  share  toward  the  public  expenses. 
By  taxation  the  inhabitants  are  compelled  to  part  with  their 
property,  but  the  taxation  must  be  proportional  and  reasonable, 
and  for  public  purposes.  Taxes  may  be  imposed  upon  all  the  in- 
habitants of  the  State  for  general  public  purposes,  or  upon  the 
inhabitants  of  defined  localities  for  local  purposes,  and  when  dis- 
tinct private  benefits  are  received  from  public  works  special  as- 
sessments may  be  laid  upon  individuals. ' ' 

It  was  held  by  the  Supreme  Court^  that  the  United  States 
had  authority  under  the  Fifth  Amendment  to  condemn  land  for 
the  purpose  of  preserving  and  suitably  marking  the  battlefield 
of  Gettysburg,  and  that  any  act  which  may  indirectly  tend  to 
enhance  the  respect  of  the  local  citizens  for  the  institutions  of 
their  country  and  quicken  and  strengthen  their  motives  to  de- 
fend them  constitutes  a  legitimate  public  purpose. 

But  an  act  of  the  State  of  Nebraska,  which,  as  construed  by 
the  Supreme  Court  of  the  State,  authorized  the  Board  of  Trans- 
portation to  require  a  railroad  company,  which  had  permitted 
the  erection  of  two  elevators  by  private  persons  on  its  right  of 
way  at  a  station,  to  grant  the  same  privilege  upon  similar  condi- 


1  People  V.  Township  Board  of  Salem,  20  Mich.  452. 

2  Cooley  on  Taxation,  p.  76. 

8  United  States  v.  Gettysburg  Electric  Ry.  Co.,  supra-.  Sec.  386. 


412  THE   PUBLIC   PURPOSE   ESSENTIAL   IN    TAXATION.  §    390 

tions  to  other  private  persons  in  that  neighborhood,  authorized 
a  taking  of  private  property  for  private  use  in  violation  of  the 
Fourteenth  Amendment.^ 

§  389.  Any  Proceeding  Dependent  Upon  Taxes  for  Pri- 
vate Purposes  Invalid. — The  cases  cited  in  which  the  Supreme 
Court  passed  upon  the  want  of  public  purpose  in  taxation  Were 
suits  upon  municipal  bonds  which  were  held  to  involve  the  exer- 
cise of  the  power  of  taxation,  and  because  the  purpose  of  the  tax 
was  illegal,  the  bonds  dependent  thereon  were  also  invalid.  This 
principle  has  been  extended  to  the  case  of  a  contract  made  by  a 
village  with  a  manufacturing  company,  whereby  the  former 
agreed  to  pay  the  latter  for  the  expense  of  removal  to  the  village, 
and  further  agreed  that,  in  consideration  of  the  removal,  it  would 
establish  and  maintain  a  fire  hydrant  and  furnish  water  for  fire 
protection.  The  village  paid  the  cash  bonus  but  failed  to  main- 
tain the  hydrant.  The  mill  was  destroyed  by  fire  and  suit  was 
brought  for  its  value  by  the  owner  against  the  village,  on  the 
ground  that  the  fire  could  have  been  extinguished  if  the  hydrant 
had  been  miaintained.  It  was  held  by  the  United  States  Circuit 
Court  of  Appeals,  Sixth  Circuit,2  that  if  the  municipal  corpora- 
tion under  the  doctrine  of  Loan  Association  v.  Topeka  was  with- 
out power  to  issue  bonds  for  other  than  a  strictly  public  purpose, 
it  was  equally  without  power  to  accomplish  the  same  result  in- 
directly by  the  execution  of  a  contract,  for  the  judgment  upon 
this  could  be  rendered  against  the  corporation  which  could  be 
satisfied  only  by  taxation.    The  court  said  : 

"The  only  difference  which  could  be  suggested  relates  merely 
to  form  and  to  the  differences  between  a  direct  and  indirect 
method  of  incurring  an  obligation  which  does  or  may  require  a 
resort  to  the  power  of  taxation." 

§  390.  Railroad  Aid  Bonds. — It  has  been  uniformly  af- 
firmed by  the  Supreme  Court  that,  in  the  absence  of  restrictions 


1  Missouri  Pacific  Railway  Co.  v.  Nebraslia,  164  U.  S.  403,  41  L.  Ed. 
489   (1896),  reversing  29  Neb.  550. 

2  Soutlierland-Innes  Co.  v.  Village  of  Evart,  30  C.  C.  A.,  305  (6th  Cir.) 
86  F3d.  596  (1898). 


§    391  THE   PUBLIC   PURPOSE   ESSENTIAL   IN    TAXATION.  413 

in  the  State  constitution,  subscriptions  for  aid  in  the  building  of 
railways,  canals  and  bridges  constitute  a  public  purpose  for 
which  bonds,  to  be  paid  by  taxation,  can  be  issued.  Thus  that 
tribunal  said,i  referring  to  a  railroad : 

''Though  the  corporation  was  private,  its  work  was  public, 
as  much  so  as  if  it  werfe  to  be  constructed  by  the  State.  Pri- 
vate property  can  be  taken  for  a  public  purpose  only,  and  not 
for  private  gain  or  benefit.  Upon  no  other  ground  than  that 
the  purpose  is  public  can  the  exercise  of  the  power  of  emi- 
nent domain  in  behalf  of  such  corporations  be  supported. 
.  .  .  Unless  prohibited  from  doing  so,  the  municipal  corpo- 
ration has  the  same  power  to  aid  in  their  construction  as  to 
procure  water  for  its  water  works,  coal  for  its  gas  works,  or 
gravel  for  its  streets  from  beyond  its  territorial  limits.  "2 

§  391.  Purpose  of  Taxation  Must  Not  Only  be  Public,  but 
Pertain  to  District  Taxed. — The  requirement  of  a  public  pur- 
pose obviously  applies  to  all  forms  of  taxation,  whether  levied  by 
the  State  or  any  of  the  subdivisions  of  the  State  to  which  the 
power  of  taxation  may  be  delegated,  and  whether  the  tax  is  gen- 
eral in  the  State  or  municipality,  or  special,  that  is,  levied  by  way 
of  special  assessment  in  limited  taxing  districts  created  for  pub- 
lic improvements.  Whatever  the  form  of  the  tax,  it  is  inherent  in 
its  nature  that  it  must  be  levied  for  a  public,  as  distinct  from  a 
private,  purpose ;  and  it  also  must  be  public  in  the  sense  that  the 
purpose  must  pertain  to  the  district  taxed,  that  is,  the  tax  levied 


1  Township  of  Pine  Grove  v.  Talcott,  19  Wall.  666,  1.  c.  676;  Sharpless 
V.  Mayor,  21  Pa.  St.  147.  In  Whiting  v.  Fond-du-lac  Railroad,  25  Wis. 
167,  it  was  held  that  a  tax  for  making  a  donation  to  a  railroad,  in  which 
the  county  did  not  become  a  stockholder,  was  void. 

^See  also  Meyer  v.  Muscatine,  1  Wall.  384,  17  L.  Ed.  564  (1864), 
and  see  dissenting  opinion  of  Mr.  Justice  Miller,  who  consistently 
denied  this  doctrine. 

Judge  Dillon  remarks  in  1  Dillon  on  Municipal  Corporations,  4th 
Ed.,  note.  Sec.  509:  "If  it  be  allowable  to  judge  of  a  legal  principle  by 
its  fruits,  the  dissenting  and  minority  of  judges  on  this  question  will 
find  much  to  confirm  the  conviction  that  their  views  were  sound.  But 
it  is  useless  to  fight  that  battle  over  again;  it  has  been  fought  and 
lost.  All  that  is  left  is  the  contemplation  and  contrast  of  what  might 
have  been  and  what  is." 


414  THE   PUBLIC    PURPOSE   ESSENTIAL   IN    TAXATION.  §    391 

upon  the  entire  State  must  be  for  a  general  public  purpose  as 
distinguished  from  a  distinctively  local  or  municipal  purpose. 
On  the  other  hand,  a  tax  cannot,  or  rather  should  not,  be  levied 
upon  a  particular  district  of  a  State  alone  for  a  general  public 
purpose  not  peculiar  to  the  district  taxed.^  This  line  of  dis- 
tinction, however,  is  not  sharply  defined,  but  there  is  obviously 
a  very  large  field  of  legislative  discretion  in  determining  what 
are  the  public  purposes  which  warrant  general  taxation  on  the 
one  hand,  and  on  the  other,  those  which  justify  the  legislature 
in  imposing  taxation  upon  the  municipal  subdivisions  of  the 
State.  As  the  Supreme  Court  has  repeatedly  declared,  this  is 
one  of  the  questions  which  cannot  be  adjusted  with  precise  ac- 
curacy, and  it  is  primarily  addressed  to  the  legislative  discre- 
tion. 

This  principle  is  applicable  in  the  creation  of  local  taxing  di's 
tricts  for  public  improvements,  which  will  be  considered  in  the 
succeeding  chapter. 

Questions  relating  to  the  public  purpose  of  taxation  can  sel- 
dom be  raised  in  regard  to  general  levies  for  State  purposes,  njs 
such  taxes  are  assessed  and  collected  under  general  laws,  where- 
in the  specific  objects  for  which  taxes  are  to  be  expended  are 
not  set  forth,  as  in  the  case  of  taxes  levied  for  specific  local 
purposes;  and  the  courts  cannot  look  behind  the  declared  pur- 
poses of  a  general  tax  to  ascertain  the  intent  of  the  legislature  as 
to  the  appropriation  of  the  proceeds  of  the  tax. 


1  Sanborn  v.  Rice  Co.,  9  Minn.  273. 


CHAPTER    XIII. 

DUE  PROCESS  OF  LAW  IN  SPECIAL  ASSESSMENTS  FOR  LOCAL 
IMPROVEMENTS. 

392.  Special  assessments  made  under  taxing  power. 

393.  Peculiar  diflficulties  in  special  assessments. 

394.  Fifth  and  Fourteenth   Amendments   in   relation  to   special   as- 

sessments. 

395.  General  power  of  State  in  local  assessments. 

396.  Power  of  State  to  impose  taxation  upon  municipalities. 

397.  Limitation  of  power  to  recover  personal  judgment. 

398.  Assessments  for  drainage. 

399.  Assessments   for    irrigation. 

400.  Assessment  for  defraying  preliminary  expenses  sustained. 

401.  Public  improvements  in  municipalities. 

402.  Difficulty  of  determining  special  benefits. 

403.  Apportionment  of  cost  of  municipal  public  improvements. 

404.  Special  assessments  under  State  constitutions. 

405.  Legislative  discretion  in  apportionment. 

406.  Consideration  of  special  benefits  excluded  by  legislative  appor- 

tionment. 

407.  Legislative  power  not  unlimited. 

408.  Supreme  Court  on  assessments  for  municipal  improvements. 

409.  Supreme  Court  on  assessments  for  sewers. 

410.  Supreme  Court  on  assessments  for  streets  and  sidewalks. 

411.  Improvement  ordinance  not  invalidated  by  restricting  work  to 

resident  citizens. 

412.  Right  of  property  owner  to  equitable  relief  after  performance 

of  contract. 

413.  Benefit  districts  for  street  improvements. 

414.  Special  assessments  for  public  parks. 

415.  If  assessment  is  set  aside,  reassessment  may  be  made. 

416.  Reassessment  dependent  on  the  local  law. 

417.  Notice  and  opportunity  for  hearing. 

418.  Notice  and  hearing  under  legislative  apportionment. 

419.  Where   court   relief   denied,   some   hearing   essential. 

420.  Hearing  not  essential  for  party  only  contingently  liable. 

421.  Hearing   not   required   before   including   property    in   benefited 

district. 

422.  Notice  to  parties  liable  to  be  assessed  in  street  openings  not 

required. 

(415) 


416  SPECIAL   ASSESSMENTS.  §    392 

423.  Express  finding  of  benefits  not  required. 

424.  Enforcement  of  special   assessments. 

425.  Conclusiveness  of  State  determination. 

426.  Supreme  Court  in  Norwood  v.  Baker. 

427.  Norwood  v.  Baker  in  State  courts  and  U.  S.  Circuit  Courts. 

428.  Norwood  v.  Baker  limited  to  its  "special  facts." 

429.  Municipal  bonds  payable  from  assessments  held  valid  notwith- 

standing invalidity  of  assessment. 

430.  Supreme  Court  in  King  v.  Portland. 

431.  Assessment  lawfully  levied  for  benefits  already  accrued. 

432.  Eminent   domain  and   special   assessments. 

433.  Legislative  power  and  special  facts. 

434.  Accidental   or  exceptional   circumstances. 

435.  Requirements  of  "due  process  of  law." 

436.  Property  incapable  of  benefit,  not  lawfully  assessable. 

437.  Municipal  bonds  for  local  improvements. 

438.  Jurisdiction  of  equity. 

§  392.    Special  Assessments  Made  Under  Taxing  Power. — 

Special  assessments  for  local  improvements  are  made  under  the 
sovereign  povrer  of  taxation/  yet  they  are  clearly  distinguished 
from  regular  tax  levies  made  under  State  authority  for  general 


1  It  was  contended  at  one  time  that  such  assessments  could  only  be 
made  in  the  exercise  of  the  right  of.  eminent  domain.  For  an  interest- 
ing discussion  of  this  point,  see  People  ex  rel.  Grifiin  v.  Brooklyn,  4 
N.  Y.  419,  which  is  a  leading  case  on  the  doctrine  that  such  assess- 
ments are  an  exercise  of  the  power  of  taxation,  and  which  distinguishes 
the  power  of  taxation  from  the  power  of  eminent  domain.  See  also 
Newby  v.  Platte  Co.,  25  Mo.  1.  c.  269.  In  certain  cases  such  assessments 
have  been  sustained  as  an  exercise  of  the  police  power  of  the  State,  as  in 
the  case  of  drains  and  sewers,  Paulsen  v.  Portland,  149  U.  S.  30,  infra; 
Morrison  v.  Morey,  146  Mo.  543,  where  the  creation  of  levee  districts 
was  sustained  on  that  ground.  Special  assessments  for  sidewalks  have 
also  been  sustained  as  an  exercise  of  the  police  power.  Palmer  v.  Way, 
6  Colo.  106;  State  v.  Newark,  8  Vroom  (N.  J.),  415;  "Washington  v. 
Nashville,  1  Swan  (Tenn.)  177.  See  also  McBean  v.  Chandler,  9  Heisk. 
349.  A  distinction  was  thus  made  in  some  cases  between  sewers  and 
sidewalks  and  other  improvements.  But  it  was  said  by  Redfield,  J.,  in 
Allen  V.  Drew,  44  Vt.  174,  that  it  is  not  easy  to  see  any  distinction  be- 
tween an  assessment  for  the  building  of  a  sewer  or  sidewalk  and  an 
aqueduct,  and  that  each  in  degree  is  a  general  benefit  to  the  public  and 
a  special  benefit  to  the  local  property  both  in  the  uses  and  the  enhanced 
value  of  the  property. 


§   392  SPECIAL  ASSESSMENTS.  417 

public  purposes.  Taxes  proper,  or  general  taxes,  it  was  said  by 
the  Supreme  Court,i  proceed  upon  the  theory  that  the  cost  of 
government  is  a  necessity;  that  it  cannot  continue  without 
means  to  pay  its  expenses ;  that  for  those  means  it  has  the  right 
to  compel  all  citizens  and  property  within  its  limits  to  contribute ; 
and  that  for  such  contribution  it  renders  no  special  benefit,  but 
only  secures  to  the  citizen  that  general  benefit,  which  results 
from  the  protection  of  his  person  and  property  and  the  promo- 
tion of  those  various  schemes  which  have  for  their  object  the 
welfare  of  all.  On  the  other  hand,  special  assessments  or  special 
taxes  are  justified  by  the  principle  that  when  a  local  improve- 
ment enhanches  the  value  of  neighboring  property,  that  property 
should  pay  the  expense.  Special  assessments  are  made  upon  the 
assumption  that  a  portion  of  the  community  will  be  specially 
and  peculiarly  benefited  by  the  enhancement  of  the  value  of 
property  peculiarly  situated  as  regards  the  contemplated  ex- 
penditure of  public  funds ;  and,  in  addition  to  the  general  levy, 
special  contributions  in  consideration  of  the  special  benefit  are 
required  from  the  party  specially  benefited. 
It  was  said  in  an  early  case  in  Missouri  :2 

"These  special  assessments  are  found  in  the  English  law 
and  have  prevailed,  it  is  believed,  in  most,  if  not  all,  of  our 
American  States,  and  their  validity,  when  assessed,  as  in  this 
instance  (for  a  sewer  tax),  cannot  be  questioned  under  our 
constitution.  Their  intrinsic  justice  strikes  every  one.  If 
an  improvement  is  to  be  made  the  benefit  of  which  is  local,  it 
is  but  just  that  the  property  benefited  should  bear  the  bur- 
den. While  the  few  ought  not  to  be  taxed  for  the  benefit 
of  the  whole,  the  whole  ought  not  to  be  taxed  for  the  benefit 
of  the  few.  A  single  township  in  a  county  ought  not  to  bear 
the  whole  county  expenses,  neither  ought  the  whole  county  be 
taxed  for  the  benefit  of  a  single  toAvnship.  And  the  same  prin- 
ciple requires  that  taxation  for  a  local  object,  beneficial  only 
to  a  portion  of  a  town  or  city,  should  be  upon  that  part  only. 
General  taxation  for  a  mere  local  purpose  is  unjust.  It  bur- 
dens those  who  are  not  benefited  and  benefits  those  Avho  are 
exempt  from  the   burden." 


1  Illinois  Central   R.  R.   Co.  v.   Docatur,  147  U.   S.   190,  1.  c.   197,  37 
L.   Ed.    132    (1893). 

2  Lockwood  V.  St.  Louis,  24  Mo.  22. 


418  SPECIAL    ASSESSMENTS.  §    393 

Special  assessments  are  clearly  distinguislied  from  general 
taxes.  Thus  contracts  of  exemption  from  taxation  have  been 
held  not  to  exempt  the  property  from  assessments  for  public 
improvements/  and  it  is  a  question  in  the  construction  of  pri- 
vate contracts,  like  leases,  whether  the  term  taxation  therein  in- 
cludes special  assessments.^ 

§  393.    Peculiar  DiflBculties  in  Special  Assessments. — The 

exercise  of  the  taxing  power  of  the  State  to  pay  the  cost  of  a 
public  improvement  by  assessment  upon  the  property  specially 
benefited  involves  peculiar  difficulties  which  do  not  attend  the 
levy  of  general  taxes.  For  the  latter,  there  is  no  need  to  create 
a  special  taxing  district  and  define  its  boundaries,  nor  is  there 
any  question  as  to  the  determination  of  what  property  is  spe- 
cially benefited  by  the  expenditure  of  the  taxes  when  collected. 
All  this  is  regulated  by  general  law.  Neither  is  there  any  ques- 
tion, as  a  rule,  as  to  the  notice  and  opportunity  to  the  taxpayer 
for  hearing  in  relation  to  the  assessment.  Property  is  assessed 
for  general  taxation  under  general  law,  and  the  taxpayer  is 
bound  to  take  notice  of  the  time  and  place  fixed  for  hearing  by 
the  board  of  review  or  equalization  to  which  he  may  appeal  for 
correction  of  his  assessment.  Furthermore  general  taxes  are 
assessed  and  collected  at  regularly  recurring  intervals  fixed  by 
law;  and  the  proceeds  of  general  taxes,  when  collected  by  the 
State  of  political  subdivision  acting  under  State  authority,  for 
prescribed  public  purposes,  are  disposed  of  by  the  legislative 
authority  within  the  limits  of  its  power.     Comparatively  seldom 


T^  Supra,  Sec.  96. 

2  It  was  said  by  the  Supreme  Court  of  Missouri,  sustaining  a  special 
assessment  for  the  establishment  of  a  public  park,  Kansas  City  v. 
Bacon,  157  Mo.  450,  1.  c.  463:  "There  are  two  kinds  of  taxation,  both 
emanating  from  the  taxing  power  of  the  government,  but  each  resting 
on  a  different  principle,  the  one  aimed  to  raise  a  revenue  for  general 
governmental  purposes,  the  other  to  raise  a  fund  to  be  devoted  to  a 
particular  purpose.  The  one  for  its  justification  leaves  out  of  view  the 
question  of  individual  benefit,  merging  the  individual  in  the  community, 
the  other  for  its  justification  advances  the  theory  that  the  individual  is 
benefited  by  the  improvement  contemplated,  and  because  of  his  benefit 
he  must  contribute  to  the  cost." 


§    394  SPECIAL   ASSESSMENTS.  419 

therefore  have  questions  arisen  concerning  due  process  of  law 
in  relation  to  general  taxation,  and  these  have  usually  been  in 
relation  to  special  methods  of  assessment  applied  to  certain 
classes  of  property,  as  in  the  valuation  of  railroads  or  other  in- 
terstate properties. 

But  special  assessments  for  local  improvements  from  their 
very  nature  involve  peculiar  and  difficult  questions,  which  have 
occasioned  much  litigation  and  much  diverse  judicial  opinion. 
Thus  what  are  the  limits,  if  any,  of  the  power  of  the  State  to 
determine  that  any  public  improvement  shall  be  paid  for  by 
local  taxation,  rather  than  out  of  the  public  revenues,  to  deter- 
mine the  boundaries  of  the  taxing  district  whereon  the  cost  of 
that  improvement  shall  be  levied,  and  to  determine  the  method  of 
apportionment  upon  the  property  in  the  district,  whether  by 
ascertainment  of  values  through  quasi  judicial  bearing,  or  by 
some  definite  rule,  as  by  area  or  by  frontage?  When  must  no- 
tice and  opportunity  for  hearing  be  afforded  to  the  taxpayer  to 
constitute  due  process  of  law? 

§  394.  Fifth  and  Fourteenth  Amendments  in  Relation  to 
Special  Assessments. — The  subject  of  due  process  of  law  in 
connection  with  special  assessments  for  local  improvements  has 
been  considered  by  the  Supreme  Court  of  the  United  States  in 
numerous  cases,  in  relation  to  both  the  Fifth  and  the  Four- 
teenth Amendments  to  the  Constitution.  The  provision  of  the 
Fifth  Amendment  that  no  person  shall  be  deprived  of  life,  lib- 
erty, or  property  without  due  process  of  law,  as  heretofore 
shown,  is  only  a  restraint  upon  the  power  of  Congress  and  not 
upon  the  power  of  the  States;  while  the  Fourteenth  Amend- 
ment imposes  the  same  prohibition  directly  upon  the  States.  In 
cases  from  the  States,  the  Supreme  Court  has  considered  the 
question  with  relation  to  the  Fourteenth  Amendment,  while  in 
cases  from  the  city  of  Washington  or  elsewhere  in  the  District 
of  Columbia  where  Congress  exercises  exclusive  jurisdiction, 
both  political  and  municipal,  it  has  applied  the  Fifth.  In  a  re- 
cent case^  the  court  said : 


1  French  v.  Barber  Asphalt  Paving  Co.,   181   U.  S.   324,  1.  c.  328,  45 
L.  Ed.  879  (1901),  affirming  158  Mo.  534,  54  L.  R.  A.  492. 


420  SPECIAL   ASSESSMENTS.  §    395 

"While  the  language  of  those  amendments  is  the  same,  yet 
as  they  were  engrafted  upon  the  Constitution  at  different 
times  and  in  widely  different  circumstances  of  our  national 
life,  it  may  be  that  questions  may  arise  in  which  different 
constructions  and  applications  of  their  provisions  may  be 
proper. ' ' 

The  court,  however,  further  stated  in  this  case  that  it  pro- 
ceeded therein  upon  the  assumption  that  the  legal  import  of  the 
phrase  due  process  of  law  is  the  same  in  both  amendments  and 
added,  1.  c,  page  329 : 

"Certainly  it  cannot  be  supposed  that,  by  the  Fourteenth 
Amendment,  it  was  intended  to  impose  on  the  States,  when  ex- 
ercising their  powers  of  taxation,  any  more  rigid  or  stricter 
curb  than  that  imposed  on  the  Federal  government  in  a  sim- 
ilar exercise  of  power  by  the  Fifth  Amendment." 

In  none  of  the  cases  has  the  Supreme  Court  made  any  distinc- 
tion between  the  two  amendments  as  to  the  two  requirements  of 
"due  process  of  law"  in  special  assessments. 

§  395.  General  Power  of  State  in  Local  Assessments. — Al- 
though special  assessments  are  usually  made  for  public  im- 
provements in  municipalities  and  form  one  of  the  most  perplex- 
ing problems  in  municipal  government,  their  use  is  not  limited 
to  municipalities.  Public  improvements,  which  may  be  of  spe- 
cial benefit  to  property  in  a  certain  locality,  may  be  required  in 
any  part  of  the  State,  and  in  the  application  be  thus  warranted 
of  the  principle  on  which  special  assessments  rest,  that  the  prop- 
erty benefited  by  the  improvement  should  pay  the  cost.  The 
State  therefore  has  the  general  power  not  only  to  determine  that 
public  improvements  shall  be  made,  whenever  it  deems  them 
essential  to  the  health  and  prosperity  of  the  community,  but  also 
to  determine  to  what  extent  the  cost  of  such  public  improvements 
shall  be  paid  by  the  public  at  large  and  what  part  shall  be  paid 
by  the  property  specially  benefited  thereby.  It  follows  that  the 
State  has  the  power,  subject  to  the  restraint  of  its  owrb  consti- 
tution, to  establish  local  taxing  districts  in  any  part  of  its  terri- 
tory and  to  impose  upon  such  districts  the  cost  of  a  public  im- 
provement.   Upon  the  same  principle  it  may  impose  the  expense 


§    395  SPECIAL   ASSESSMENTS.  '  421 

of  a  public  improvement  upon  a  municipality,  which  is  specially 
benefited  thereby,  although  benefit  from  the  improvement  may 
also  inure  to  the  people  of  the  State  at  large.  Thus  it  was  said 
by  the  Supreme  Court/  in  reference  to  the  act  of  the  State  of  Ala- 
bama, which  imposed  upon  the  city  of  Mobile  the  expense  of  a 
harbor  improvement  in  Mobile  Bay: 

''When  any  public  work  is  authorized  it  rests  with  the 
legislature,  unless  restrained  by  constitutional  provisions,  to 
determine  in  Avhat  manner  the  means  to  defray  its  cost  shall 
be  raised.  It  may  apportion  the  burden  ratably  among  all  the 
counties  or  other  particular  subdivisions  of  the  State,  or  lay 
the  greater  share  or  the  whole  upon  that  county  or  portion 
of  the  State  specially  and  immediately  benefited  by  the  ex- 
penditure. 

*'It  may  be  that  the  act  in  imposing  upon  the  county  of 
Mobile  the  entire  burden  of  improving  the  river,  bay,  and  har- 
bor of  Mobile  is  harsh  and  oppressive,  and  that  it  would  have 
been  more  just  to  the  people  of  the  county  if  the  legislature 
had  apportioned  the  expenses  of  the  improvement,  which  was 
to  benefit  the  Avhole  State,  among  all  its  counties.  But  this 
court  is  not  the  harbor  in  which  the  people  of  a  city  or  county 
can  find  a  refuge  from  ill-advised,  unequal  and  oppressive 
State  legislation.  The  judicial  power  of  the  Federal  govern- 
ment can  only  be  invoked  when  some  right  under  the  Con- 
stitution, laws,  or  treaties  of  the  United  States  is  invaded.  In 
all  other  cases,  the  only  remedy  for  the  evils  complained  of 
rests  with  the  people,  and  must  be  obtained  through  a  change 
of  their  representatives.  They  must  select  agents  who  will  cor- 
rect the  injurious  legislation,  so  far  as  that  is  practicable,  and 
be  more  mindful  than  their  predecessors  of  the  public  inter- 
ests. "2 


1  Mobile  V.  Kimball,  102  U.  S.  691,  1.  c.  703,  26  L.  Ed.  238  (1881). 

2  It  was  said  by  the  Supreme  Court  of  Missouri  in  State  v.  Leffing- 
well,  54  Mo.  458,  1.  c.  473,  holding  void  an  act  making  a  park  district 
out  of  part  of  a  city,  that  nothing  is  better  settled  than  that  special 
taxation  for  objects  that  are  general  and  public  is  illegal.  .  ,  .  "The 
legislature  has  no  power  to  take  the  money  of  one  man  and  transfer  it 
to  another,  nor  can  it  select  a  particular  township  and  say  that  it 
shall  pay  all  the  taxes  of  the  county,  nor  designate  a  certain  county 
and  declare  it  shall  assume  all  the  burdens  of  the  State."  The  act  was 
held  void  on  the  ground  that  the  property  in  the  district  was  not  any 
more  benefited  by  the  park  than  the  property  in  the  city  at  large,  and 


422  SPECIAL   ASSESSMENTS,  §    396 

§  396.  Power  of  State  to  Impose  Taxation  Upon  Munici- 
palities.— The  power  of  the  State  to  create  taxing  districts  is 
closely  allied  Avith  its  sovereign  power  over  its  political  subdi- 
visions and  municipalities,  the  limits  of  which  it  is  obviously- 
very  difficult  to  determine.  The  question  of  the  State's  power 
over  its  municipalities  was  presented  in  another  form  to  the 
Supreme  Court,  in  a  case  involving  the  validity  of  a  statute  annex- 
ing to  a  city  what  was  claimed  to  be  rural  territory,  and  impos- 
ing upon  the  latter 's  inhabitants  arbitrarily  the  burden  of  tax- 
ation for  city  pui^poses,  in  return  for  which  it  was  claimed  they 
derived  no  benefit.^  The  court  held  that  what  portion  of  the 
State  should  be  within  the  limits  of  a  city  and  be  governed  by 
its  authorities  and  its  laws  has  always  been  considered  to  be  a 
proper  subject  of  legislation.  How  thickly  or  how  sparsely  the 
territory  within  a  city  should  be  settled  is  one  of  the  matters 
within  the  legislative   discretion.     Whether  territory  shall   be 


the  case  was  decided  irrespective  of  the  provision  of  the  State  constitu- 
tion as  to  organizing  public  corporations.  In  Dyar  v.  Parmington  Vil- 
lage, 70  Me.  515,  an  act  authorizing  a  town  to  levy  a  general  tax  upon 
part  of  the  real  estate  included  within  its  limits  was  held  void,  the 
court  saying  that  one  public  district  could  not  be  created  within  an- 
other nor  be  allowed  to  overlap  another,  so  that  for  the  same  public 
purpose  or  any  other  public  purpose  one  portion  of  the  real  estate 
is  taxed  twice  while  the  remainder  is  taxed  only  once. 

1  Kelly  V.  Pittsburgh,  104  U.  S.  78,  supra.  Sec.  318.  See  also  Forsythe 
V.  Hammond,  68  Fed.  774.  It  has  been  held  in  Missouri  that  the  legis- 
lature cannot  constitutionally  authorize  a  municipal  corporation  to  tax 
for  its  own  purposes  lands  lying  beyond  its  limits,  Wells  v.  "Weston,  22 
Mo.  384.  It  would  seem,  under  the  same  principle,  that  the  legislature 
could  not  impose  upon  a  municipality  a  tax  for  purely  State  purposes 
having  no  relation  to  the  municipality.  Judge  Dillon  says  in  Municipal 
Corporations,  4th  Ed.,  Sec.  73,  as  to  the  distinction  between  the  public 
and  proprietary  rights  of  a  municipality,  after  reviewing  the  author- 
ities, that  there  are  difficulties  attending  the  usually  unlimited  power 
over  municipal  corporations,  and  difficulties  also  in  assigning  limits 
to  that  power.  He  concludes:  "On  the  whole  the  question  whether  a 
city  may  be  compelled  to  create  a  debt  or  liability  against  its  will  must 
be  answered,  we  think,  with  reference  not  only  to  the  constitutional 
provisions  of  the  State,  but  to  the  nature  of  the  purposes  for  which  the 
debt  or  liability  is  to  be  incurred. 


§    396  SPECIAL    ASSESSMENTS.  423 

governed  for  local  purposes  by  a  county,  a  city,  or  a  township 
organization  is  one  of  the  most  usual  and  ordinary  subjects  of 
State  legislation,  and  the  court  refused  to  interfere  with  the  ex- 
ercise of  the  legislative  discretion  on  this  subject. 

This  principle  of  the  State's  control  over  its  municipalities 
was  reaffirmed  by  the  court  in  sustaining  the  legislation  of  Con- 
necticut, whereby  a  bridge  district  was  made  of  five  municipal- 
ities, upon  which  was  apportioned  the  cost  of  the  purchase  and 
maintenance  of  a  free  bridge  in  the  proportion  of  benefits  re- 
ceived by  each,  as  determined  by  judicial  proceedings.^  The 
regulation  of  municipal  corporations  is  a  matter  peculiarly 
within  the  domain  of  State  control,  and  a  municipal  corpora- 
tion, so  far  as  its  purely  municipal  relations  are  concerned,  is 
simply  an  agency  of  the  State  for  conducting  the  affairs  of  the 
government,  and  as  such  subject  to  the  control  of  the  legislature. 
These  are  matters  of  a  purely  local  nature,  in  respect  to  which 
the  Federal  Constitution  does  not  limit  the  power  of  the  State. 
It  was  also  said  that  the  legislature,  speaking  generally,  may 
create  a  new  taxing  district,  if  the  State's  constitution  does  not 
prevent,  and  determine  what  territory  shall  belong  to  such  dis- 
trict and  what  property  shall  be  considered  as  benefited  by  the 
proposed  improvement. 

The  power  of  the  State  to  impose  upon  municipalities  or  local 
taxing  districts  the  cost  of  public  improvements  is  primarily  a 
legislative  power.  As  this  power  in  the  distribution  of  public 
burdens  is  of  the  very  essence  of  sovereignty,  it  is  very  difficult 
to  declare  its  limitations,  and  especially  is  this  true  when  the 
Federal  Supreme  Court  is  called  upon  to  review  the  judgment 
of  the  State  courts  upon  the  validity  of  State  legislation.  Never- 
theless it  is  clear  that  the  fundamental  canons  of  taxation,  that 
the  purpose  must  be  public  and  that  the  public  purpose  must 
directly  appertain  to  tlie  district  taxed,  apply  to  special  assess- 


1  Williams  v.  Eggleston,  170  U.  S.  304,  42  L.  Ed.  1047  (1898),  affirm- 
ing State  V.  Williams,  68  Conn.  131.  As  to  the  power  of  the  State  over 
municipalities,  see  also  New  Orleans  v.  New  Orleans  Water  Co.,  142 
U.  S.  79,  35  L.  Ed.  943  (1891),  dismissing  writ  of  error  to  42  La.  Ann. 
910. 


424  SPECIAL   ASSESSMENTS.  §    397 

ments  as  fully  as  to  general  taxation.  The  legislative  power  is 
not  absolute  and  unlimited  in  the  one  ease  any  more  than  in  the 
other.  The  legislative  discretion,  therefore,  in  apportioning  the 
cost  of  public  improvements,  while  broad  and  comprehensive,  is 
not  unlimited,  but  is  subject  to  judicial  review  and  scrutiny  in 
determining  whether  property  charged  with  such  cost  is  taxed 
in  accord  with  the  fundamental  canons  of  taxation  and  thus  un- 
der ''due  process  of  law." 

The  Fourteenth  Amendment  does  not  deprive  a  State  of  the 
power  to  compel  a  tovmship,  as  one  of  its  political  subdivisions, 
to  levy  and  collect  taxes  for  the  purpose  of  paying  the  amount 
assessed  against  such  township  for  the  public  benefits  accruing 
from  the  construction  of  a  drain  and  to  make  special  assessments 
accordingly,  when  notice  is  given  and  opportunity  to  be  heard 
afforded  the  land  owner  before  the  assessment  becomes  a  lien 
against  his  property.^ 

§  397.  Limitation  of  Power  to  Recover  Personal  Judg-- 
ment. — The  State  must  exercise  this  power  wdthin  the  limits 
of  its  jurisdiction  and  cannot,  therefore,  in  assessing  the  cost  of 
a  public  improvement  upon  the  property  in  a  certain  district, 
authorize  the  recovery  of  a  personal  judgment  against  a  non- 
resident, wdthout  service  of  process.  Thus  the  statute  of  Iowa 
authorized  a  personal  judgment  in  a  suit  upon  a  special  tax  bill 
for  a  local  assessment.  It  was  held  by  the  Supreme  Court^  that 
such  a  judgment  rendered  without  personal  service  against  a 
non-resident,  so  far  as  the  personal  liability  is  concerned,  would 
amount  to  the  taking  of  property  without  due  process  of  law; 
and  that  such  a  judgment  is  good  only  so  far  as  it  affects  the 
property  which  is  taken  or  brought  under  the  jurisdiction  of 
the  court  or  other  tribunal  in  an  ordinary  action  to  enforce  the 
personal  liability.  No  jurisdiction  is  thereby  acquired  over  the 
person  of  a  non-resident,  further  than  respects  the  property  so 


iSoliah  V.  Heskin,  222  U.  S.  522,  56  L.  Ed.  294  (1912),  affirming  17 
N.   D.   393. 

2  Dewey  v.  Des  Moines,  173  U.  S.  195,  43  L.  Ed.  665  (1899),  reversing 
101,  Iowa  416. 


§    398  SPECIAL   ASSESSMENTS.  425 

taken,  and  this  is  as  true  of  an  assessment  against  a  non-resident 
as  of  a  more  formal  judgment.  In  this  case  the  landowner  never 
voluntarily  appeared  in  the  litigation. 

But  it  seems  that  the  authorization  of  a  personal  judgment  on 
a  special  assessment,  to  he  recovered  upon  personal  service,  is 
within  the  power  of  a  State  and  presents  no  Federal  question,  i 
As  to  this  point  the  court  said,  1.  c,  page  106 : 

**It  is  urged  with  force, — and  some  highly  respectable  au- 
thorities are  cited  to  support  the  proposition, — that  while  for 
such  improvements  as  this  a  part,  or  even  the  whole,  of  a  man's 
property  connected  with  the  improvement  may  be  taken,  no 
personal  liability  can  be  imposed  on  him  in  regard  to  it.  If 
this  were  a  proposition  coming  before  us  sitting  in  a  State 
court,  or,  perhaps,  in  a  Circuit  Court  of  the  United  States,^  we 
might  be  called  upon  to  decide  it ;  but  we  are  unable  to  see 
that  any  of  the  provisions  of  the  Federal  Constitution  author- 
izes us  to  reverse  the  judgment  of  a  State  court  on  that  ques- 
tion. It  is  not  one  which  is  involved  in  the  phrase  'due  proc- 
ess of  law,'  and  none  other  is  called  to  our  attention  in  the 
present  case." 

§  398.    Assessments    for    Drainage. — The    extent    of    the 

State's  power  to  create  special  taxing  districts  for  public  im- 
provements is  illustrated  in  the  drainage  or  swamp  land  cases, 
wherein  the  laws  of  Louisiana,  New  Jersey  and  California,  provid- 


1  Davidson  v.  New  Orleans,  96  U.  S.  97,  supra. 

2  This  was  a  writ  of  error  to  the  Supreme  Court  of  Louisiana.  Though 
it  may  be  within  the  power  of  the  State  to  create  and  enforce  a  personal 
liability  in  such  cases,  it  is  difficult  to  see  how  it  can  be  defended.  Spe- 
cial assessments  rest  upon  the  theory  that  the  property  is  benefited 
sufficiently  to  pay  the  tax,  and  it  seems  inconsistent  therewith  that  there 
should  be  any  liability  beyond  the  value  of  the  benefited  property.  See 

.Taylor  v.  Palmer,  31  Cal.  240,  where  the  decision  seems  to  have  turned 
upon  the  construction  of  the  State  constitution.  In  Neenan  v.  Smith, 
50  Mo.  525,  the  court  based  its  decision  denying  the  right  to  a  personal 
judgment  on  its  construction  of  the  statute,  but  said  that  it  greatly 
doubted  whether  a  legislature  has  the  power  to  authorize  a  general 
charge  upon  the  owner  of  local  property  that  may  be  assessed  for  its 
sperial  benefit,  unless  the  owners  of  all  taxable  property  within  the 
municipality  are  equally  charged. 


426  SPECIAL  ASSESSMENTS.  §    398 

ing  for  the  drainage  of  swamp  lands  by  the  levy  of  local  assess- 
ments, were  all  sustained  by  the  Supreme  Court.i 

In  the  first  of  these  eases  it  was  claimed  that  the  property  of 
the  plaintiff  was  not  benefited  by  the  improvement.  The  court 
said  that  this  was  a  matter  of  detail  on  which  it  could  not  -inter- 
fere, if  it  was  clearly  true;  but  that  it  was  hard  to  fix  a  limit 
within  the  two  parishes  which  constituted  the  taxing  district, 
where  the  property  would  not  be  benefited  by  the  removal  of 
the  swamps  and  marshes  situated  in  those  parishes. 

In  the  second  case  in  California,  a  system  was  formed  for  re- 
claiming swamps  and  overflowed  lands  and  fitting  them  for  cul- 
tivation through  reclamation  districts,  established  by  the  super- 
visors of  a  county  upon  petition  of  one-half  or  more  of  the  hold- 
ers of  the  lands.  Commissioners  were  appointed  to  view  the 
land  and  assess  upon  each  acre  to  be  reclaimed  a  tax,  which 
should  be  its  proportion  of  the  whole  expense.  The  Supreme 
Court  sustained  the  judgment  of  the  Circuit  Court  enforcing  the 
collection  of  these  taxes,  saying,  page  704 : 

"It  is  not  open  to  doubt  that  it  is  in  the  power  of  the  State 
to  require  local  improvements  to  be  made  which  are  essential 
to  the  health  and  prosperity  of  any  community  within  its  bor- 
ders. To  this  end  it  may  provide  for  the  construction  of  ca- 
nals for  draining  marshy  and  malarious  districts,  and  of  levees 
to  prevent  inundations,  as  well  as  for  the  opening  of  streets  in 
cities  and  of  roads  in  the  country. 

"It  may  possibly  be  that  in  some  portions  of  the  country 
there  are  overflowed  lands  of  so  large  an  extent  that  the  ex- 
pense of  their  reclamation  should  properly  be  borne  by  the 
State.  But  this  is  a  matter  purely  of  legislative  discretion. 
"Whenever  a  local  improvement  is  authorized,  it  is  for  the  leg- 
islature to  prescribe  the  way  in  which  the  means  to  meet  its 
cost  shall  be  raised,  whether  by  general  taxation,  or  by  laying 
the  burden  upon  the  district  speciallv  benefited  by  the  ex- 
penditure. County  of  Mobile  v.  Kunball,  102  U.  S.'  691,  704, 
The  rule  of  equality  and  uniformity,  prescribed  in  cases  of  tax- 
ation for  State  and  county  purposes,  does  not  require  that  all 


1  Davidson  v.  New  Orleans,  96  U.  S.  97;  supra,  Hagar  v.  Reclamation 
District,  111  U.  S.  701;  Wurts  y.  Hoagland,  114  U.  S.  606,  29  L.  Ed.  229 
(1885)  supra. 


§    399  SPECIAL   ASSESSMENTS.  427 

property,  or  all  persons  in  a  county  or  district,  shall  be  taxed 
for  local  purposes.  Such  an  application  of  the  rule  would 
often  produce  the  very  inequality  it  was  designed  to  prevent. 
As  we  said  in  Louisiana  v.  Pilsbury,  105  U.  S.  278,  295,  there 
would  often  be  manifest  injustice  in  subjecting  the  whole 
property  of  a  city,  and  the  same  may  be  said  of  the  whole 
property  of  any  district,  to  taxation  for  an  improvement  of  a 
local  character.  The  rule,  that  he  who  reaps  the  benefit  should 
bear  the  burden,  must  in  such  cases  be  applied." 

In  the  third  case  the  New  Jersey  act  provided  for  a  system  of 
drainage  of  all  wet  or  marshy  lands,  upon  proceedings  insti- 
tuted by  at  least  five  owners  of  separate  lots  of  land  in  the  tract 
and  not  objected  to  by  the  owners  of  a  greater  part  thereof. 
The  commissioners  appointed  by  the  Supreme  Court  of  the 
State,  after  notice  and  hearing,  made  an  assessment  of  the  cost 
of  the  drainage  upon  all  of  the  owners  in  the  district.  The  Su- 
preme Court  after  remarking  that  such  drainage  assessment  had 
been  sustained  by  the  courts  of  New  Jersey,  held  that,  as  the 
statute  was  applicable  to  all  lands  of  the  same  kind,  and  no  per- 
son could  be  assessed  under  it  for  the  expense  of  the  drainage 
without  notice  and  opportunity  to  be  heard,  there  was  no  depri- 
vation of  property  without  due  process  of  law. 

§  399.  Assessments  for  Irrigation. — ^A  very  important  ex- 
tension of  this  principle  was  made  by  the  courts  in  sustaining 
the  Irrigation  Acts  of  California^  of  1887,  and  as  amended  by 
the  act  of  1891.  This  statute  provided  for  the  formation  of  irri- 
gation districts  upon  the  petition  of  fifty  or  a  majority  of  the 
owners  of  land  susceptible  of  one  mode  of  irrigation  from  a  com- 
mon source  and  by  the  same  system  of  work.  On  hearing,  as  to 
whether  petitioners  were  of  this  class,  whether  they  had  com- 


1  Fallbrook  Irrigation  District  v.  Bradley,  164  U.  S.  112,  supra. 

In  C,  B.  &  Q.  R.  Co.  v.  Board  of  Supervisors,  C.  C.  A.,  8th  Circuit, 
182  Fed.  291,  301,  affirming  170  Fed.  665  (1910),  it  was  held  that  an 
assessment  of  benefits  made  by  a  drainage  board  against  the  property 
of  a  railroad  company  on  account  of  the  construction  of  a  public  drain- 
age ditch,  affirmed  by  the  court,  will  not  be  disturbed  by  an  appellate 
court,  except  in  case  of  gross  error  showing  prejudice,  corruption,  or 
plain  mistake. 


428  SPECIAL   ASSESSMENTS.  §    399 

plied  with  the  statutory  requirements  and  whether  their  lands 
would  be  benefited  by  the  proposed  improvements,  the  board  of 
supervisors  might  modify  the  boundaries  of  the  district  so  as  to 
include  other  lands  susceptible  of  the  same  improvement,  that 
is,  by  irrigation  from  the  same  source,  and  to  exclude  lands 
which  would  not  be  thus  improved.  On  approval  by  a  two-thirds 
vote  at  an  election  in  the  district,  held  under  the  direction  of 
the  Board  of  Supervisors,  the  irrigation  district  .should  be  organ- 
ized as  a  public  corporation  with  fixed  boundaries  and  the  cost 
of  the  irrigation  works  assessed  ad  valorem  upon  all  lands  within 
the  corporate  limits.  In  a  suit  brought  in  the  United  States  Cir- 
cuit Court  by  an  alien  property  owner  in  the  district,  the  en- 
forcement of  this  statute  by  giving  a  deed  of  plaintiff's  land 
sold  for  the  non-payment  of  the  assessment  was  enjoined  on  the 
ground  that  the  statute  was  void  as  taking  property  without  due 
process  of  law.^  It  was  strongly  urged  on  appeal  that  this  act 
was  distinguished  from  the  drainage  cases,  in  that  there  only  the 
land  drained  was  assessed  for  the  improvement,  but  that  in  this 
case  a  man 's  land  could  be  included,  even  if  he  did  not  want  the 
water,  did  not  need  it  and  would  not  be  benefited  by  it.  It  was 
also  claimed  that  it  was  a  delegation  of  the  power  of  taxation  to 
irresponsible  petitioners  and  to  a  majority  of  the  electors  of  the 
district.^ 


1  For  opinion  in  the  Circuit  Court,  see  68  Fed.  948.  This  act  had  been 
sustained  by  the  Supreme  Court  of  California,  Modesto  Irrigation  Dis- 
trict v.  Tragea,  88  Cal.  334.  See  also  In  re  Madera  Irrigation  District, 
14  L.  R.  A.  755,  92  Cal.  296.  For  an  opinion  of  the  Sup.  Court  of 
Nebraska  holding  the  Irrigation  Act  of  that  State  valid  under  State 
and  Federal  Constitutions,  see  Board  of  Directors  v.  Collins,  46 
Neb.  411. 

2  See  argument  of  Mr.  Joseph  H.  Choate  in  this  case,  pp.  131  to  151. 
He  said  at  page  142:  "Patronage,  plunder  and  bonds  without  limit  are 
the  obvious  tendency  and  result,  if  not  the  direct  object,  of  the  act. 
Towns  and  villages,  however  solidly  built,  may  be  included,  and  prac- 
tically are  included  in  the  districts  proposed.  .  .  .  We  submit, 
with  all  confidence,  that  this  novel  mode  of  constituting  districts  for 
assessment  is  an  unlawful  delegation  of  legislative  power,  and  is  in 
its  very  nature  one  of  those  exercises  of  the  powers  of  government,  un- 
restrained by  the  established  principles  of  private  rights  and  of  dis- 


§    399  SPECIAL    ASSESSMENTS.  429 

The  Supreme  Court,  reversing  the  Circuit  Court,  held^  that 
the  act  was  valid  and  enforceable.  The  irrigation  of  really  arid 
lands  is  a  public  use,  and  the  question  whether  any  particular 
land  will  be  benefited  is  one  of  fact,  for  the  determination  of 
which  the  act  made  sufficient  provision. 

The  court  said,  1.  c.  166,  that  the  question  to  what  extent  the 
land  required  irrigation  was  primarily  legislative,  though  "sub- 
ject to  the  scrutiny  and  judgment  of  the  courts  to  the  extent 
that  it  must  appear  that  the  use  intended  is  a  public  use,  as  that 
expression  has  been  defined  relatively  to  this  kind  of  legisla- 
tion." The  act  sufficiently  limited  the  land  which  could  be  in- 
cluded in  a  district.  It  must  be  susceptible  of  irrigation  from 
a  common  source,  and  by  the  same  system  of  works,  and  it  must 
be  of  such  a  character  that  it  would  be  benefited  by  irrigation  by 
the  system  to  be  adopted.     This  meant  that  the  benefit  must  be 


tributive  justice,  which  this  court  has  declared  to  be  the  thing  which 
constitutes  the  taking  of  a  naan's  property  without  due  process  of  law." 
In  this  case,  Mr.  Maxwell  appeared  with  Mr.  Choate,  while  against  them 
were  ex-President  Harrison,  ex- Judge  John  F.  Dillon,  Mr.  William  B. 
Guthrie,  and  Mr.  Clarence  A.  Seward. 

1  Chief  Justice  Fuller  and  Justice  Field  dissented.  The  magnitude 
of  the  interest  involved  in  this  litigation  may  be  realized  from  the  fol- 
lowing portion  of  the  statement,  p.  152: 

"What  is  termed  the  'arid'  belt  is  said  in  the  Census  Bulletin,  No. 
23,  for  the  census  of  1890,  to  extend  from  Colorado  to  the  Pacific  Ocean, 
and  to  include  over  600,000,000  acres  of  land.  Of  this  enormous  total, 
artificial  irrigation  has  thus  far  been  used  only  upon  about  three  and 
a  half  million  acres,  of  which  slightly  over  a  million  acres  lie  in  the 
State  of  California,  It  was  stated  by  counsel  that  something  over 
thirty  irrigation  districts  had  been  organized  in  California  under  the 
act  in  question,  and  that  a  total  bonded  indebtedness  of  more  than 
$16,000,000  had  been  authorzed  by  the  various  districts  under  the  pro- 
visions of  the  act,  and  that  more  than  $8,000,000  of  the  bonds  had  been 
sold  and  the  money  used  for  the  acquisition  of  property  and  water 
rights  and  for  the  construction  of  works  necessary  for  the  irrigation  of 
the  lands  contained  in  the  various  districts." 

The  Act  of  Congress  of  June  17,  1902,  appropriates  the  receipts  from 
the  sale  and  disposal  of  public  lands  in  certain  western  States  and  Ter- 
ritories, to  be  set  aside  as  a  "reclamation  fund"  for  the  construction  of 
irrigation  works  to  reclaim  arid  lands,  in  the  area  between  Kansas, 
Nebraska  and  the  Dakotas  and  the  Pacific  Ocean. 


430  SPECIAL    ASSESSMENTS.  §    399 

substantial,  and  the  question  whether  any  particular  land  would 
be  substantially  benefited  was  necessarily  one  of  fact,  upon  which 
the  court  could  not  review  the  decision  of  the  State  court. 

In  answer  to  the  claim  that  apportionment  of  the  expense 
upon  an  ad  valorem  basis  was  wholly  arbitrary  and  without  any 
regard  to  the  actual  benefits  received,  some  lands  being,  with- 
out irrigation,  wholly  arid,  and  some  needing  very  little  irriga- 
tion, if  any  at  all,  the  court  said,  pp.  .176,  177 : 

**  Although  there  is  a  marked  distinction  between  an  as- 
sessment for  a  local  improvement  and  the  levy  of  a  general 
tax,  yet  the  former  is  still  the  exercise  of  the  same  power  as 
the  latter,  both  having  their  source  in  the  sovereign  power  of 
taxation.  "Whatever  objections  may  be  urged  to  this  kind  of 
an  assessment,  as  being  in  violation  of  the  State  constitution, 
yet  as  the  State  court  has  held  them  to  be  without  force,  we 
folloAv  its  judgment  in  that  case,  and  our  attention  must  be 
directed  to  the  question  whether  any  violation  of  the  Federal 
Constitution  is  shown  in  such  an  assessment.  .  .  .  Assume 
that  the  only  theory  of  these  assessments  for  local  improve- 
ments upon  which  they  can  stand  is  that  they  are  imposed  on 
account  of  the  benefits  received,  and  that  no  land  ought  in 
justice  to  be  assessed  for  a  greater  sum  than  the  benefits  re- 
ceived by  it,  yet  it  is  plain  that  the  fact  of  the  amount  of  ben- 
efits is  not  susceptible  of  that  accurate  determination  which 
appertains  to  a  demonstration  in  geometry.  Some  means  of 
arriving  at  this  amount  must  be  used,  and  the  same  method 
may  be  more  or  less  accurate  in  different  cases  involving  dif- 
ferent facts.  Some  choice  is  to  be  made,  and  when  the  fact  of 
some  benefit  accruing  to  all  the  lands  has  been  legally  found, 
can  it  be  that  the  adoption  of  an  ad  valorem  method  of  assess- 
ing the  lands  is  to  be  held  a  violation  of  the  Federal  Constitu- 
tion ?  It  seems  to  us  clearly  not.  It  is  one  of  those  matters  of 
detail  in  arriving  at  the  proper  and  fair  amount  and  propor- 
tion of  the  tax  that  is  to  be  levied  on  the  land  with  regard  to 
the  benefits  it  has  received,  which  is  open  to  the  discretion  of 
the  State  legislature,  and  with  which  this  court  ought  to  have 
nothing  to  do.  The  way  of  arriving  at  the  amount  may  be  in 
some  instances  inequitable  and  unequal,  but  that  is  far  from 
rising  to  the  level  of  a  constitutional  problem  and  far  from  a 
case  of  taking  property  wdthout  due  process  of  law. '  '^ 


1  It  was  held  by  the  New  York  Court  of  Appeals,  In  re  Tuthill,  163 
N.  Y.  133,  49  L.  R.  A.  781,  that  the  provision  of  the  New  York  constitu- 


§  401  SPECIAL  ASSESSMENTS.  431 

§  400.    Assessment    for    Defraying   Preliminary   Expenses 

Sustained. — An  assessment,  under  the  laws  of  Missouri,  of 
twenty-five  .cents  per  acre  on  the  lands  within  a  drainage 
district  for  paying  its  preliminary  expenses,  was  held  valid. i 
In  this  case  it  was  claimed  that  parties  could  not  be  sub- 
jected to  this  preliminary  tax  because  their  land  would  not  be 
benefited  by  the  drainage ;  but  the  Supreme  Court  said  that  the 
power  of  taxation  should  not  be  confused  with  the  power  of  em- 
inent domain ;  there  was  no  requirement  for  a  special  assessment ; 
nor  must  there  be  an  equal  benefit  for  every  payment.  In  this 
case,  the  initial  inquiry,  whatever  its  result,  was  for  the  purpose 
of  securing  the  reclamation  of  the  lands  of  which  the  district 
was  comprised;  and  in  this  inquiry  all  the  owners  were  inter- 
ested. To  say  that  a  tax  could  not  be  levied  except  as  a  result 
of  an  inquiry,  would  be  to  assert  in  effect  that,  as  a  preliminary 
tax,  it  could  not  be  laid  at  all.  In  this  case  it  seemed  that  the 
section  had  been  passed  after  the  district  was  organized ;  but  the 
court  said  that  was  immaterial,  as  the  statute  which  was  in  force 
at  the  time  contemplated  taxation  to  pay  the  preliminary  ex- 
penses, which  must  be  regarded  as  incident  to  the  organization, 
for  which  the  legislature  was  competent  to  provide  in  the  exer- 
cise of  its  taxing  power. 

§  401.  Public  Improvements  in  Municipalities. — The  diffi- 
culty of  the  questions  growing  out  of  the  essential  difference  be- 
tween special  assessments  and  general  taxation  is  increased  by 
the  circumstances  attending  the  demand  for  public  improve- 
ments in  the  rapidly  growing  cities  of  the  country.     Costly  pub- 


tion  authorizing  the  drainage  of  agricultural  lands  by  necessary  ditches 
and  dykes  upon  the  lands  of  others,  under  proper  restrictions  and  mak- 
ing just  compensation,  did  not  authorize  the  assessment  of  the  expense 
of  constructing  a  drain  upon  other  land-owners  deemed  benefited 
thereby,  as  the  constitution  contemplated  that  the  expense  should  be 
borne  by  the  petitioners.  But  it  was  said  that,  if  the  constitution  did 
authorize  such  an  assessment,  it  would  involve  the  taking  of  property 
without  due  process  of  law,  in  violation  of  the  Federal  Constitution,  as 
it  would  be  levying  a  tax  for  a  private  purpose. 

1  Houck  v.  Little  River  Drainage  District,  2.39  U.  S.  254,  GO  L.  Ed. 
58  (1915),  affirming  248  Mo.  373,  holding  valid  Sec.  5538  R.  S.  Mo,  1909. 


432  SPECIAL   ASSESSMENTS.  §    401 

lie  improvements,  such  as  sewers  and  paved  streets,  are,  in  the 
nature  of  things,  only  possible  where  there  are  compact  popula- 
tions and  high  real  estate  values.  In  the  actual  or  anticipated 
growth  of  cities,  very  often  these  improvements  are  forced  upon 
localities  where  the  property  is  not  of  sufficient  value  to  pay  for 
them,  and  the  enforcement  of  special  assessments  involves  prac- 
tical confiscation. 

The  expansion  of  city  populations  over  large  areas  through 
the  application  of  electricity  to  rapid  transit  has  increased  these 
difficulties,  as  the  diffusion  of  population,  while  promoting  the 
health  and  comfort  of  the  people,  sometimes  diminishes  rental 
values  in  other  sections  and  makes  special  assessments  for  street 
improvements  a  greater  burden  upon  property.  This  same  cause 
has  enormously  enhanced  the  expense  of  municipal  government, 
and  has  rendered  more  difficult  of  determination  the  proportion 
of  expense  of  public  improvements,  which  should  be  paid  by  the 
property  owners  of  the  community  at  large.  What  might  be 
fair  and  just  in  a  compact  community  in  a  comparatively  small 
space,  may  be  very  unfair  and  unjust  in  a  sparsely  populated 
area.  There  the  same  social  and  economic  conditions  which  have 
increased  the  expense  of  municipal  administration  and  which 
require  that  public  improvements,  if  they  are  made  at  all,  must 
be  paid  for  by  means  of  special  assessments,  make  the  property 
less  able  to  carry  the  burden  of  such  assessments. 

Public  improvements  in  municipalities  are  usually  under  the 
control  of  the  municipal  authorities,  to  whom  the  authority  is 
delegated  by  the  State  to  make  such  improvements  at  the  cost 
of  the  property  in  the  special  taxing  district  created  by  the 
municipality  therefor.  Very  often  such  improvements  are  made 
upon  the  demand  of  those  who  are  not  compelled  to  pay  for 
them,  and  the  discontent  thus  caused  is  not  infrequently  ag- 
gravated by  a  want  of  confidence  in  the  municipal  authorities. 
With  the  best  possible  municipal  administration  it  require? 
careful  consideration  to  determine  what  and  when  public  im- 
provements are  required,  and  when  property  in  a  district  is 
sufficiently  benefited  to  justify  the  assessment  of  the  necessary 
cost.  It  is  inevitable  therefore  that  under  existing  conditions 
the  imposition  of  special  assessments  should  frequently  encoun- 
ter the  most  vigorous  resistance. 


§    403  SPECIAL   ASSESSMENTS. 


433 


§  402.    Difficulty  of  Determining  Special  Benefits.— While 

the  principle  involved  in  the  establishment  of  a  taxing  district 
in  a  city  is  the  same  as  in  the  case  of  a  drainage  or  irrigation 
district  in  the  country,  the  application  often  raises  different 
and  difficult  questions.  Thus  while  in  the  case  of  a  sewer  the 
territory  drained  may  be  a  natural  benefited  district,  what  rule 
can  determine  with  any  degree  of  accuracy  what  part  of  the 
benefits  from  a  street  improvement  inures  to  the  property  front- 
ing the  street,  what  part  to  the  property  on  intersecting  streets, 
and  what  part  to  the  general  public  using  the  street  ?  It  not  in- 
frequently happens  that  the  cost  of  a  paved  street  is  wholly  out 
of  proportion  to  the  value  of  the  abutting  property,  and  the  im- 
provement is  demanded  solely  for  the  convenience  of  the  public. 
Thus  in  the  case  of  a  park  which  is  open  to  the  general  public, 
what  rule  can  determine  the  limits  of  the  district  upon  which 
the  cost  of  opening  the  park  shall  be  charged?  It  is  obvious 
that  the  determination  of  the  proportional  benefits  enjoyed  by 
contiguous  property  on  the  one  hand  and  by  the  general  public 
on  the  other,  or  the  apportionment  of  the  benefits  as  between 
the  property  owners  in  the  district,  cannot  be  determined  with 
precision  and  can  at  best  be  but  approximate. 

It  is  agreed  that  the  only  basis  for  the  apportionment  is  the 
presumption  of  special  benefit  to  the  property  to  the  extent  of 
the  tax  assessed.  As  the  exercise  of  the  taxing  power  is  legisla- 
tive and  not  judicial,  the  determination  of  the  necessity  for  the 
improvement  and  the  basis  of  the  apportionment  is  primarily 
legislative.  The  most  serious  legal  difficulty,  and  the  one  upon 
which  the  courts  have  most  widely  differed,  is  as  to  the  conclu- 
siveness of  the  legislative  determination  in  fixing  the  basis  of 
apportionment,  when  this  basis  excludes  the  investigation  of 
special  benefits  as  to  the  individual  property  holders. 

§  403.  Apportionment  of  Cost  of  Municipal  Public  Im- 
provements.^— Different  methods  have  been  adopted  for  ap- 
portioning the  cost  of  public  improvements  in   municipalities. 


1  See  Walston  v.  Nevin,  128  U.  S.  578.  32  L.  Ed.  544  (1888) ;  infra,  Sec. 
373. 


434  SPECIAL    ASSESSMENTS.  §    403 

Thus  when  the  taxing  district  is  created,  the  proportion  of  ben- 
efits may  be  determined  by  a  commission  or  other  quasi  judicial 
authority,  or,  as  is  more  usual,  a  definite  basis  of  apportionment 
may  be  established  by  the  charter  or  ordinance  of  the  muni- 
cipality, according  to  the  assessed  value  of  the  propertj^  in  the 
district,  or  according  to  the  frontage  upon  the  street  or  other 
improvement,  or  upon  the  area  within  a  designated  district. 
Such  legislative  basis  of  apportionment,  whether  by  assessed 
value  or  frontage  or  area  is  made  upon  the  presumption  that 
the  special  benefits  are  equally  distributed  through  the  district 
and  are  fairly  apportioned  on  such  basis. 

Sometimes  this  apportionment  by  frontage  or  area  is  made 
the  fixed  rule  of  the  city  charter  or  statute,  so  that  no  discretion 
is  left  to  the  municipal  authorities  except  in  determining  when 
the  improvement  shall  be  made,  that  is,  when  the  conclusion  is 
warranted  that  the  special  benefits  to  the  property  within  the 
district  will  equal  that  part  of  the  cost  of  the  improvement  to 
be  taxed  against  such  property.  This  method  of  fixing  the  basis 
of  apportionment  has  the  advantage  of  leaving  as  little  as  pos- 
sible to  the  discretion  of  the  municipal  authorities.  It  also  in- 
volves the  disadvantage  that  the  improvement,  if  made  at  all, 
must  be  made  upon  the  basis  prescribed  by  the  charter,  and 
there  can  be  no  modification  to  meet  special  and  exceptional 
circumstances  which  may  make  the  application  of  this  basis  in- 
equitable in  individual  cases.  Although  the  special  benefit  is 
the  only  admissible  warrant  for  the  assessment,  the  considera- 
tion of  the  question  is  liable,  under  this  system,  to  be  obscured 
by  the  general  public  convenience  demanding  the  improvement. 

Sometimes  a  fixed  proportion  of  the  cost  of  the  work  is  re- 
quired to  be  paid  from  the  general  fund  of  the  city,  and  only  a 
part  levied  upon  the  property  specially  benefited ;  while  in  other 
cases  the  entire  cost  is  assessed  as  special  benefits  upon  property 
within  the  district.  In  sewer  construction  both  the  area  and 
frontage  rules  have  been  applied.  In  street  improvement  the 
frontage  rule  is  generally  used,  sometimes  in  connection  with 
the  area  rule  so  as  to  include  property  upon  intersecting  streets, 
presumably  benefited  by  the  improvement. 


§    404  SPECIAL   ASSESSMENTS.  435 

§  404,    Special  Assessments  Under  State  Constitutions. — 

It  is  not  within  the  scope  of  this  work  to  consider  the  questions 
arising  in  the  different  States,  as  to  the  construction  of  their 
own  constitutions  upon  the  power  of  the  legislature  to  make  as- 
sessments for  local  improvements.  It  is  sufficient  to  state  that 
the  rule  has  been  settled  in  nearly  all  the  States,  that  special 
assessments  for  public  improvements  upon  property  specially 
benefited  do  not  violate  the  constitutional  requirement  of  uni- 
formity and  equality  in  taxation,  or  that  property  shall  be  as- 
sessed according  to  its  value.  Such  provisions  have  been  held  to 
have  no  application  to  assessments  based  upon  special  benefits.* 
In  several  States  the  earlier  decisions  to  the  contrary  were 
subsequently  overruled.2  It  was  said  by  the  Supreme  Courts 
that  it  fully  agreed  with  the  Supreme  Court  of  Louisiana  in  its 
construction  of  the  constitution  of  that  State  requiring  equality 
and  uniformity  in  taxation,  that  it  did  not  take  away  the  power 
of  making  assessments  for  local  public  improvements.  The 
court  said,  p.  295 : 

"We  are  of  opinion  that  the  construction  given  was  correct. 
It  is  impossible  to  apply  to  the  varying  wants  of  a  municipal- 
ity the  rule  invoked  with  reference  to  taxation  for  State  pur- 
poses on  property  throughout  the  State,  without  producing 
the  very  inequality  which  that  rule  was  designed  to  prevent. 
There  would  often  be  manifest  injustice  in  subjecting  the 
whole  property  of  a  city  to  taxation  for  an  improvement  of  a 
local  character.  The  rule  that  he  who  reaps  the  benefit  should 
bear  the  burden  must  in  such  cases  be  applied." 

The  court  added  that  the  same  construction  of  a  similar 
clause  in  the  constitutions  of  other  States  had  been  adopted  by 
their  highest  courts. 


1  See  2  Dillon's  Municipal  Corporations,  Sec.  752,  where  the  State 
authorities  are  reviewed. 

2  Thus  in  Colorado,  Denver  v.  Knowles,  17  Colo.  204,  overruling  Pal- 
mer V.  Ray,  6  Colo.  106;  in  Maryland,  In  re  Johns  Hopkins  Hospital,  56 
Md.  1,  overruling  Baltimore  v.  Scharf,  54  Md.  499;  in  Alabama,  Bir- 
mingham V.  Klein,  89  Ala.  461,  overruling  Mobile  v.  Dargan,  45  Ala. 
310.  Early  decisions  in  Minnesota  and  in  Illinois  were  in  effect  over- 
ruled by  changes  in  the  Stato  constitutions. 

3  Louisiana  v.  Pilsbury,  105  U.  S.  278. 


436  SPECIAL   ASSESSMENTS.  §    406 

§  405.  Legislative  Discretion  in  Apportionment. — ^While  a 
few  States  still  insist  that  the  apportionment  must  be  made  ac- 
cording to  a  determination  of  special  benefits  in  each  case.t  the 
trend  of  authority  has  been  overwhelmingly  in  support  of  the 
rule  that  a  legislative  apportionment  by  frontage  or  area  is  al- 
lowed. Thus  it  was  said  by  Judge  Cooley  in  the  Supreme  Court 
of  Michigan  in  1881 :2 

"We  might  fill  pages  with  the  names  of  cases  decided  in 
other  States  which  have  sustained  assessments  for  improving 
streets,  though  the  apportionment  of  the  cost  was  made  on  the 
same  basis  (according  to  frontage)  as  the  one  before  us.  If 
anything  can  be  regarded  as  settled  in  municipal  law  in  this 
country,  the  power  of  the  legislature  to  permit  such  assess- 
ments and  direct  an  apportionment  of  the  cost  by  frontage, 
should  by  this  time  be  considered  as  no  longer  open  to  contro- 
versy. Writers  on  constitutional  law,  on  municipal  law,  and 
on  the  law  of  taxation  have  collected  the  cases  and  have  recog- 
nized the  principle  as  settled,  and  if  the  question  w^ere  new 
in  this  State,  we  might  think  it  important  to  refer  to  what 
they  say.  But  the  question  was  not  new ;  it  was  settled  for  us 
thirty  years  ago." 


Judge  Dillon  said  in  1891,  after  reviewing  the  State 

ttrrsi    -     J        n        ^  ^      .  .  t    j1_j    j^i_  .     i 


cases  -J 


'The  courts  are  very  generally  agreed  that  the  authority  to 
require  the  property  specially  benefited  to  bear  the  expense 
of  local  improvments  is  a  branch  of  the  taxing  power,  or  in- 
cluded within  it.  .  .  .  Whether  the  expense  of  making  such 
improvements  shall  be  paid  out  of  the  general  treasury,  or  be 
assessed  upon  the  abutting  property  or  other  property  spe- 
cially benefited,  and,  if  in  the  latter  mode,  the  assessment  shall 
be  upon  all  property  found  to  be  benefited,  or  alone  upon  the 
abutters,  according  to  frontage  or  according  to  the  area  of 
their  lots,  is  according  to  the  present  weight  of  authority  con- 
sidered to  be  a  question  of  legislative  expediency." 

§  406.     Consideration  of  Special  Benefits  Excluded  by  Legis- 
lative Apportionment. — The  apportionment  of  the  cost  of  a 


1  Peay  v.  Little  Rock,  32  Ark.  31.    The  frontage  rule  was  denied  in 
McBean  v.  Chandler,  9  Heisk.  (Tenn.)  349,  as  unequal  and  not  uniform. 

2  Sheley  v.  Detroit,  45  Mich.  431,  1.  c,  page  433. 

3  Dillon's  Municipal  Corporations,  4th  Ed.,  Vol.  2,  Sec.  752. 


§    406  SPECIAL   ASSESSMENTS.  437 

public  improvement  by  a  definite  rule,  as  by  frontage  or  area  in 
the  taxing  district,  has  been  held  necessarily  to  exclude  evidence 
of  the  want  of  special  benefits  in  the  enforcement  of  assessments 
upon  the  propert}^,  as  the  legislative  determination  in  ordering 
the  assessment  upon  that  basis  presumptively  involves  the  find- 
ing that  the  property  is  benefited  to  the  extent  of  the  assess- 
ment. 

This  conclusiveness  of  the  legislative  decision  in  the  forma- 
tion of  taxing  districts  is  said  therefore  to  rest  upon  the  pre- 
sumption that  the  legislature  proceeds  upon  investigation  and 
inquiry,  and  decides  what  the  public  good  requires ;  that  it  only 
creates  a  taxing  district  and  charges  the  expense  of  a  public  im- 
provement upon  it  when  satisfied  that  the  property  therein  will 
be  specially  benefited  by  the  improvement.^  The  courts  in  sus- 
taining this  doctrine  of  legislative  conclusiveness,  recognize  that 
its  real  basis  is  the  impracticability  of  making  any  satisfactory 
judicial  apportionment  of  the  benefits  from  such  improvements 
as  between  ihe  abutting  property  and  the  general  public.  In 
tlie  language  of  the  Supreme  Court  of  North  Dakota:^ 

"How  could  the  courts  ever  determine  what  part  should  be 
paid  out  of  the  general  treasury  and  what  part  raised  by  local 
assessment?  What  rule  would  govern  them  in  investigating 
such  a  question?  And  Avhat  right  have  they  to  dictate  where 
the  line  shall  be  draAvn?"^ 


1  Spencer  v.  Merchant,  125  U.  S.  345,  31  L.  Ed.  763  (1888),  affirming 
100  N.  Y.  587. 

2  Ralph  v.  Fargo,  7  N.  Dak.  640,  1.  c.  p.  650. 

3  The  difficulty  of  drawing  the  line  between  the  general  benefit  to  the 
public  and  the  special  benefit  to  the  property  owner  is  illustrated  not  only 
in  street  improvement  cases  but  in  such  matters  as  street  sprinkling. 
Thus  it  was  held  in  Minnesota,  State  v.  Reis,  38  Minn.  371,  that  street 
sprinkling  is  a  public  improvement  for  which  a  special  assessment  can 
be  made;  while  in  City  of  Chicago  v.  Blair,  149  111.  310,  and  24  L.  R.  A. 
412.  and  in  New  York  Life  Ins.  Co.  r.  Prest,  71  Fed.  815,  it  was  held  that 
it  is  not  a  local  improvement  and  that  the  conclusion  of  the  local 
authorities  that  it  is,  is  reviewable  by  the  courts.  See  also  Sears  v. 
Boston,  173  Mass.  71,  and  43  L.  R.  A.  834.  street  sweeping  was  held  a 
proper  charge  for  local  assessments  in  Reinken  v.  Fuehring,  130  Ind. 
382,  and  15  L.  R.  A.  624.    The  cleaning  of  ice  and  snow  from  a  sidewalk 


438  SPECIAL    ASSESSMENTS.  §    407 

§  407.  Legislative  Power  Not  Unlimited. — Notwithstand- 
ing this  general  acceptance  of  the  doctrine  that  the  apportion- 
ment of  the  cost  according  to  a  definite  rale  of  presumed  bene- 
fits is  a  matter  of  legislative  discretion,  excluding  thereafter  the 
judicial  consideration  of  special  benefits,  it  does  not  follow  that 
the  legislative  authority  in  that  regard  is  unlimited.  On  the 
contrary,  this  exclusion  of  the  consideration  of  special  benefits 
can  only  be  justified  on  the  theory  that  it  had  been  determined 
by  the  municipal  authorities  upon  investigation  that  the  special 
benefits  to  each  lot  charged  were  equal  to  the  assessment.  Evi- 
dence of  the  want  of  special  benefits  is  excluded  only  on  the 
theory  that  the  fact  sought  to  be  disproved  has  be'en  conclusively 
determined  in  the  proceedings  in  which  the  assessment  was 
made.  Thus  it  was  said  by  the  Supreme  Court  of  Massachu- 
setts :^ 

"While  these  assessments  must  be  founded  upon  benefits, 
the  courts  have  generally  recognized  the  difficulty,  and  in 
many  cases  the  impracticability,  of  attempting,  to    estimate 


was  held  a  proper  local  charge  in  New  York,  Carthage  v.  Frederick,  122 
N.  Y.  268,  and  10  L.  R.  A.  178;  and  in  Massachusetts,  In  re  Goddard,  16 
Pickering  504;  but  denied  in  Illinois,  Gridley  v.  Bloomington,  88  111. 
554;  Chicago  v.  O'Brien,  111  111.  532.  The  Supreme  Court  of  Pennsyl- 
vania in  Hammett  v.  Philadelphia,  65  Pa.  146,  held  that  the  power  to 
assess  was  exhausted  with  a  single  exercise  for  the  same  improvement, 
and  maintenance  and  reconstruction  must  be  a  public  expense.-  This 
was  a  street  paving  case  and  was  reaffirmed  in  City  of  Erie  v.  Russell, 
148  Pa.  384,  in  the  case  of  a  sewer.  But  in  Missouri,  McCormack  v. 
Patchin,  53  Mo.  33,  and  Farrar  v.  St.  Louis,  80  Mo.  379,  the  power  was 
held  to  be  a  continuing  power,  unless  expressly  restrained  by  the  con- 
stitution or  by  the  charter  of  the  city. 

1  Sears  v.  Boston,  173  Mass.  71,  p.  78.  The  court  in  this  case  held 
valid  an  assessment  for  watering  streets  in  proportion  to  the  lineal 
feet  as  applied  to  occupied  estates  in  the  central  portion  of  the  city. 
It  said  that  it  made  this  decision  with  some  hesitation,  as  waterng 
produces  only  a  temporary  effect,  but  concluded  that  the  habitual 
watering  was  a  benefit  to  the  property.  But  it  was  held  in  another 
case,  Sears  v.  Street  Commissioners,  173  Mass.  350,  that  a  sewer  assess- 
ment which  included,  in  addition  to  the  cost  of  the  sewer,  part  of  the 
general  expenses  of  the  department,  was  invalid.  See  also  2  Dillon 
on  Municipal  Corporations,  4th  Ed.,  Sec.  761. 


§    408  SPECIAL   ASSESSMENTS.  439 

benefits  to  estates  one  by  one  -without  some  rule  of  principle 
of  general  application  Avhich  will  make  the  assessments  reason- 
able and  proportional,  according  to  benefits.  Accordingly,  the 
determination  of  such  a  rule  or  principle  by  the  legislature 
itself,  or  by  the  tribunal  appointed  by  the  legislature  to  make 
the  assessments,  has  commonly  been  upheld  by  the  courts.  If, 
hoAvever,  its  effect  plainly  is  to  make  an  assessment  upon  any 
estate  substantially  in  excess  of  the  benefit  received,  it  is  set 
aside." 

Other  courts,  sustaining  legislative  apportionment  of  special 
assessments,  have  been  less  decided  in  asserting  this  limitation 
of  legislative  authority;  and  the  fundamental  principle,  that 
such  assessments  can  only  be  justified  in  any  case  by  the  benefits 
received,  has  been  obscured  by  the  practical  convenience  of  the 
legislative  apportionment  by  frontage  or  area  throughout  the 
taxing  district.  Wliere  the  conditions  of  the  parcels  of  land  as- 
sessed are  substantially  uniform,  as  in  average  city  lots,  such 
apportionment  by  frontage  or  area  works  approximate  equality. 
The  recognition  of  this  fact  and  the  realization  of  the  imprac- 
ticability of  judicial  determining  the  special  benefits  led  to  the 
general  adoption  and  enforcement  of  the  rule  that  the  legislative 
apportionment  is  conclusive,  until  the  essential  limitations  of 
legislative  authority  were  reasserted  by  the  decision  of  the  Su- 
preme Court  in  Norwood  v.  Baker  in  1898.^ 

§  408.  Supreme  Court  on  Assessments  for  Municipal  Im- 
provements.— The  Supreme  Court  can  only  consider  this  sub- 
ject in  relation  to  due  process  of  law  as  guaranteed  by  the  Four- 
teenth Amendment.  Only  on  this  ground  can  it  overturn  the 
system  established  by  the  State  authorities  and  approved  by  the 
State  courts.  It  cannot  review  the  decisions  of  the  State  courts 
with  reference  to  the  construction  of  their  own  statutes  and  con- 
stitutions, and  thus  it  has  had  no  concern  with  the  many  ques- 
tions which  have  arisen  in  that  connection.  Furthermore  in 
questions  so  intimately  related  to  the  sovereignty  of  the  State 
as  the  exercise  of  the  State  power  in  establishing  taxing  dis- 
tricts and  apportioning  the  burden  of  taxation  for  the  cost  of 


1  In^ra,  Sec.  426. 


440  SPECIAL   ASSESSMENTS.  §    408 

public  improvements,  it  would  necessarily  require  a  clear  case 
of  violation  of  right  under  the  Federal  Constitution,  before  the 
Supreme  Court  would  interfere  with  the  exercise  of  legislative 
discretion  under  the  State  laws  as  approved  by  the  State  courts. 
The  Supreme  Court  has  considered  this  question  not  only  in 
cases  from  the  State  courts,  where  the  protection  of  the  Four- 
teenth Amendment  was  invoked,^  but  also  in  cases  from  the  Dis- 
trict of  Columbia  where  the  same  claim  was  made  in  reference 
to  the  Fifth  Amendment^  restraining  the  power  of  Congress; 
and  it  will  be  convenient  therefore  to  consider  the  decisions  of 
the  court  in  relation  to  the  different  classes  of  public  improve- 
ments. It  will  be  observed,  however,  that  in  cases  from  the  Dis- 
trict of  Columbia,  the  court  exercised  a  broader  jurisdiction  in 
determining  the  validity  of  the  action  of  Congress  in  its  powers 
over  the  District,  than  it  assumed  in  reviewing  the  decisions  of 


1  Hagar  v.  Reclamation  District,  supra,  Irrigation  District  v.  Bradley, 
supra,  Wurts  v.  Hoagland,  supra,  Davidson  v.  New  Orleans,  96  U.  S.  97, 
supra;  County  of  Mobile  v.  Kimball,  102  U.  S.  691,  supra;  Spencer  y. 
Merchant,  125  U.  S.  345,  supra;  Kerr  r.  South  Park  Commissioners,  117 
U.  S.  379,  29  L.  Ed.  924  (1886) ;  Walston  r.  Nevin,  128  U.  S.  578,  supra; 
Lent  V.  Tillson,  140  U.  S.  316,  35  L.  Ed.  419  (1891);  Paulsen  v.  Port- 
land, 149  U.  S.  30,  37  L.  Ed.  637  (1893),  affirming  16  Oregon  450; 
Norwood  V.  Baker,  infra.  Sec.  426;  Billingham  Bay,  etc.,  Co.  v.  New 
Wharcom,  172  U.  S.  314,  43  L.  Ed.  463  (1899) ;  Loeb  v.  Columbia  Town- 
ship Trustees,  179  U.  S.  472,  45  L.  Ed.  280  (1900),  reversing  91  Fed.  37; 
French  v.  Barber  Asphalt  Co.,  181  U.  S.  324,  supra  (and  following 
cases);  Farrell  v.  West  Chicago  Park  Commissioners,  181  U.  S.  404, 
45  L.  Ed.  924  (1901),  affirming  182  111.  250;  Lombard  v.  Park  Com- 
missioners, 181  U.  S.  38,  45  L.  Ed.  731  (1901),  affirming  181  111.  136; 
Carson  v.  Brockton  Sewerage  Co.,  182  U.  S.  398,  45  L.  Ed.  1151  (1901), 
affirming  175  Mass.  242;  King  v.  Portland,  184  U.  S.  61,  infra.  Sec.  430; 
Voigt  V.  Detroit,  184  U.  S.  115,  46  L.  Ed.  459  (1902),  affirming  123  Mich. 
547;  Goodrich  v.  Detroit,  184  U.  S.  432,  46  L.  Ed.  627  (1902),  affirming 
123  Mich.  559. 

2Willard  v.  Presbury,  14  Wallace  676,  20  L.  Ed.  719  (1870) ;  Matting- 
ly  V.  District  of  Columbia,  97  U.  S.  687,  24  L.  Ed.  1098  (1878);  Shoe- 
maker v.  United  States,  147  U.  S.  282,  37  L.  Ed.  170  (1893),  affirming 
19  Wash.  L.  R.  466;  Bauman  v.  Ross,  167  U.  S.  548,  42  L  Ed.  270  (1897), 
reversing  24  Wash.  L.  R.  65;  Parsons  v.  District  of  Columbia,  170  U.  S. 
45,  42  L.  Ed.  943  (1898),  affirming  8  App.  D.  C.  391;  Wight  v.  Davidson, 
181  U.  S.  371,  45  L.  Ed.  900  (1901),  reversing  16  App.  D.  C.  37L 


§    409  SPECIAL   ASSESSMENTS.  441 

the  Supreme  Courts  of  the  States.  In  the  latter  cases  it  was 
limited  to  the  constitutional  question,  in  the  former  it  was  not. 

§  409.    Supreme  Court  on  Assessments  for  Sewers. — In  the 

matter  of  sewers  there  is  a  natural  benefited  district,  to-wit,  the 
territory  drained,  and  as  to  such  cases  the  courts  have  had  little 
difficulty  in  accepting  the  conclusiveness  of  the  legislative  de- 
termination regarding  the  property  benefited.^  In  Paulsen  v. 
Portland,  the  Supreme  Court  held  that  in  making  a  taxing  dis- 
trict out  of  the  area  drained  by  a  sewer,  no  notice  to  or  assent 
by  the  taxpayer  was  necessary.  The  sewer  in  question  was  con- 
structed in  the  exercise  of  the  police  power  for  the  health  and 
cleanliness  of  the  city,  and  the  police  power  is  exercised  solely 
at  the  legislative  will.  So  also  it  is  for  the  legislature  to  de- 
termine the  territorial  district  to  be  taxed  for  the  local  improve- 
ment. 

In  a  case  from  Massachusetts  the  court  held  valid  an  ordi- 
nance making  an  annual  assessment  upon  property  owners  for 
the  use  of  a  common  sewer,  which  had  been  built  by  assess- 
ments upon  the  property  benefited.^ 

In  a  case  from  the  District  of  Columbia,^  the  court  sustained 
an  assessment,  under  Act  of  Congress,  in  the  District  of  Colum- 
bia, where  one-third  of  the  cost  of  the  sewer  was  taxed  upon  the 
property  adjoining,  according  to  frontage,  for  the  enlargement 
of  the  sewer.  In  this  case  the  assessment  was  confirmed  by  Act 
of  Congress,  which  the  court  held  was  equivalent  to  an  au- 
thorization, adding  at  p.  692 : 

"It  may  be  that  the  burden  laid  upon  the  property  of  the  com- 
plainants is  onerous.  Special  assessments  for  special  road  or 
street  improvements  very  often  are  oppressive.  But  that  the 
legislative  power  may  authorize  them  and  may  direct  them  to 
be  made  in  proportion  to  the  frontage,  area,  or  market  value  of 
the  adjoining  property  at  its  discretion,  is,  under  the  decisions, 
no  longer  an  open  question." 


1  Gillette  V.  City  of  Denver,  21  Fed.  822,  Brewer,  J.;  Paulson  v. 
Portland,  149  U.  S.  30,  supra;  Cleancag  v.  Norwood,  C.  C.  137  Fed.  962 
(1905). 

2  Carson  v.  Brockton  Sewerage  Commission,  182  U.  S.  398,  supra. 
sMattingly  v.  District  of  Columbia,  97  U.  S.  687,  supra. 


442  SPECIAL   ASSESSMENTS,  §    410 

§  410.  Supreme  Court  on  Assessments  for  Streets  and 
Sidewalks. — The  same  principle  has  been  applied  to  the  open- 
ing, widening,  and  paving  of  streets  and  sidewalks.  Thus  an 
assessment  under  the  statute  of  New  York  making  a  taxing  dis- 
trict of  the  lands  lying  within  three  hundred  feet  on  either  side 
of  the  street  improved  was  sustained  and  held  valid  as  to  all 
parcels  of  land  which  were  included  within  that  district,  though 
some  of  them  did  not  front  upon  the  street.^  The  court  af- 
firmed the  judgment  of  the  New  York  Court  of  Appeals,  which 
had  said  in  its  opinion: 

''The  act  of  1881  determines  absolutely  and  conclusively  the 
amount  of  tax  to  be  raised,  and  the  property  to  be  assessed,  and 
upon  which  it  is  to  be  apportioned.  Each  of  these  things  was 
within  the  power  of  the  legislature,  whose  action  cannot  be  re- 
viewed in  the  courts  upon  the  ground  that  it  acted  unjustly  or 
without  appropriate  and  adequate  reason." 

And  the  Supreme  Court  added : 

' '  The  legislature,  in  the  exercise  of  its  power  of  taxation,  has 
the  right  to  direct  the  whole  or  a  part  of  the  expense  of  a  public 
improvement,  such  as  the  laying  out,  grading  or  repairing  of  a 
street,  to  be  assessed  upon  the  owners  of  lands  benefited  thereby ; 
and  the  determination  of  the  territorial  district  which  should  be 
taxed  for  a  local  improvement  is  within  the  province  of  legis- 
lative discretion.  ...  If  the  legislature  provides  for  notice  to 
and  hearing  of  each  proprietor,  at  some  stage  of  the  proceed- 
ings, upon  the  Yjuestion  what  proportion  of  the  tax  shall  be  as- 
sessed upon  his  land,  there  is  no  taking  of  his  property  without 
due  process  of  law.    .    .    . 

' '  In  the  absence  of  any  more  specific  constitutional  restriction 
than  the  general  prohibition  against  taking  property  without 
due  process  of  law,  the  legislature  of  the  State,  having  the 
power  to  fix  the  sum  necessary  to  be  levied  for,  the  expense  of  a 
public  improvement,  and  to  order  it  to  be  assessed,  either,  like 
other  taxes,  upon  property  generally,  or  only  upon  the  lands 
benefited  by  the  improvement,  is  authorized  to  determine  both 
the  amount  of  the  whole  tax,  and  the  class  of  lands  which  will 
receive  the  benefit  and  should  therefore  bear  the  burden,   al- 


1  Spencer  v.  Merchant,  125  U.  S.  345,  supra,  and  New  York  Court  of 
Appeals,  100  N.  Y.  587. 


§    410  SPECIAL   ASSESSMENTS.  443 

though  it  may,  if  it  sees  fit,  commit  the  ascertainm.ent  of  either 
or  both  of  these  facts  to  the  judgment  of  commissioners."^ 

The  Act  of  Congress  for  opening  streets  in  the  city  of  "Wash- 
ington and  providing  for  apportioning  one-half  of  the  cost  upon 
the  lands  found  to  be  benefited  was  sustained  as  not  violative  of 
the  Fifth  Amendment.^  The  court  said  that  it  was  for  the 
legislature  and  not  for  the  judiciary  to  determine,  whether  the 
expense  of  a  public  improvement  should  be  boriie  by  the  whole 
city,  or  by  the  district,  or  by  the  property  immediately  bene- 
fited. The  rule  of  apportionment  among  the  parcels  of  land 
benefited  also  rests  within  the  discretion  of  the  legislature,  and 
may  be  fixed  in  proportion  to  the  frontage,  area,  or  the  market 
value  of  the  lands,  or  in  proportion  to  the  benefits  as  estimated 
by  the  commissioners.  It  was  within  the  power  of  Congress 
to  include  as  benefited  all  lands  lying  within  the  benefited  dis- 
trict, and  Congress  might  submit  the  question  of  what  parcels 
of  land  were  benefited  to  the  determination  of  the  tribunal  in- 
trusted with  the  authority  of  making  the  assessment. 

In  a  later  case  from  the  District  of  Columbia,-^  the  validity 
of  an  act  making  an  assessment  at  the  rate  of  $1.25  per  lineal 
foot  upon  property  abutting  on  streets  where  a  water  main  was 
laid  was  sustained  by  the  Supreme  Court,  which  held  that  the 
action  of  Congress  was  conclusive  alike  of  the  question  of  the 
necessity  of  the  work  and  of  the  benefit  to  the  abutting  prop- 
erty. The  court  said  in  this  case  that  there  was  an  obvious 
necessity  for  a  system  to  supply  the  inhabitants  with  a  constant 
and  unfailing  supply  of  water,  an  essential  for  health,  comfort 
and  safety  next  in  importance  to  air.  The  citizen  cannot  be 
heard  to  contend  that  he  is  entitled  to  receive  such  advantages 
gratuitously,  nor  that  the  laws  and  ordinances  under  which  they 
ai^e  created  and  regulated  are  invalid,  unless  his  individual  and 
personal  views  have  been  formally  obtained  and  considered.4 


1  Justice  Matthews  and  Justice  Harlan  dissented. 

2  Bauman  v.  Ross,  167  U.  S.  548,  supra. 

3  Parsons  v.  District  of  Columbia,  170  U.  S.  45,  supra. 

*  In   Provident  Institution  v.  Jersey  City.  113  U.  S.   506,  28   L.   Ed. 
1102    (1885),  an   act  passed   prior  to  the  date  of  plaintiff's   mortgage 


444  SPECIAL    ASSESSMENTS.  §    412 

§  411.  Improvement  Ordinance  Not  Invalidated  by  Re- 
stricting Work  to  Resident  Citizens. — An  ordinance  of  New 
Orleans  for  street  paving,  providing  that  the  contractor  should 
not  employ  any  other  than  bona  fide  residents  of  the  city  as 
laborers  on  such  public  work,  was  not  violative  of  the  con- 
stitutional right  of  a  taxpayer  justifying  resistance  to  special 
taxation.^  The  court  said  that  the  objection  to  the  cost  of  the 
work  being  increased,  was  too  far-fetched  and  uncertain  to  fur- 
nish material  for  judicial  determination,  and  in  any  event  the 
objection  could  only  be  raised  by  a  party  directly  affected  there- 
by, that  is,  one  of  the  non-resident  laborers. 

§  412.  Right  of  Property  Owner  to  Equitable  Relief  After 
Performance  of  Contract. — Special  tax  bills  for  a  public  im- 
provement will  not  be  set  aside  after  full  performance  of  the 
contract,  because  of  the  acts  of  the  agent  of  the  contractor  to- 
ward the  securing  of  the  contract,  where  no  fraud  or  corrup- 
tion is  shown.2 

In  this  case  it  was  claimed  that  the  specification  of  Trinidad 
Lake  Asphaltum,  the  product  of  a  foreign  country,  when  there 


made  water  rents  a  charge  upon  lands  in  Jersey  City,  though  at  the 
date  of  the  mortgage  there  were  no  valid  water  rents  due  on  the  mort- 
gaged property.  Plaintiff  contended  that  the  statutes,  by  giving  a 
superior  lien  to  water  rents  afterwards  accrued,  deprived  it  of  its 
property  without  due  process  of  law,  but  the  court  held  that,  since 
plaintiff  took  the  mortgages  subject  to  the  statute,  it  had  no  ground  to 
complain.  And  even  if  the  mortgages  had  been  created  before  its 
passage,  the  statute  would  be  valid.  That  which  is  given  for  the  better- 
ment of  the  common  pledge  is  in  natural  equity  entitled  to  first  place 
among  the  claims  against  it.  Providing  a  sufficient  water  supply  for 
the  inhabitants  of  a  great  and  growing  city,  is  one  of  the  highest  func- 
tions of  municipal  government,  and  tends  greatly  to  enhance  the  value 
of  all  real  estate  in  its  limits.  It  might  be  difficult,  the  court  concluded, 
to  show  any  substantial  distinction  between  such  charge  for  water  and 
a  tax,  but  the  case  at  bar  did  not  call  for  an  opinion  on  that  point. 

1  Chadwick  v.  Kelley,  187  U.  S.  540,  47  L.  Ed.  293,  affirming  104  La. 
719  (1903). 

2  Field  V.  Barber  Asphalt  Paving  Co.,  194  U.  S.  618,  48  L.  Ed.  1142 
(1904),  reversing  117  Fed.  925,  and  directing  the  dismissal  of  the  bill 
of  complaint. 


§    414  SPECIAL   ASSESSMENTS.  445 

were  deposits  in  several  of  the  United  States  from  which  suit- 
able asphalt  could  he  had  did  not  constitute  such  an  interfer- 
ence with  interstate  commerce  as  to  justify  the  setting  aside  of 
the  contract  after  the  full  performance  of  its  terms.  The  court 
held  that  the  charges  of  undue  influences  of  the  agents  of  the 
paving  company  did  not  show  any  fraud  or  corruption.  The 
court  said,  however,  that  there  might  be  cases  of  fraud  or  ar- 
bitrary abuse  of  power  when  the  court  would  interfere.  Under 
other  circumstances  the  municipality  and  property  owners  in- 
terested are  bound  by  the  acts  of  their  agents. 

§  413.  Benefit  Districts  for  Street  Improvements. — A  Ken- 
tucky statute  authorized  the  city  government  of  Louisville  to 
open  and  improve  streets  at  the  exclusive  cost  of  the  owners 
of  lots  in  each  one-fourth  of  a  square,  to  be  equally  apportioned 
by  the  council  according  to  the  number  of  square  feet  owned  by 
them  respectively,  except  that  corner  lots  of  prescribed  dimen- 
sions paid  twenty-five  per  cent  more  than  others,  each  subdivi- 
sion of  territory  bounded  on  all  sides  by  principal  streets  being 
deemed  a  square.  This  statute  had  been  sustained  by  the  Ken- 
tucky Court  of  Appeals,^  and  its  judgment  was  affirmed  on  mo- 
tion by  the  Supreme  Court,  as  the  contention  had  been  pressed 
upon  them  before  and  determined  adversely,  so  that  there  was 
no  necessity  for  its  being  argued.^ 

§  414.  Special  Assessments  for  Public  Parks. — It  was  said 
hy  the  Supreme  Court  in  a  case  from  the  District  of  Columbia,-'' 
involving  an  assessment  for  a  public  park  established  under  Act 
of  Congress  for  the  District  of  Columbia,  that  in  the  memory  of 
men  now  living  the  proposition  to  take  private  property  with- 
out the  consent  of  its  owner  for  a  public  park  and  assess  a  pro- 
portionate part  of  the  cost  upon  the  real  estate  benefited  would 
have  been  regarded  as  a  novel  exercise  of  the  legislative  power. 


iPreston  v.  Roberts,  12  Bush  57;  Beck  v.  Obst,  12  Bush  268;  Broad- 
way Baptist  Church  v.  McAtee,  8  Bush  508. 

2\Valston  V.  Nevin,  128  U.  S.  578,  supra.  Another  case  of  summary 
dispo.sition  was  in  Corry  v.  Campbell,  154  U.  S.  629,  supj-a. 

3  Shoemaker  v.  United  States,  147  U.  S.  283,  supra. 


446 


SPECIAL    ASSESSMENTS.  §    415 


But  the  adjudicated  cases  determine,  not  only  that  the  estab- 
lishment of  a  public  park  is  a  public  use,  but  that  the  judicial 
function  is  exhausted  when  this  question  is  decided,  and  that 
the  extent  to  which  such  private  property  shall  be  taken  for 
such  use  rests  wholly  in  the  legislative  diseretion.i 

§  415.  If  Assessment  is  Set  Aside,  Reassessment  May  be 
Made. Where  an  improvement  has  been  ordered  and  the  as- 
sessment made  to  pay  for  it  has  been  adjudged  invalid  or  has 
proven  ineffective  for  any  reason,  an  act  of  the  legislature  au- 
thorizing a  reassessment  in  the  taxing  district  involves  no  viola- 
tion of  the  rule  requiring  due  process  of  law,2  although  the  re- 
assessment includes  interest  on  the  unpaid  old  assessments  and 
part  of  the  expense  of  levying  them. 

In  a  later  case  involving  the  validity  of  a  reassessment  by  the 
West  Chicago  Park  Commissioners  under  the  laws  of  Illinois, 
it  was  said  to  be  no  longer  open  to  question  that,  where  a  spe- 
cial assessment  to  pay  for  a  particular  park  has  been  held  to  be 
illegal,  no  violation  of  the  Constitution  of  the  United  States 
arises  from  a  subsequent  authority  given  to  make  a  new  special 
assessment  to  pay  for  the  completed  work.3 

This  principle,  that  the  invalidity  for  any  reason  of  a  special 
assessment  does  not  release  the  property  from  the  obligation  to 
pay  its  proper  share  of  the  cost  of  the  improvement  on  the  due 
ascertainment  thereof  by  a  reassessment  lawfully  made,  is  illus- 
trated, in  the  ease  of  Norwood  v.  Baker,  infra,  Sec.  426,  where 
the  assessment  was  set  aside  as  wanting  in  due  process  of  law. 
The  court  said  that  the  legal  effect  of  the  injunction  granted  by 
it  was  only  to  prevent  the  enforcement  of  the  particular  assess- 
ment in  question.  It  left  the  village  in  its  discretion  to  take 
such  steps  as  were  within  its  power,  either  under  existing  stat- 


1  Kerr  v.  South  Park  Commissioners,  117  U.  S.  379,  supra;  Farrell  v. 
West  Chicago  Park  Commissioners,  181  U.  S.  404,  supra;  Lombard  v. 
West  Chicago  Park  Commissioners,  181  U.  S.  38,  supra. 

2  Spencer  v.  Merchant,  125  U.  S.  345,  supra. 

3  Lombard  v.  West  Chicago  Park  Commissioners,  181  U.  S.  33, 
supra;  Bellingham  Bay  Co.  v.  New  Whatcom,  172  U.  S.  314,  supra, 
affirming  16  Wash.  131. 


§    416  SPECIAL   ASSESSMENTS.  447 

utes  or  under  any  authority  which  might  thereafter  be  conferred 
upon  it,  to  make  a  new  assessment  upon  the  plaintiff's  abutting 
property  for  so  much  of  the  expense  of  opening  the  street,  as 
Avas  found  upon  due  and  proper  inquiry  to  be  equal  to  the  spe- 
cial benefits  accruing  to  the  property.! 

§  416.  Reassessment  Dependent  on  the  Local  Law. — While 
it  is  well  settled  that  a  State  may  authorize  a  new  special  as- 
sessment on  property  benefited,  to  pay  for  completed  work, 
where  the  original  assessment  has  been  held  to  be  illegal  or  de- 
fective, of  course,  such  right  of  reassessment  is  dependent  upon 
the  local  law.  Whether  a  municipal  ordinance  providing  for 
such  reassessment  is  valid,  having  regard  to  the  State  Constitu- 
tion and  laws,  is  wholly  a  State,  and  not  a  Federal  question. 

It  was  helda  by  the  Supreme  Court  that  the  decision  of  the 
Supreme  Court  of  the  State,  that  it  is  competent  on  a  new  as- 
sessment to  determine  questions  of  benefit  from  the  proof,  even 
though  in  so  doing  a  different  result  is  reached  from  that  which 
has  been  arrived  at,  when  a  former  assessment  which  has  been 
set  aside  is  made,  decides  a  local,  and  not  a  Federal,  ques- 
tion. 

In  the  absence  of  such  duly  authorized  reassessment,  it  was 
lield  by  the  Circuit  Court  of  Appeals,  that  no  recovery  can  be 
allowed  on  a  quantum  meruit  by  a  city  against  a  property 
owner  under  the  Iowa  statute,  which  provided  for  such  suit 
"notwithstanding  any  informality,  irregularity,  or  defect  of 
such  municipal  corporation  or  its  officers,"  where  the  contract 
under  which  the  work  was  done  had  been  adjudged  void  by  the 
Supreme  Court  of  the  State  as  beyond  the  constitutional  power 
of  the  city.  The  court  said  that  the  purpose  of  such  a  provi- 
sion was  to  prevent  property  owners  from  taking  advantage  of 
technical  defense,  when  the  municipality  had  exercised  its  pow- 
ers in  substantial  conformity  with  law;  but  where  a  contract 
was  adjudged  void,  it  created  no  obligation,  and  confen-ed  no 
authority  on  the  city,  in  the  absence  of  a  statute  authorizing 


1  Norwood  V.  Baker,  172  U.  S.  269,  1.  c.  293,  infra. 

2  Lombard   case,  supra,   Sec.   416. 


448  SPECIAL   ASSESSMENTS.  §   417 

reassessment  to  make  a  special  assessment  against  the  abutting 
property  for  the  cost  of  the  work  done  through  an  action  on  a 
quantum  meruit.i 

§  417.  Notice  and  Opportunity  of  Hearing. — The  general 
principle,  that  there  must  be  some  opportunity  for  hearing  at 
some  stage  of  the  procedure,  discussed  in  Chapter  XI  in  rela- 
tion to  general  taxation,  applies  with  special  force  to  local  as- 
sessments and  for  the  reason  there  explained,  that  assessments 
for  special  taxes  are  not  made  at  stated  periods  as  in  general 
taxation,  but  whenever  the  legislative  discretion  determines  that 
the  improvement  shall  be  made  at  local  expense.  There  is  there- 
fore a  necessity  for  notice  and  opportunity  for  hearing,  which 
does  not  exist  in  the  case  of  general  taxation. 

Wherever  the  cost  of  a  public  improvement  is  apportioned 
according  to  the  judgment  of  commissioners  or  other  tribunal 
as  to  the  special  benefits  accruing  to  the  property  in  the  district, 
there  must  be  notice  and  opportunity  for  hearing  allowed  to 
the  taxpayer  before  such  tribunal  on  the  question  of  the  bene- 
fits accruing  to  his  property,  and  the  amount  of  tax  to  be  as- 
sessed against  him.2  It  is  not  enough  that  he  may  by  chance 
have  notice,  or  as  a  matter  of  fact  have  a  hearing.  It  is  imma- 
terial that  the  assessment  has  in  fact  been  fairly  apportioned. 
The  constitutional  validity  of  the  law  is  to  be  decided,  not  by 
what  has  been  done  under  it,  but  by  what  by  its  authority  may 
be  done.  3  The  construction  of  the  State  statutes  by  the  State 
courts  as  requiring  notice  will,  however,  be  conclusive  upon  the 
Supreme  Court. 

But  due  process  of  law  does  not  require  in  special  assess- 
ments, any  more  than  in  general  taxation,  that  there  should 
be  a  formal  or  plenary  judicial  proceeding  or  any  interposition 
of  judicial  authority.  The  assessment  and  collection  of  taxes, 
general  and  special,  belong  to  the  legislative  and  executive,  and 


iSee  Allen  v.  Davenport,  C.  C.  A.,  8th  Circuit,  132  Fed.  209   (1904). 

2  Hagar  v.  Reclamation  District,  supra.  Sec.  319,  and  cases  cited. 

3  Stuart  v.  Palmer,  74  N.  Y.  183;   St.  Louis  t.  Ranken,  96  Mo.  497; 
Heth  v.  Radford,  96  Va.  272. 


§    418  SPECIAL   ASSESSMENTS.  449 

not  to  the  judicial,  departments  of  tlie  government.     Neither 
is  a  rehearing  or  new  trial  essential  to  due  process  of  law.^ 

The  general  rules  stated  in  Chapter  XI  as  to  the  essentials  of 
notice  apply  to  special  assessments,  subject  to  the  distinction 
stated,  that  there  is  a  reason  for  notice  and  opportunity  for 
hearing  which  does  not  exist  in  general  taxation.  The  publica- 
tion of  a  notice  that  it  is  proposed  to  present  a  petition  for  a 
public  improvement  is  a  sufficient  notification  to  those  inter- 
ested in  the  question,  when  such  notice  carries  with  it  an  op- 
portunity to  be  heard. ^ 

§  418.  Notice  and  Hearing  Under  Legislative  Apportion- 
ment.— "When  the  apportionment  is  not  made  by  commission- 
ers or  other  quasi  judicial  authority,  but  by  the  legislature, 
such  legislative  deteimiination  may  exclude  any  subsequent  hear- 
ing upon  the  question  determined.  This  question  was  decided 
by  the  Supreme  Court'  in  affirming  the  judgment  of  the  New 
York  Court  of  Appeals.  The  court  said  that  when  the  de- 
termination of  the  lands  to  be  benefited  is  intrusted  to  commis- 
sioners, its  OA\Tiers  may  be  entitled  to  notice  and  hearing  upon 
the  question  whether  their  lands  have  been  benefited,  and  how 
much.  But  the  legislature  has  the  power  to  determine  by  the 
statute  imposing  the  tax  what  lands,  which  might  be  benefited 
by  the  tax,  are  in  fact  benefited  by  it,  and  if  it  does  so,  the  de- 
termination is  conclusive  upon  the  owners  and  the  courts.  The 
owners  in  such  case  have  no  right  to  a  hearing  upon  the  ques- 
tion whether  their  lands  are  benefited,  but  only  upon  the  validity 
of  the  assessment  and  its  apportionment  among  the  different 
parcels  of  the  class  decided  upon  by  the  legislature.  This  is  in 
accordance  with  the  general  principle  that  there  is  no  right  to  a 
hearing  upon  a  question  which  has  been  determined  by  the  ex- 
ercise of  legislative  discretion. 

1  See  Chapter  XI,  "Essentials  of  Notice  and  Hearing."  See  also 
Lent  V.  Tillson,  supra.  Sec.  328;  Paulsen  v.  Portland,  149  U.  S.  30, 
supra. 

^Fallbrook  Irrigation  District  v.  Bradley,  supra,  Sec.  362;  Hagar 
V.  Reclamation  District,  supra,  Sec.  319. 

3  Spencer  v.  Merchant,  supra.  Sec.  375. 


450  SPECIAL   ASSESSMENTS.  §    418 

But  this  rule,  that  notice  and  hearing  are  not  required  where 
they  can  be  of  no  effect,  has  been  applied  not  only  to  the  legis- 
lative creation  of  the  taxing  district  and  determination  of  what 
part,  if  any,  of  the  total  cost  is  to  be  assessed  upon  the  district, 
but  further  to  the  decision  by  the  legislature  as  to  the  basis  of 
apportionment  within  the  district,  that  is,  whether  according  to 
special  benefits,  or  value,  or  area,  or  frontage.  Therefore,  if 
that  body  concludes  that  the  cost  shall  be  assessed  according 
to  special  benefits  or  according  to  value,  the  determination  of 
such  benefit  or  value  requires  notice  and  opportunity  for  hear- 
ing. But  if  the  legislature  determines  for  itself  that  an  appor- 
tionment according  to  area,  or  according  to  frontage,  corre- 
sponds to  the  benefits  received,  it  follow^s  that  the  calculation 
on  that  basis  is  a  mere  matter  of  figures,  and  no  notice  or  hear- 
ing thereon  is  required.^  It  results  therefore  that  the  estab- 
lishment of  such  a  rule  of  area  or  frontage  excludes  the  consid- 
eration of  special  benefits. 

Theoretically  this  determination  by  legislative  or  municipal 
authority  is  made  upon  investigation  of  the  special  benefits  ac- 
cruing to  all  the  property.  But  under  the  prevailing  system  of 
fixing  the  basis  of  apportionment  in  the  charter  or  enabling 
statute,  the  municipal  authorities  have  only  the  discretion  of 
determining  what  and  when  improvements  shall  be  made,  and 
the  theory  of  ''presumed  investigation"  and  "conclusive  dis- 
cretion" in  the  exercise  of  such  municipal  authority  may  prac- 
tically deprive  the  property  owner,  not  only  of  any  judicial 
protection,  but  also  of  any  hearing  upon  the  question  of  benefits 
from  the  improvement. 

This  logical  outcome  of  the  premises  was  the  occasion  of  the 
sharp  division  of  the  Supreme  Court  in  the  notable  case  of  Nor- 
wood V.  Baker.2  Although  that  decision  was  subsequently  lim- 
ited to  its  "special  facts,"  .the  re-examination   of  the  funda- 


iln  Amery  v.  Keokuk,  72  Iowa  701,  it  was  said:  "It  appears  to 
have  been  quite  uniformly  held  that  where  the  only -act  necessary  to 
ascertain  the  amount  of  the  assessment  upon  the  property  is  a  plain 
mathematical  calculation,  and  no  discretion  is  left  to  the  city  council, 
no  notice  is  necessary." 

2  Infra,  Sec.  383. 


§    419  SPECIAL   ASSESSMENTS.  451 

mental  basis  of  special  assessments  in  this  and  subsequent  cases 
has  resulted  as  hereafter  shown,  not  only  in  the  reaffirmation 
of  the  salutary  principle  that  the  judicial  authority  is  supreme 
in  enforcing  the  limitations  of  the  legislative  power,  but  also  in 
the  enforcement  of  the  right  of  the  property  owner  to  notice 
and  opportunity  for  hearing  upon  the  question  of  benefits  at 
some  stage  before  the  municipal  action  makes  the  assessment  a 
binding  charge  against  his  property. 

§  419.  Where  Court  Relief  Denied,  Some  Hearing  Essen- 
tial.— Where  the  law  denies  the  land  owners  the  right  to  ob- 
ject in  the  courts  to  an  assessment  for  a  street  improvement,  on 
the  ground  that  the  objections  are  cognizable  only  by  the  Board 
of  Equalization,  there  must  be  something  more  than  an  oppor- 
tunity to  submit  in  writing  to  the  City  Council,  sitting  as  a 
Board  of  Equalization,  all  objections  to,  and  complaints  of  such 
assessment  in  order  to  satisfy  the  due  process  of  law  guaranteed 
by  the  Fourteenth  Amendment.i 

In  this  case  the  court  said  that  the  decision  of  the  Supreme 
Court  of  Colorado,  that  the  tax  was  assessed  in  conformity  with 
the  Constitution  and  laws  of  the  State,  was  conclusive ;  but  the 
court  said  that  the  law  of  Colorado  denied  the  land  owner  the 
right  to  object  in  the  courts  to  the  assessment  on  the  ground 
that  the  objections  were  cognizable  only  by  the  Board  of  Equali- 
zation ;  that  when  the  legislature  committed  to  some  subordinate 
body  the  duty  of  determining  whether,  in  what  amount,  and 
upon  whom  it  should  be  levied,  and  of  making  its  assessment 
and  apportionment,  due  process  of  law  required  that  at  some 
stage  of  the  proceedings,  before  the  tax  became  irrevocably 
fixed,  the  taxpayer  should  have  an  opportunity  to  be  heard,  of 
which  he  must  have  notice,  either  personally,  by  publication,  or 
by  law,  fixing  the  time  and  place  of  hearing.  A  hearing  in  its 
very  essence  demanded  that  the  party  should  have  the  right 
"to  support  his  contention  by  argument,  however  brief,  and,  if 
need  be,  by  proof,  however  informal." 


1  Londoner  v.  City  and  County  of  Denver,  210  U.  S.  373,  52  L.  Ed. 
1103   (1908),  reversing  33  Colo.  104. 


452  SPECTAT.    ASSESSMENTS.  §    421 

§  420.     Hearing  Not  Essential  for  Party  Only  Contingently 

Liable. — An  Indiana  statute  providing  that  the  creation  of  a 
taxing  district  for  a  street  improvement  extending  back  there- 
from 150  feet,  and  that  back-lying  property,  that  is,  property 
fifty  feet  distant  from  the  street  and  within  150  feet,  was  so  far 
benefited  that  it  should  be  made  liable  if  the  abutting  fifty  feet 
proved  insufficient  to  pay  the  cost  of  the  improvement,  was  not 
violative  of  due  process  of  law  as  to  the  back-lying  property.^ 
The  court  said  this  contention  was  based  upon  a  misapprehen- 
sion of  the  statute.  The  amount  of  the  assessment  was  fixed  for 
both  owners  at  the  same  time,  for  the  abutting  owner  and  the 
back-lying  owner,  the  latter,  however,  being  only  contingently 
liable. 

§  421.  Hearing  Not  Required  Before  Including  Property  in 
Benefited  District. — Due  process  of  laAv  does  not  require 
notice  to  the  property  owner  nor  an  opportunity  for  hearing, 
before  a  legislative  or  municipal  authority  forms  the  taxing  dis- 
trict and  determines  the  maximum  amount  to  be  apportioned 
thereto,  provided  he  is  given  notice  and  allowed  a  hearing  as  to 
the  amount  to  be  assessed  against  his  own  property,  and  it  is 
provided  by  the  statute  or  charter,  as  construed  by  the  Supreme 
Court  of  the  State,  that  the  amount  of  taxes  which  may  be  as- 
sessed upon  any  given  parcel  shall  not  exceed  the  benefits  there- 
to. This  was  determined  by  the  Supreme  Court  in  a  case  from 
Detroit,2  where  the  court  said  that  it  was  not  necessary  for  the 
property  owner  to  have  notice  of  every  step  in  the  proceeding. 
It  is  sufficient  if  he  is  given  a  thoroughly  efficient  opportunity 
to  be  heard  to  test  the  legality  of  the  charge  upon  him  for  it  is 
only  with  the  charge  upon  him  that  he  is  concerned,  and  of 
that  alone  can  he  complain.  In  the  legality  of  that  charge  is 
necessarily  involved  the  legality  of  all  which  precedes  it  and  of 
which  it  is  the  consequence.  This  ruling,  however,  was  based 
upon  the  finding  of  the  Supreme  Court  of  the  State,  that  under 
the  statute   the   amount   of   assessment  upon   any  lot   of  land 


iC.  C.  C.  &  St.  L.  Ry.  V.  Porter,  210  U.  S.  177,  52  L.  Ed.  1012   (1908), 
affirming  38  Ind.  App.  226. 
2  Voigt  V.  Detroit,  184  U.  S.  115,  supra,  affirming  123  Mich.  547. 


§    422  SPECIAL   ASSESSMENTS.  453 

could  not  exceed  the  benefits,  and  that,  at  the  hearing  allowed 
the  property  owner,  he  could  show  that  this  rule  had  been  vio- 
lated, and  this  showing  would  have  relieved  his  land  from  the 
tax. 

§  422.  Notice  to  Parties  Liable  to  be  Assessed  in  Street 
Openings  Not  Required. — AYhere  a  statute  providing  for  the 
opening  of  streets  or  other  public  improvements  requires  notice 
to  the  parties  whose  land  is  to  be  taken  for  public  use,  and  the 
damages  paid  for  the  property  so  taken  are  assessed  as  benefits 
against  the  property  in  a  district  which  it  is  determined  will  be 
benefited  by  the  improvement,  the  fact  that  there  is  no  provi- 
sion for  giving  notice  to  the  owners  of  land  liable  to  be  assessed 
for  the  improvement  by  being  included  in  such  benefited  dis- 
trict does  not  deprive  them  of  their  property  without  due  pro- 
cess of  law. 

This  was  decided  in  another  case  from  Detroit,^  where  it  was 
argued  that  parties  liable  to  be  assessed  for  benefits  are  as  much 
interested  in  the  question  as  to  the  necessity  of  making  the  im- 
provement and  the  amount  of  compensation  to  be  paid  for  the 
land  taken  therefor  as  are  the  owners  of  the  land  taken,  and 
that  the  same  reasons  for  notice  apply  in  the  one  case  as  in  the 
other.    But  the  court  said : 

"But  whatever  weight  be  given  to  these  authorities,  the  law 
m  this  court  is  too  well  settled  to  be  now  disturbed,  that  the 
interest  of  neighboring  property  owners,  who  may  possibly 
thereafter  be  assessed  for  the  benefit  to  their  property  accru- 
ing from  opening  a  street,  is  too  remote  and  indeterminate  to 
require  notice  to  them  of  the  taking  of  lands  for  such  improve- 
ments, in  which  they  have  no  direct  interest.  The  position  of 
the  plaintiffs  in  this  particular  would  require  a  readjustment 
of  the  entire  proceedings,  and  a  determination  of  the  property 


1  Goodrich  v.  Detroit,  184  U.  S.  432,  supra,  affirming  123  Mich.  559. 
In  support  of  complainant's  contention  the  following  cases  were  cited 
and  referred  to  in  the  opinion  of  the  court,  Paul  v.  Detroit,  32  Mich. 
108;  Wells  County  v.  Fahlor,  132  Ind.  426;  State  v.  Fond-du-lac,  42  Wis. 
287;  Stuart  v.  Palmer,  74  N.  Y.  183;  Scott  r.  Toledo,  36  Fed.  385  Und 
1  L.  R.  A.  688. 


454  SPECIxVL   ASSESSMENTS.  §    423 

incidentalb'  benefited,  before  any  proceedings  are  taken  for 
the  condemnation  of  land  directly  taken  or  damaged  by  such 
improvement.  It  might  be  argued  upon  the  same  lines  that, 
■whenever  the  city  contemplated  a  public  improvement  of  any 
description,  personal  notice  should  be  given  to  the  taxpayers, 
since  all  such  are  interested  in  such  improvements  and  are  lia- 
ble to  have  their  taxes  increased  thereby.  It  might  easily  hap- 
pen that  a  whole  district  or  ward  of  a  particular  city  would  be 
incidentally  benefited  by  a  proposed  improvement,  as,  for  in- 
stance, a  public  school,  yet  to  require  personal  notice. to  be 
given  to  all  the  taxpayers  of  such  ward  would  be  an  intoler- 
able burden.  Hence  it  has  been  held  by  this  court  that  it  is 
only  those  whose  property  is  proposed  to  be  taken  for  a  pub- 
lic improvement  that  due  process  of  law  requires  shall  have 
prior  notice." 

It  will  be  observed,  however,  that  this  only  applies  to  the  no- 
tice and  hearing  before  the  taxing  district  is  made.  After  the 
improvement  is  ordered  and  the  taxing  district  determined,  the 
right  of  the  property  owner  to  notice  and  hearing  on  the  ques- 
tion of  the  validity  of  the  charge  against  him  remains,  and  is 
determined  upon  the  principles  discussed  in  the  preceding  sec- 
tion. 

§  423.  Express  Finding'  of  Benefits  Not  Required. — ^Although 
the  power  to  make  special  assessments  upon  property  for  public 
improvements  is  based  upon  the  assumption  that  such  property 
is  specially  benefited  to  the  amount  of  the  assessment,  and  the 
statute  may  authorize  such  assessment  only  upon  a  prior  de- 
termination that  the  property  assessed  will  be  thus  benefited,  it 
is  sufficient  that  the  proceedings  show  a  substantial  compliance 
with  this  requirement.  Due  process  of  law,  in  the  matter  of 
special  assessments  as  in  other  cases,  looks  to  substance  rather 
than  to  form.  Thus  a  statute  of  Michigan  provided  that  if  the 
common  council  believed  that  a  portion  of  the  city  would  be 
benefited  by  a  certain  improvement,  they  might  determine  that 
the  whole  or  any  just  proportion  of  the  cost  of  the  improvement 
should  be  assessed,  etc.,  upon  the  real  estate  deemed  to  be  thus 
benefited,  and  thereupon  they  should  by  resolution  fix  and  de- 
termine the  portion  of  the  city  benefited,  and  specify  the  amount 
to  be  assessed  upon  the  owners  of  the  real  estate  therein.     It 


§    424  SPECIAL   ASSESSMENTS.  455 

was  held^  that  a  resolution  that  the  ''common  conneil  do  hereby 
fix  and  determine  that  the  following  district  is  benefited  and 
that  there  be  assessed  upon  the  several  parcels  of  real  estate 

therein  the  amount  of  dollars  in  proportion,  as  near  as 

may  be,  to  the  advantage  which  each  lot  or  parcel  is  deemed  to 
acquire  by  this  improvement,"  was  a  substantial  if  not  a  literal 
compliance  with  the  statute.  The  court  said  that,  whether  it 
was  a  compliance  or  not,  there  was  no  want  of  due  process  of 
law,  because  under  another  provision  of  the  statute,  as  con- 
sti*ued  by  the  Supreme  Court  of  the  State,  the  property  owner 
was  entitled  to  a  hearing,  wherein  he  could  insist  that  his  prop- 
erty was  not  benefited  at  all. 

§  424.  Enforcement  of  Special  Assessments.— The  subject 
of  procedure  in  tax  collection,  as  discussed  in  Chapter  XI,  ap- 
plies also  to  special  assessments  which  are  levied  and  collected 
under  the  taxing  power.2  The  rule  requiring  due  process  of 
law  is  complied  with,  if  the  taxpayer  has  a  hearing  as  to  the 
validity  of  the  charge  upon  his  property,  at  any  stage  of  the 
proceedings.  Thus  if  the  assessment  can  only  be  enforced  by  a 
plenary  suit  or  a  more  summary  form  of  judicial  procedure, 
and  the  taxpayer  is  allowed  an  opportunity  to  set  up  any  de- 
fense as  to  the  legality  of  the  charge,  the  requirements  of  due 
process  of  law  are  satisfied.  In  some  States  the  taxpayer  is  al- 
lowed to  appear  before  the  council  or  other  municipal  au- 
thority, and  make  his  objections  both  as  to  the  necessity  of  the 
improvement,  and  also  to  the  apportionment  of  benefits  between 
the  city  and  the  district.  Then,  in  a  suit  to  enforce  the  collec- 
tion of  the  assessment,  he  is  limited  to  questions  relating  to  the 
performance  of  the  work,  and  such  limitation  when  notice  and 
opportunity  for  hearing  are  afforded  before  the  work  is  done, 
is  no  violation  of  due  process  of  law. 

It  was  said  in  a  recent  opinion  of  the  Supreme  Court,3  in  a 
suit  to  enjoin  the  collection  of  an  assessment  for  opening  a 
street,  that  the  plaintiff  could  not  urge  as  a  ground  of  injuuc- 


1  Goodrich  v.  Detroit,  184  U.  S.  432,  439,  supra. 

2  Speer  v.  Athens  (Geo.),  9  L.  R.  A.  402. 

3  Goodrich  v.  Detroit,  184  U.  S.  432,  supra. 


456  SPECIAL   ASSESSMENTS.  §    425 

tioii  that  tlie  lands  in  the  condemnation  proceeding  were  de- 
fectively described.  Not  only  was  it  a  collateral  matter  so  far 
as  plaintiff  was  concerned,  but  it  is  extremely  doubtful  whether 
a  simple  misdescription  involves  any  Federal  question  what- 
ever. 

But  it  was  held  in  a  State  courti  that  a  clause  of  a  city 
charter,  providing  that  the  owner  of  real  estate  should,  within 
sixty  days  from  the  date  of  the  issuance  of  the  tax  bill,  file  with 
the  Board  of  Public  Improvements  a  written  statement  of  all 
his  objections  to  the  validity  of  the  bill,  and  that  in  a  suit  on  the 
tax  bill  no  objection  should  be  pleaded  other  than  those  which 
had  been  so  filed,  was  void  as  a  deprivation  of  property  without 
due  process  of  law,  and  that  plaintiff  could  make  all  the  de- 
fenses to  the  tax  bill  allowed  by  law  regardless  of  such  provi- 
sion. The  court  said  in  this  case  that  there  is  a  distinction  be- 
tween requiring  a  man,  who  proposes  taking  same  affirmative 
legal  action,  to  do  so  within  a  limited  time  and  requiring  him 
to  state  in  advance  his  defenses  to  a  future  suit.  The  law  does 
not  compel  a  man  who  is  unassailed  to  pay  any  attention  to  un- 
lawful pretenses  which  are  not  asserted  by  possession  or  suit. 

§  425.  Conclusiveness  of  State  Determination. — In  the  de- 
termination of  any  question  of  fact  such  as  the  necessity  for  a 
public  improvement,  the  amount  of  special  benefit  accruing  to  the 
district,  or  valuations  in  the  apportionment  of  special  assess- 
ments the  decision  of  the  proper  State  tribunal,  in  the  absence 
of  actual  fraud  and  bad  faith,  is  conclusive.2  Erroneous  deci- 
sions on  questions  of  fact  submitted  to  such  tribunals  do  not 
violate  any  provision  of  the  Federal  Constitution.s  Even  bad 
faith  or  fraud  on  the  part  of  State  officials  making  the  assess- 


i  Barber  Asphalt  Paving  Co.  v.  Ridge,  169  Mo.  376   (1902). 

2  It  was  held  in  California,  Ramish  v.  Hartwell,  126  Cal.  443,  that 
while  the  legislature  had  no  power  to  make  the  recitals  of  bonds  is- 
sued, payable  from  proceeds  of  special  assessments,  conclusive  evi- 
dence of  the  validity  of  the  lien  for  street  improvements,  the  recitals 
could  be  made  conclusive  evidence  of  the  regularity  of  the  proceedings 
not  essential  to  jurisdiction  of  the  officers  to  create  the  assessment. 

3  Fallbrook  Irrigation  District  v.  Bradley,  164  U.  S.  112,  1.  c.  167, 
supra;  see  also  Lent  v.  Tillson,  140  U.  S.  315,  supra. 


§    426  '  SPECIAL   ASSESSMENTS.  457 

meut  involves  no  constitutional  element,  and  the  remedy  there- 
for depends  upon  the  ordinary  jurisdiction  of  courts  of  justice 
over  that  class  of  cases.  When  the  matter  comes  before  the  Su- 
preme Court  on  writ  of  error  to  the  highest  court  of  the  State, 
only  the  Federal  question  can  be  considered,  and  the  court  in 
considering  that  question  is  concluded  by  the  construction  of 
the  State  statute  by  the  State  court. i  The  same  rule,  that  the 
State  court's  construction  is  conclusive,  applies  if  the  case  is 
construed  by  the  Supreme  Court  on  appeal  from  the  United 
States  District  Court. 

§  426.  Supreme  Court  in  Norwood  v.  Baker. — The  prin- 
ciple of  the  conclusiveness  of  legislative  determination  in  fixing 
the  basis  of  apportionment  in  special  assessments  and  the  ex- 
clusion of  any  consideration  of  special  benefits  in  the  enforce- 
ment of  special  assessments  upon  such  statutory  apportionment, 
which  seemed  to  have  become  thoroughly  intrenched  in  Ameri- 
can jurisprudence,  received  a  severe  shock  from  the  decision  of 
the  Supreme  Court  in  the  case  of  Norwood  v.  Baker,  decided 
in  1898  on  appeal  from  the  United  States  Circuit  Court,  South- 
ern District  of  Ohio.2 

The  constitution  of  Ohio  authorized  the  taking  of  private  prop- 
erty for  the  purpose  of  making  public  roads,  on  paying  to  the 
owner  compensation  to  the  amount  -assessed  by  a  jury  without 
deduction  for  benefits.  The  statutes  of  Ohio  provided,  in  case 
of  the  opening  of  a  new  road,  for  a  special  assessment  by  the 
front  foot  upon  bounding  and  abutting  property  of  the  entire 
cost  and  expense  of  the  improvement,  making  no  provision  for 
the  consideration  of  special  benefits.  A  street  was  opened 
through  the  property  of  complainant  three  hundred  feet  long 

iFor  a  forcible  illustration  of  this  see  King  v.  Portland,  184  U.  S. 
61,  infra;  Voigt  v.  Detroit,  supra.  Sec.  422;  Goodrich  v.  Detroit, 
supra.  Sec.  422. 

See  also  Schaefer  v.  Werling,  188  U.  S.  516,  47  L.  Ed.  570,  aflTirming 
156  Ind.  704  (1903),  where  it  was  held  that  the  question  whether  a 
municipality,  by  refusing  to  hear  objections  to  a  public  improvement, 
was  estopped  to  collect  any  portion  of  the  cost  thereof  from  the  ob- 
jector, was  not  a  Federal  question  which  could  be  reviewed  on  writ 
of  error  to  a  State  court. 

a  172  U.  S.  209,  43  L.  Ed.  443    (1898),  affirming  74  Fed.  997. 


458  SPECIAL   ASSESSMENTS.  §    426 

and  fifty  feet  "wdde,  to  connect  two  streets  of  that  width  which 
ran  from  each  end  of  complainant's  property  in  opposite  direc- 
tions. The  jury  gave  plaintiff  $2,000  damages,  irrespective  of 
any  benefits.  The  village  then  assessed  her  with  the  cost  of 
opening  and  making  this  street,  including  the  solicitors'  and  ex- 
perts' fees  and  advertising,  in  all  $2,218.  Complainant  brought 
suit  to  restrain  the  village  from  enforcing  the  assessment.  The 
sum  awarded  by  the  jury  had  been  paid  to  the  plaintiff,  and  it 
w^as  this  sum  with  costs  and  charges  which  the  village  was  un- 
dertaking to  assess  back  upon  her.  The  Circuit  Court  granted 
a  decree  to  plaintiff  on  the  ground  that  the  assessment  was  in 
violation  of  the  Fourteenth  Amendment,  providing  that  no 
State  should  deprive  any  citizen  of  his  property  without  due 
process  of  law. 

The  Supreme  Court,  after  holding  that  the  taking  of  plain- 
tiff's land  for  the  street  w^as  under  the  power  of  eminent  do- 
main, and  that  abutting  owners  may  be  subjected  to  special  as- 
sessments to  meet  the  expenses  of  opening  public  highways  in 
front  of  their  property,  said,  by  Justice  Harlan,  i  that  such  as- 
sessments were  special  burdens  imposed  for  special  or  peculiar 
benefits  accruing  for  public  improvements;  and  if  the  State 
constitution  did  not  prohibit  it,  the  legislature  might  create  a 
new  taxing  district  and  determine  what  property  should  be  in- 
eluded  and  what  should  be  considered  benefited;  but  the  legis- 
lative power  was  not  unlimited.  It  w^as  one  thing  for  the  legis- 
lature to  prescribe  as  a  general  rule  that  property  abutting  on 
a  street  opened  by  the  public  should  be  deemed  to  have  been 
especially  benefited  by  the  improvement,  and  should  specially 
contribute  to  the  cost;  but  it  was  quite  a  different  thing  to  lay 
down  an  absolute  rule  that  such  property,  whether  benefited 
or  not,  could  be  assessed  by  the  front  foot  for  a  fixed  sum  repre- 
senting the  cost  of  the  improvement,  and  without  any  right  in 
the  property  owner  to  show  that  the  sum  was  in  excess  of  the 
benefits.  The  exaction  from  the  owner  of  any  sum  in  substan- 
tial excess  of  the  special  benefits,  was  the  taking  of  private 
property  for  public  use  without  compensation. 

It  was  not  necessary  for  plaintiff,  the  court  said,  to  show  the 

1  L.  c,  p.  278. 


§    427  SPECIAL   ASSESSMENTS.  459 

excess  of  cost  over  her  special  benefits,  as  the  assessment  was  by 
the  front  foot  irrespective  of  special  benefits,  so  that  the  assess- 
ment was  illegal  in  itself,  because  it  rested  upon  a  basis  which 
excluded  any  considerations  of  benefits.  The  decree  enjoining 
the  whole  assessment  was  therefore  the  only  proper  one.  But 
the  injunction  did  not  prevent  a  reassessment  for  such  amount 
as  could  be  assessed  against  the  property  upon  a  due  and  proper 
inquiry  as  to  the  special  benefits  accruing. 

The  court  added  that  the  assessment  was  also  invalid  under 
the  constitution  of  Ohio  which  required  that  compensation  be 
made  for  private  property  taken  for  public  use,  and  that  such 
compensation  be  assessed  without  any  deduction  for  benefits  to 
the  property  of  the  owner.  This  provision  would  be  of  little 
practical  value  if,  upon  the  opening  of  a  public  street  through 
private  property,  the  owner  could  be  assessed,  not  only  for  an 
amount  equal  to  the  benefits  received,  but  also  for  such  addi- 
tional amounts  as  would  meet  the  excess  of  expense  over  the 
benefits.^ 

§  427.  Norwood  v.  Baker  in  State  Courts  and  United  States 
Courts. — So  firmly  had  the  rule  of  legislative  conclusiveness 
become  established  in  the  different  States  that  this  decision  in 
many  places  put  a  stop  to  public  work,  especially  in  localities 
where  the  area  and  frontage  rules  were  established  by  statute 
of  city  charters  excluding  the  consideration  of  special  benefits 
in  individual  cases.2  The  Supreme  Court  of  the  District  of 
Columbia  held  that  the  decision  invalidated  all  procedures  which 
did  not  provide  a  judicial  inquiry  as  to  special  benefits. 


1  Justice  Brewer,  with  whom  Justice  Shiras  and  Gray  concurred,  dis- 
sented on  the  ground,  among  others,  that  when  a  public  improvement 
has  been  made,  it  is,  beyond  question,  a  legislative  function  to  deter- 
mine conclusively  the  area  benefited  thereby.  The  opinion  of  the  ma- 
jority, he  said,  went  so  far  as  to  hold  that  the  legislative  determina- 
tion is  not  conclusive,  and  that  in  all  cases  there  must  be  a  judicial 
inquiry  as  to  the  area  in  fact  benefited,  adding:  "We  have  often  held 
the  contrary,  and  I  think  should  adhere  to  those  oft-repeated  rul- 
ings." 

^Fay  v.  Springfield,  94  Fed.  409;  Loeb  v.  Trustees,  91  Fed.  37; 
Charles  v.  Marion  City,  98  Fed.  166;  Cowley  t.  Spokane,  99  Fed.  840; 
Davidson  v.  Wight,  16  D.  C.  App.  371;  Lyon  v.  Tonawanda,  98  Fed. 
361;   Parker  v.  Detroit,  103  Fed.  357. 


460  SPECIAL   ASSESSMENTS.  §    427 

In  some  of  the  State  courts  this  construction  was  given  to  the 
decision,  while  others  limited  the  ease  to  the  special  facts,  in- 
volving both  the  power  of  eminent  domain  and  the  right  of  as- 
sessment for  public  improvements,  and  held  that  their  method 
of  apportionment  of  costs  by  the  area  and  frontage  rules  did 
not  necessarily  come  within  the  scope  of  the  judgment.  The  lat- 
ter was  the  decision  in  Missouri,^  Michigan,^  North  Dakota,^ 
Illinois,*  Pennsylvania,^  New  York,''  California,^  "Wisconsin,®  and 
Kentucky.^  In  Indiana^"  it  was  held  by  the  Supreme  Court  that 
a  statute,  which  authorized  the  improvement  of  a  street  and  the 
assessment  of  the  cost  under  the  frontage  rule,  was  made  valid 
by  the  allowance  to  property  owners  of  opportunity  for  a  hear- 
ing as  to  special  benefits,  the  frontage  rule  being  considered  to 
raise  only  a  prima  facie  standard.  It  was  said,  however,  that 
prior  to  the  decision  in  Norwood  v.  Baker  the  ordinance  would 
have  been  held  invalid  without  the  provision  for  hearing. 

The  Supreme  Court  of  Massachusetts  held^^  that  the  assess- 
ment upon  the  property-owners  of  the  expense  of  watering  the 
streets  under  the  frontage  rule  was  approximately  an  accurate 
method  of  determining  the  benefits,  and  therefore  distinguished 
the  case  from  Norwood  v.  Baker. 

The  Supreme  Court  of  Minnesota,^-  following  Norwood  v. 
Baker,  held  that  the  principle  involved  was  not  confined  to  a 
street  opening  case,  but  extended  to  all  cases  of  local  public  im- 
provements ;  that  the  real  principle  involved  was  that  of  having 


1  French  v.  Barber  Asphalt  P.  Co.,  158  Mo.  534. 

2  Cass  Farm  Co.  v.  Detroit,  124  Mich.  433. 

3  Webster  v.  Fargo,  9  N.  Dak.  208. 

■iFarrell  v.  West  Chicago  Park  Commissioners,  182  III.  250. 

5  Harrisburg  v.  McPherran,  200  Pa.  343;   aliter,  Scranton  v.  Levers, 
9  Pa.  Dist.  176. 

6  Conde  v.  City  of  Schenectady,  164  N.  Y.  258. 
7Hadley  v.  Dague,  130  Cal.  207. 

sGleason  v.  Waukesha  Co.,  103  Wis.  225. 

9  City  of  Augusta  v.  McKibben,  22  Ky.  Law  Rep.  1224. 

10  Adams  v.  Shelbyville,  154  Ind.  467. 

11  Sears  v.  Boston,  173  Mass.  71. 

12  Ramsey  County  v.  Robt.  P.  Lewis  Co.,  53  L.  R.  A.  421,  1.  c.  p.  423. 


§    427  SPECIAL   ASSESSMENTS.  461 

a  basis  of  apportionment  upon  the  abutting  property,  which 
should  exact  contribution  only  in  consideration  of  special  bene- 
fits, and  that  this  appeared  from  the  dissenting  opinion  of  Jus- 
tice Brewer.  The  court  therefore  held  invalid  the  assessment 
of  the  annual  frontage  taxes  for  water  pipes  laid  in  front  of  the 
lots  assessed,  saying: 

"Prior  to  the  appearance  of  the  case  of  Norwood  v.  Baker, 
perhaps  the  trend  of  the  decisions  in  this  country  was  in  sup- 
port of  the  theory  that  the  legislative  power  in  respect  to 
special  assessments  was  practically  unlimited,  and  since  that 
case  was  decided,  the  State  courts  have  not  been  agreed  as  to 
its  scope  and  meaning.  Probably  no  decision  emanating  from 
the  Supreme  Federal  Court  for  many  years  has  been  so  sweep- 
ing and  at  the  same  time  so  imperfectly  understood  and  ap- 
plied." 

The  court  said  in  concluding,  at  page  427 : 

"The  stake  driven  by  the  decision  in  Norwood  v.  Baker  is 
timely.  Judicial  expression  on  the  subject  w^as  indefinite. 
There  was  a  tendency  to  lose  sight  of  the  equitable  basis  which 
justifies  the  assessment  upon  private  property  of  the  cost  of 
public  improvements.  The  arbitrary  act  of  the  legislative 
body  "was  often  accepted  as  final  without  regard  to  its  justice. 
It  is  to  be  hoped  that  the  highest  court  of  the  land  has  spoken 
finally  and  will  not  recede  from  its  position."^ 


1  After  the  above  decision  was  announced,  the  Supreme  Court  de- 
cided the  case  of  French  v.  Barber  Asphalt  Paving  Co.,  and  the  other 
cases  in  181  U.  S.,  infra.  Thereupon  the  Minnesota  court,  by  the  same 
judge,  on  June  18,  1901,  sustained  a  motion  for  rehearing  and  reversed 
the  former  decision,  saying  that  if  the  case  was  one  of  final  jurisdiction 
of  that  court  it  would  adhere  to  its  former  opinion.  But  after  consid- 
ering the  decision  of  the  Supreme  Court  in  French  v.  Barber  Asphalt 
Paving  Co.  and  the  other  cases  concurrently  decided,  wherein  that 
court  attempted  to  qualify  and  limit  the  principles  applied  in  Nor- 
wood V.  Baker,  it  was  in  doubt  as  to  the  effect  of  these  holdings.  It 
did  not  appear  that  the  Supreme  Court  had  directly  denied  the  sound- 
ness of  the  rule  announced,  yet  it  seemed  to  intend  to  hold  that  "the 
principle  will  not  apply  when  in  conflict  with  the  systems  of  taxation 
as  adopted  by  a  State,  unless,  in  some  special  case,  peculiar  and  ex- 
traordinary hardship  is  the  result.     In  other  words,  it  is  not  tho  prin- 


462  SPECIAL   ASSESSMENTS.  §    428 

§  428.    Norwood  v.  Baker  Limited  to  Its  * '  Special  Facts. '  '— 

But  the  far-reaching  character  of  the  decision  in  Norwood  v. 
Baker  and  the  widely  different  judicial  views  as  to  its  effect  re- 
sulted in  a  number  of  cases  from  different  parts  of  the  country, 
involving  the  validity  of  systems  of  procedure  under  the  area 
and  frontage  rules  of  apportionment.  These  were  appealed  to 
the  court,  and  having  been  advanced  upon  the  docket,  were 
heard  together  at  the  October  term,  1900.  One  of  them^  was 
from  Missouri,  wherein  the  Supreme  Court  of  that  State  had  de- 
clined to  apply  the  doctrine  of  Norwood  v.  Baker  to  tax  bills 
levied  according  to  the  frontage  rule  for  street  improvements 
in  Kansas  City.  Another  had  been  appealed  from  a  similar  de- 
cision upon  the   frontage  rule  by  the   Supreme   Court  of  the 


ciple  or  rule  of  assessment  which  is  the  test  of  the  validity  of  the 
State  act,  but,  rather,  the  effect  of  the  application  of  the  rule  in  par- 
ticular cases.  It  may  be  a  sound  rule  in  one  case,  and  not  in  another. 
It  would  be  useless  at  this  time  to  further  attempt  to  define  the  posi- 
tion of  the  Federal  court  as  expressed  in  its  later  decisions."  The 
court  said  that  its  own  decisions  had  sustained  this  method  of  assess- 
ment. State  v.  Robert  P.  Lewis  Co.,  72  Minn.  87  and  42  L.  R.  A.  639. 
It  therefore  reversed  its  decision,  being  influenced  by  the  fact  that 
the  property  owner  might  have  its  final  conclusion  reviewed  by  the 
Supreme  Court  of  the  United  States  on  writ  of  error,  but  if  it  ad- 
hered to  its  former  decision  the  judgment  would  be  conclusive.  53 
L.  R.  A.  428. 

The  decision  in  Norwood  v.  Baker  was  followed  and  applied  in 
Texas,  Hutcheson  v.  Storrie,  92  Texas  685,  and  45  L.  R.  A.  289,  where 
the  frontage  rule  to  the  exclusion  of  special  benefits  was  held  invalid. 
But  in  Ohio,  Schroder  v.  German,  47  L.  R.  A.  156,  the  court  refused  to 
declare  a  frontage  assessment  invalid,  holding  that  the  Norwood  case 
did  not  control,  because  it  appeared  that  an  issue  was  made  by  the 
pleadings,  whether  the  land  assessed  was  in  fact  benefited,  which 
issue  was  found  by  the  trial  court  against  the  complainant,  and 
furthermore  it  was  neither  shown  nor  claimed  that  the  expense  was 
not  fairly  apportioned  between  plaintiff's  property  and  other  property 
affected  by  the  assessment.  It  was  not  necessary  that  the  council's 
proceedings  should  show  affirmatively  that  the  question  of  benefit  to 
the  lands  was  taken  into  consideration  in  the  levying  of  the  assess- 
ment. 

1  French  v.  Barber  Asphalt  Co.,  181  U.  S.  324,  supra. 


§    428  SPECIAL   ASSESSMENTS.  463 

State  of  North  Dakota.^  The  others  were  two  frontage  rule 
cases,  one  from  the  Supreme  Court  of  Michigan^  and  the  other 
from  the  Supreme  Court  of  Illinois,^  and  an  area  rule  case,  in- 
volving the  construction  of  a  sewer,  from  the  Supreme  Court  of 
Missouri.* 

In  all  of  these  cases  the  State  courts  had  affirmed  the  validity 
of  the  tax  bills  or  tax  procedure,  declining  to  apply  the  rule  of 
Norwood  V.  Baker,  so  that  in  each  case  a  writ  of  error  was  taken 
out  by  the  party  affirming  that  he  was  deprived  of  his  property 
without  due  process  of  law.  At  the  same  time  there  were  pre- 
sented to  the  court  cases  appealed  from  the  United  States  Cir- 
cuit Courts  in  the  Northern  District  of  New  York^  and  the 
Eastern  District  of  Michigan,^  wherein  those  courts  had  en- 
joined the  enforcement  of  the  frontage  rule,  and  also  a  case 
from  the  Court  of  Appeals  of  the  District  of  Columbia,^  which 
had  applied  the  rule  of  Norwood  v.  Baker,  under  the  Fifth 
Amendment  to  the  Constitution  and  held  invalid  the  procedure 
established  by  Act  of  Congress  for  the  opening  and  improve- 
ment of  streets  in  that  jurisdiction.  In  all  of  these  cases  the 
Supreme  Court,  opinion  by  Judge  Shiras,  held  that  the  tax 
assessments  apportioned  according  to  the  frontage  and  area 
rule,  with  no  hearing  as  to  special  benefits,  involved  no  depriva- 
tion of  property  without  due  process  of  law;  that  the  case  of 
Norwood  V.  Baker  was  to  be  ''limited  to  its  special  facts"  and 
was  not  intended  to  establish  the  principle,  indeed  it  did  not 
necessarily  import,  that  the  assessment  of  the  cost  of  a  local  im- 
provement against  abutting  property  according  to  frontage  was 
invalid  unless  the  law  provided  for  a  preliminary  hearing  as  to 
the  benefits  to  be  derived  by  the  property.     The  court  said  its 

1  Webster  v.  Fargo,  181  U.  S.  394,  45  L.  Ed.  912  (1901),  affirming 
82  N.  W.    (N.  Dak.)   732. 

2  Cass  Farm  Co.  v.  Detroit,  181  U.  S.  396,  45  L.  Ed.  916  (1901), 
reversing  103  Fed.   357. 

3  Farrell  v.  West  Chicago  Park  Commissioners,  181  U.  S.  404,  supra. 
•*  Shumate  v.  Heman,  181  U.  S.  402,  45  L.  Ed.  922  (1901),  supra. 

•-' Tonawanda  v.  Lyon,  181  U.  S.  389,  45  L.  Ed.  908   (.1901). 
"Detroit  V.  Parker,  181  U.  S.  399,  45  L.  Ed.  916   (1901). 
7  Wight  v.  Davidson,  181  U.  S.  371,  supra. 


464  SPECIAL   ASSESSMENTS.  §    428 

legal  effect  was  only  to  prevent  the  enforcement  of  the  particular 
assessment  in  question,  adding,  p.  345 : 

''That  this  decision  did  not  go  to  the  extent  claimed  by  the 
plaintiff  in  error  in  this  case  is  evident,  because  in  the  opinion 
of  the  majority  it  is  expressly  said  that  the  decision  was  not 
inconsistent  with  our  decisions  in  Parsons  v.  District  of  Co- 
lumbia, 170  U.  S.  45,  56,  and  in  Spencer  v.  Merchant,  125  U. 
S.  345,  357: 

"It  may  be  conceded  that  courts  of  equity  are  always  open 
to  afford  a  remedy  M'here  there  is  an  attempt,  under  the  guise 
of  legal  proceedings,  to  deprive  a  person  of  his  life,  liberty  or 
property,  without  due  process  of  law.  And  such,  in  the  opin- 
ion of  the  majority  of  the  judges  of  this  court,  was  the  nature 
and  effect  of  the  proceedings  in  the  case  of  Norwood  v.  Ba- 
ker. "^ 


1  Justice  Harlan  with  Justices  McKenna  and  White  dissented  in  a 
vigorous  opinion.  As  Justices  Shiras  and  Gray  concurred  in  the  dis- 
senting opinion  of  Justice  Brewer  in  Norwood  v.  Baker,  it  follows 
that  Justices  Fuller,  Peckhani  and  Brown,  who  concurred  in  the 
opinion  in  Norwood  v.  Baker,  concurred  also  in  these  decisions  limit- 
ing it  to  its  "special  facts."  It  was  said  in  the  dissenting  opinion,  pp. 
352,  353:  "Does  the  court  intend  in  this  case  to  overrule  the  principles 
announced  in  Norwood  v.  Baker?  Is  it  the  purpose  of  the  court,  in 
this  case,  to  overrule  the  doctrine  that  taxation  of  abutting  property 
to  meet  the  cost  of  a  public  improvement — such  taxation  for  an 
amount  in  substantial  excess  of  the  special  benefits  received — will,  to 
the  extent  of  such  excess,  be  a  taking  of  private  property  for  public 
use  without  compensation?  That  taxation  of  abutting  property  to 
meet  the  cost  of  a  public  improvement  or  any  substantial  excess  of 
the  special  benefits  is,  to  the  extent  of  such  excess,  a  taking  of  private 
property  for  public  use  without  compensation?  The  opinion  of  the 
majority  is  so  worded  that  I  am  not  able  to  answer  these  questions 
with  absolute  confidence.  It  is  difficult  to  tell  just  how  far  the  court 
intends  to  go.  But  I  am  quite  sure,  from  the  intimations  contained 
in  the  opinion,  that  it  will  be  cited  by  some  as  resting  upon  the  broad 
ground  that  a  legislative  determination  as  to  the  extent  to  which  land 
abutting  on  a  public  street  may  be  specially  assessed  for  the  cost  of 
paving  such  street  is  conclusive  upon  the  owner,  and  that  he  will  not 
be  heard,  in  a  judicial  tribunal  or  elsewhere,  to  complain,  even  if, 
under  the  rule  prescribed,  the  cost  is  in  substantial  excess  of  any 
special  benefits  accruing  to  his  property,  or  even  if  such  cost  equals 
or  exceeds  the  value  of  the  property  specially  taxed." 


§    428  SPECIAL   ASSESSMENTS.  465 

The  court  said,  in  the  frontage  case  from  Kansas  City,  that 
there  was  no  showing  of  any  difference  in  the  value  of  the  lots 
abutting  on  the  improvement,  and  that  the  procedure  followed 
had  been  orderly,  under  the  scheme  of  local  improvements  pre- 
scribed by  the  legislature  and  approved  by  the  courts  of  the 
State  as  consistent  with  constitutional  principles. 

In  the  case  from  the  District  of  Columbia^  the  court  stated 
that  the  District  Court  erred  in  deciding  that  it  was  intended, 
in  the  Norwood  case,  to  overrule  Bauman  v.  Ross  and  Parsons 
V.  District  of  Columbia.  It  by  no  means  necessarily  followed 
that  the  construction  eonsistenth^  put  upon  the  Fifth  Amend- 
ment, maintaining  the  validity  of  the  Acts  of  Congress  relating 
to  public  improvements  within  the  District  of  Columbia,  was 
to  be  deemed  overruled  by  a  decision  concerning  the  operation 
of  the  Fourteenth  Amendment  in  controlling  State  legislation. 
The  court  held  also  that  the  District  Court  erred  in  its  construc- 
tion of  the  opinion  in  Norwood  v.  Baker,  and  that  it  was  ''lim- 
ited to  its  special  facts.  "^ 

In  another  series  of  cases,3  wherein  the  Circuit  Court  for  the 
Northern  District  of  New  York  under  authority  of  Noi-wood  v. 
Baker  had  granted  an  injunction  restraining  the  enforcement 
of  an  assessment  for  grading  and  paving  a  street  according  to 
the  frontage  rule,  the  court  said,  at  p.  391,  in  reversing  the 
judgment  of  the  Circuit  Court,  the  same  judges  dissenting : 

1  Wight  V.  Davidson,  supra. 

2  The  same  Justices  dissented,  Justice  Harlan  saying  that  he  could 
not  understand  what  was  meant  by  "special  facts"  or  an  "actual  de- 
privation of  property,"  and  concluded  as  follows,  p.  388: 

"I  submit  that  if  the  present  case  is  to  be  distinguished  from  Nor- 
wood V.  Baker,  it  should  be  done  upon  grounds  that  do  not  involve  a 
misapprehension  of  the  scope  and  effect  of  the  decision  in  that  case. 
If  Congress  can,  by  direct  enactment,  put  a  special  assessment  upon 
private  property  to  meet  the  entire  cost  of  'a  public  improvement  made 
for  the  benefit  and  convenience  of  the  entire  community,  even  if  the 
amount  so  assessed  be  in  substantial  excess  of  special  benefits,  and 
therefore,  to  the  extent  of  such  excess,  confiscate  private  property  for 
public  use  without  compensation,  it  should  be  declared  in  terms  so 
clear  and  definite  as  to  leave  no  room  for  doubt  as  to  what  is  In- 
tended." 

3  Tonawanda  v.  Lyon,  181  U.  S.  389,  supra. 


466  SPECIAL    ASSESSMENTS.  §    429 

"It  was  not  the  intention  of  the  court,  in  that  case  (Nor- 
wood V.  Baker),  to  hold  that  the  general  and  special  taxing 
systems  of  the  States,  however  long  existing  and  sustained  as 
valid  by  their  courts,  have  been  subverted  by  the  Fourteenth 
Amendment  of  the  Constitution  of  the  United  States.  The 
purpose  of  that  amendment  is  to  extend  to  the  citizens  and 
residents  of  the  States  the  same  protection  against  arbitrary 
State  legislation  affecting  life,  liberty  and  property,  as  is  af- 
forded by  the  Fifth  Amendment  against  similar  legislation  by 
Congress.  The  case  of  Norwood  v.  Baker  presented,  as  the 
judge  in  the  court  in  the  present  case  well  said,  'considera- 
tions of  peculiar  and  extraordinary  hardships,'  amounting,  in 
the  opinion  of  a  majority  of  the  judges  of  this  court,  to  actual 
confiscation  of  private  property  to  public  use,  and  bringing 
the  case  fairly  within  the  reach  of  the  Fourteenth  Amend- 
ment." 

In  yet  another  of  the  series  of  cases,  it  was  said  in  the  pre- 
vailing opinion:!  "We  ^agree  with  the  Supreme  Court  of  North 
Dakota  in  holding  that  it  is  within  the  power  of  the  legislature 
of  the  State  to  create  special  taxing  districts  and  to  charge  the 
cost  of  a  local  improvement  in  whole  or  in  part  upon  the  prop- 
erty in  said  districts,  either  according  to  valuation  or  superficial 
area,  or  frontage,  and  that  it  was  not  the  intention  of  this  court 
in  Norwood  v.  Baker  to  hold  otherwise." 

§  429.  Municipal  Bonds  Payable  from  Assessments  Held 
Valid  Notwithstanding  Invalidity  of  Assessment. — It  is  a  com- 
mon practice  for  municipalities,  when  authorized  by  statute  or 
charter,  to  provide  for  the  payment  of  assessments  for  local  im- 
provements in  annual  installments,  and  in  some  States  bonds 
are  issued  by  the  municipality  payable  from  the  proceeds  of  the 
assessments.  The  Supreme  Court  decided,2  in  a  suit  growing 
out  of  the  decision  in  Norwood  v.  Baker,  supra,  Sec.  426,  that 


1  Webster  v.  Fargo,  181  U.  S.  395,  supra. 

2  Loeb  V.  Columbia  Township  Trustees,  179  U.  S.  472,  supra.  In 
Warner  v.  City  of  New  Orleans,  31  C.  C.  A.  5tli  Cir.  238,  87  Fed.  829 
(1898),  defendant  had  purchased  the  drainage  system  then  in  process 
of  construction  from  the  contractor,  paying  therefor  in  warrants  and 
covenanting  to  facilitate  the  application  of  the  drainage  assessments 
to  the  payments  of  the  warrants.     The  city  abandoned  the  work,  and 


§  429  SPECIAL  ASSESSMENTS.  467 

the  invalidity  of  the  method  of  assessment  adopted  did  not  in- 
validate the  bonds  provided  for  in  another  section  of  the  same 
statute,  and  therefore  constituted  no  defense  to  the  munici- 
palit}^  in  a  suit  upon  the  bonds.  The  Ohio  statute,  under  which 
the  assessment  was  made  which  was  held  invalid  in  Norwood  v. 
Baker,  provided  in  another  section  for  the  issue  of  township 
bonds,  which  were  payable  from  the  proceeds  of  the  assessments, 
as  they  were  paid  in  five  annual  installments  provided  by  the 
statute.  The  township  refused  to  pay  these  bonds,  setting  up 
among  other  defenses  that  the  law  under  which  the  bonds  were 
issued  had  been  held  void  by  the  Supreme  Court  in  Norwood 
V.  Baker,  and  this  defense  was  sustained  by  the  United  States 
Circuit  Court.  The  decision  was  reversed  in  an  opinion  by  Jus- 
tice Harlan,  with  no  dissent.  It  did  not  follow,  said  the  court, 
that,  because  the  assessment  was  invalid,  in  that  it  precluded  in- 
quiry in  respect  to  special  benefits,  the  township  could  escape 
liability  on  the  bonds.  The  power  to  issue  the  bonds  to  raise  the 
money,  and  the  mode  in  which  the  township  should  raise  the 
necessary  sums  to  pay  the  bonds  when  due,  as  well  as  the  inter- 
est accruing  thereon  from  time  to  time,  were  distinct  and  sep- 
arable matters.  It  was  admitted  that  there  was  some  ground 
for  saying  that  the  legislature  would  not  have  passed  the  act 
without  the  section  providing  for  assessment  by  the  frontage 
rule ;  but  the  court  thought  that  this  was  not  so  manifestly  the 
case  as  to  justify  the  refusal  to  execute  the  valid  part  of  the 
statute,  when  that  could  be  done  in  harmony  with  the  intention 
of  the  legislature  to  have  the  improvement  in  question  made  by 
the  township,  and  the  cost  met  by  issuing  bonds. 

It  was  argued  that  the  bonds  were  payable  only  out  of  the 
proceeds  of  the  assessment,  and  on  this  point  the  court  said, 
p.  490: 

"The  relief  asked  and  the  only  relief  that  could  be  granted 
in  the  present  action,  is  a  judgment  for  mone.v.  If  the  town- 
ship should  refuse  to  satisfy  a  judgment  rendered  against  it, 


the  State  court  decided  that  the  assessments  were  not  collectible  be- 
cause the  property  assessed  would  not  be  benefited.  On  appeal  the 
city  was  held  estopped  to  deny  the  validity  of  the  assessments  and 
was  liable  to  account  for  the  fund  as  if  collected. 


468  SPECIAL   ASSESSMENTS.  430 

and  if  appropriate  proceedings  are  then  instituted  to  compel 
it  to  make  an  assessment  to  raise  money  sufficient  to  pay  the 
bonds,  the  question  will  then  arise  whether  the  mode  pre- 
scribed by  the  third  section  of  the  act  of  1893  can  be  legally 
pursued ;  and  if  not,  whether  the  laws  of  the  State  do  not  au- 
thorize the  adoption  of  some  other  mode  by  which  the  defend- 
ant can  be  compelled  to  meet  the  obligations  it  assumed  under 
the  authority  of  the  legislature  of  the  State.  All  that  we  now 
decide  is  that,  even  if  the  third  section  of  the  State  statute  in 
question  be  stricken  out  as  invalid,  the  petition  makes  a  case 
entitling  the  plaintiff  to  a  judgment  against  the  township. 
"Whether  a  judgment  if  rendered  could  be  collected,  without 
further  legislation,  depends  upon  considerations  that  need  not 
now  be  examined." 

The  enforcement  of  such  a  judgment  would  depend  upon  the 
construction  of  the  statute  authorizing  the  issue  of  the  bonds, 
that  is,  whether  the  statute  provided  that  the  special  assess- 
ments alone  should  be  applied  to  the  payment  of  the  bonds,  or 
the  bonds  were  general  obligations  of  the  township  with  a  spe- 
cial charge  upon  the  proceeds  of  the  assessments.^  A  judgment 
upon  such  bonds  has  the  effect  of  a  judicial  determination  that 
the  demand  of  the  judgment  creditor  is  valid  and  what  amount 
is  due  him,  but  it  gives  him  no  new  rights  in  respect  to  the 
means  of  payment.  This  would  depend,  as  stated,  upon  the 
construction  of  the  statement  under  which  the  bonds  are  issued. 

§  430.  Supreme  Court  in  King-  v.  Portland.— In  striking 
contrast  with  the  division  of  the  court  in  Norwood  v.  Baker  and 
in  the  subsequent  limitation  of  that  case  to  its  "special  facts," 
was  the  unanimous  opinion  of  the  court  sustaining  the  enforce- 
ment of  a  special  assessment  under  the  frontage  rule  in  the  city 
of  Portland,  Oregon.  The  opinion  in  this  case  was  delivered 
by  Justice  McKenna,  who  concurred  in  the  opinion  in  Norwood 
V.  Baker,  and  in  the  dissent  of  Justice  Harlan  in  the  subsequent 
•limitation  of  tliat  case  to  its  "special  facts. "2 


iSee  United  States  v.  Ft.  Scott,  99  U.  S.  152,  25  L.  Ed.  348  (1879); 
United  States  v.  County  of  Macon,  99  U.  S.  582,  25  L.  Ed.  331    (1879). 

2  King  V.  Portland,  184  U.  S.  61,  46  L.  Ed.  431  (1902),  affirming  38 
Oregon  402.  The  official  syllabus  Is  significant:  "Under  the  facts  of 
this  case  and  the  interpretation  given  to  the  charter  of  the  city  of 


§    430  SPECIAL   ASSESSMENTS.  469 

The  charter  of  Portland  provided  that  the  city  council  should 
have  no  authority  to  improve  any  streets,  until  they  should 
pass  a  resolution  of  intention  so  to  do  describing  the  improve- 
ment and  this  resolution  should  be  posted  and  published  for 
ten  days,  the  notice  stating  the  fact  of  the  passage,  the  char- 
acter of  the  work  proposed  and  the  time  within  which  written 
objections  or  remonstrances  would  be  received.  If  remon- 
strances were  not  filed  by  a  majority  of  the  property  owners, 
the  common  council  was  to  be  deemed  to  have  acquired  jurisdic- 
tion. When  the  work  should  be  substantially  completed,  the 
city  engineer  must  file  with  the  board  of  public  works  a  written 
acceptance  of  the  completed  work.  The  board  was  then  to  ad- 
vertise the  place  and  time  when  objections  to  the  improvement 
might  be  heard,  and  any  person  might  at  that  time  appear  and 
object  to  the  acceptance.  If  there  were  no  objections,  or  if  the 
objections  were  overruled,  the  board  was  to  report  to  the  coun- 
cil, and  thereupon  an  assessment  was  to  be  made  and  the  cost 
apportioned,  so  that  each  lot  abutting  on  the  street  should  be 
liable  for  the  full  cost  of  making  the  improvement  upon  one- 
half  of  the  street  in  front  and  abutting  upon  it  and  also  its  pro- 
portionate share  of  improving  the  intersections  of  two  streets. 

The  Supreme  Court  said  that  the  finding  of  the  State  court 
had  narrowed  their  inquiry.  It  must  be  accepted  as  true  that 
the  improvement  was  a  benefit  to  the  abutting  property  equal 
to  the  cost  of  the  improvement,  and  that  the  council  apportioned 
the  cost  according  to  the  benefits.  Their  inquiry  was  therefore 
confined  to  the  validity  of  the  rule  of  assessment  and  the  ques- 
tion whether  the  plaintiffs  in  error  were  afforded  an  opportunity 
to  contest  the  assessment. 

Upon  the  question  of  notice,  it  was  found  that  the  charter 
as  construed  by  the  State  court  provided  for  successive  notices 
of  the  proposed  improvement,  the  inviting  of  proposals  for  do- 
ing the  work,  touching  the  acceptance  of  the  work  and  the  entry 
of  the  assessment.    Ample  opportunity  was  thus  afforded  the 


Portland  by  the  Supreme  Court  of  the  State  of  Oregon,  this  court  is 
of  the  opinion  that  the  plaintiffs  in  error  have  not  been  deprived  of 
their  property  without  due  process  of  law." 


470  SPECIAL   ASSESSMENTS.  §    430 

owner  to  appear  aud  interpose  the  constitutional  objec- 
tions. 

It  was  strongly  urged  that  the  basis  of  apportionment  was 
itself  invalid,  in  that  it  made  no  taxing  district  but  considered 
each  lot  by  itself,  compelling  each  to  bear  the  burden  of  the 
improvement  in  front  of  it  without  reference  to  any  contribu- 
tion to  be  made  by  other  property.  Accidental  circumstances 
might  cause  the  greater  part  of  the  cost  to  be  expended  in  front 
of  a  single  lot,  although  those  circumstances  might  not  at  all 
contribute  to  make  the  improvement  more  valuable  to  the  lot 
thus  specially  burdened,  but  perhaps  even  have  the  opposite 
consequence. 

But  the  court  replied: 

*'  *If  accidental  circumstances'  may  take  from  the  rule  the 
effect  of  apportionment,  they  do  not  prevent  the  application 
of  the  rule  to  cases  where  such  circumstances  do  not  exist. 
Where  they  exist  they  can  be  properly  dealt  with.  Presum- 
ably the  rule  of  the  Portland  charter  was  prescribed  by  the 
legislature  in  view  of  the  conditions  which  existed  in  that  city 
and  in  the  expectation  that  the  common  council  would  so  ex- 
ercise its  power  and  judgment  in  the  creation  of  districts  that 
the  cost  of  the  improvement  ordered  would  be  apportioned  by 
the  application  of  the  rule  prescribed.  The  expectation  has 
been  justified  by  the  experience  of  the  city.  Under  the  rule 
of  the  charter,  the  opening  and  grading  of  the  streets  have 
been  done  for  years,  and  the  courts  have  been  watchful  against 
abuses, — ^Avatchful  to  protect  the  rights  of  property  owners."^ 


2  The  opinion  in  this  case  cites  the  opinion  in  Oregon  and  Cal.  Rail- 
road Co.  V.  Portland,  25  Or.  229  and  22  L.  R.  A.  713,  as  illustrative  of 
the  point  that  "accidental  circumstances"  would  warrant  the  courts  in 
protecting  the  property  owner.  The  court  there  enjoined  the  enforce- 
ment of  an  ordinance  for  a  special  assessment  levied  upon  the  frontage 
rule  to  pay  for  the  construction  upon  a  street  of  an  elevated  roadway. 
It  said  that  the  presumption  was  that  the  council  had  done  its  duty, 
but  that  this  presumption  was  overcome  by  the  fact  that  the  rule 
prescribed  in  the  particular  case  was  so  grossly  and  palpably  unjust 
and  oppressive  as  to  show  that  the  proper  authority  had  never  de- 
termined the  case  on  the  principles  of  taxation.  It  was  proven  that 
the  property  was  so  situated  it  could  receive  no  benefit  from  the  im- 
provement, which  had  never  been  used  by  the  public  or  by  the  plain- 
tiffs, and,  the  court  found,  never  would  be,  so  that  there  was  no 
foundation  for  the  exercise  of  discretion  by  the  council. 


§    432  SPECIAL   ASSESSMENTS.  471 

§  431,  Assessment  Lawfully  Levied  for  Benefits  Already 
Accrued. — A  special  assessment  may  be  levied  upon  an  exe- 
cuted consideration,  that  is,  for  a  public  work  already  done. 
There  was,  therefore,  no  objection  that  the  special  assessment 
levied  was  for  special  benefits  long  since  accrued,  and  that  the 
statute  was  retrospective  in  its  operation.^  In  this  case  it  was 
also  said  that  it  was  no  objection  that  the  complainant  and  oth- 
ers were  given  no  opportunity  to  be  heard  as  to  the  amount  of 
benefits  conferred  upon  them,  and  the  proper  adjustment  of 
tax,  as  the  assessment  and  classification  of  the  property  were 
fixed  and  designated  by  legislative  act,  which  provided  that  the 
property  which  had  been  improved  by  paving,  should,  accord- 
ing to  the  width  of  the  paving  in  front  of  their  respective  prop- 
erties, be  assessed  at  a  certain  sum  per  foot.  Such  a  tax,  when 
levied  by  the  legislature,  did  not  require  notice  and  hearing  as 
to  the  amount  and  extent  of  benefits  conferred  in  order  to  ren- 
der the  legislative  action  due  process  of  law. 

In  this  case,  Norwood  v.  Baker  was  relied  upon ;  but  the  court 
said  that  that  case  must  be  read  in  connection  with  the  subse- 
quent cases  in  the  court.  The  court  also  said : 

**"We  do  not  understand  this  to  mean  that  there  may  net  be 
cases  of  such  flagrant  abuse  of  such  legislative  power  as  would 
warrant  the  intervention  of  a  court  of  equity  to  protect  the 
rights  of  land  owners  because  of  arbitrary  and  wholly  unwar- 
ranted legislative  action.  The  constitutional  protection 
against  deprivation  of  property  without  due  process  of  law, 
would  certainly  be  available  to  persons  arbitrarily  deprived  of 
their  private  rights  by  such  State  action,  whether  under  the 
guise  of  legislative  authority  or  otherwise." 

§  432.  Eminent  Domain  and  Special  Assessments. — It  ap- 
pears from  the  opinion  in  Norwood  v.  Baker,  as  also  in  the  sub- 
sequent discussion  of  that  opinion,  both  in  the  Federal  and 
State  courts,  that  the  condemnation  of  property  for  public  use, 
and  the  requirement  of  due  process  of  law  in  connection  there- 


1  Wagner  v.  Lesser,  239  U.  S.  207  (1915),  60  L.  Ed.  230,  affirming  120 
Md.  671  (1904),  following  Seattle  v.  Kelleher,  195  U.  S.  351,  49  L.  Ed. 
232    (1904). 


472 


SPECIAL   ASSESSMENTS,  §    433 


with,  was  involved  in  that  case  as  well  as  the  constitutional  lim- 
itation of  the  law  of  special  assessments.  It  will  be  observed 
that  these  two  subjects  are  involved  in  many  cases  of  public  im- 
provements, that  is,  in  all  cases  where  property  is  actually  taken 
for  public  use. 

In  cases  from  the  District  of  Columbia,  the  Supreme  Court 
considers  such  cases  under  the  Fifth  Amendment,  which  pro- 
vides not  only  that  no  person  shall  be  deprived  of  life,  liberty,  or 
property  without  due  process  of  law,  but  also  that  private  prop- 
erty shall  not  be  taken  for  public  use  without  just  compensa- 
tion. 

It  has  been  seen  that  a  lawful  public  purpose  is  necessary  in 
the  condemnation  of  private  property  for  public  use,  analogous 
to  that  required  in  the  exercise  of  the  taxing  power.^ 

In  discussing  the  assessment  of  damages  for  the  opening  of 
an  alley  in  the  city  of  "Washington,  the  Supreme  Court  intimated 
that  a  form  of  assessment  that  would  be  valid  for  a  case  of  pav- 
ing, would  not  be  valid  for  the  more  serious  expenses  involved 
in  the  taking  of  land.  The  court  held  that  it  would  construe  the 
statute  as  providing  that  the  apportionment  of  the  damage  was 
to  be  limited  to  the  benefit  to  each  property  owner,  as  it  ap- 
peared that  the  jury  had  understood  their  duty  to  be  to  divide 
the  whole  cost  among  the  land  owners,  whether  the  benefit  was 
equal  to  their  share  of  the  cost  or  not.^ 

§  433.  Legislative  Power  and  Special  Facts. — It  is  clearly 
established  by  these  recent  decisions  of  the  Supreme  Court  that 
the  legislative  power,  broad  and  comprehensive  as  it  is  in  taxa- 
tion, is  not  unlimited  and  is  not  beyond  the  reach  of  judicial  re- 
view and  scrutiny.  The  rule  thus  laid  down  in  the  case  of  spe- 
cial assessments  is  substantially  the  same  which  has  been  declared 
in  regard  to  the  requirement  of  a  public  purpose  in  general  tax- 
ation or  in  the  enforcement  of  limitations  upon  the  legislative 


1  8upra,  XII. 

2  Martin  v.  Dist  of  Columbia,  205  U.  S.  135,  51  L.  Ed.  743  (1907), 
affirming  26  App.  D.  C.  140,  146,  on  writs  of  certiorari,  quashing  the 
assessments  below. 


§    433  SPECIAL   ASSESSJ^ENTS.  473 

power  of  classification.  These  are  primarily  legislative  ques- 
tions and  tlie  courts,  especially  the  Federal  courts,  will  only  in 
extreme  cases  review  the  exercise  of  that  discretion.  Thus  it  is 
primarily  for  the  legislature  to  determine  whether  a  tax  is 
levied  for  a  public  purpose.  But  as  was  seen  in  the  preceding 
chapter,  cases  are  not  wanting  in  which  such  legislative  decla- 
ration or  finding  has  been  overiTiled  by  the  courts.  It  is  primar- 
ily a  legislative  function  to  determine  what  is  a  reasonable  clas- 
sification for  taxation,  but  this  determination  is  subject  to  judi- 
cial review. 

In  assessments  for  local  improvements,  the  questions  of  the 
necessity  for  the  public  improvement  and  the  benefit  to  the  dis- 
trict charged  therewith  are  legislative  and  not  judicial.  Thus 
the  legislature  may  determine  that  the  property  drained  by  a 
sewer  or  the  property  fronting  on  or  contiguous  to  a  street 
shall  pay  the  expenses  of  the  improvement.  But  if  a  municipal- 
ity under  legislative  authority  should  undertake  to  make  prop- 
erty which  is  not  drained  by  a  sewer  part  of  a  special  taxing 
district  to  pay  for  its  construction,*  or,  when  not  located  on  a 
street  or  contiguous  thereto,  part  of  a  taxing  district  for  its  im- 
provement, such  action  would  be  a  clear  abuse  of  legislative  au- 
thority. 

The  same  principle  applies  to  the  method  of  apportionment 
as  between  different  parcels  of  property  included  in  the  taxing 
district.  It  is  settled  in  these  recent  cases  that  it  is  within  the 
legislative  power  to  establish  a  fixed  basis  of  apportionment,  as 
between  different  parcels  of  property  included  in  the  taxing  dis- 
trict.   It  is  settled  in  these  recent  cases  that  it  is  within  the  leg- 


1  See  Sears  v.  Street  Commissioners,  173  Mass.  350.  It  was  held 
in  Missouri,  Johnson  v.  Duer,  115  Mo.  366,  that  the  fact  that  part  of 
the  land  in  a  sewer  district  could  not  be  drained  by  the  sewer  was  not 
a  valid  objection  to  a  special  assessment  to  pay  for  such  sewer  on  the 
part  of  persons  whose  land  was  drained  by  it.  And  in  a  recent  case, 
Heman  v.  Schulte,  166  Mo.  409,  decided  January,  1902,  it  was  held 
that,  in  a  suit  on  a  special  tax  bill  for  sewer  construction,  it  was  not 
a  valid  defense  that  the  property  was  so  situated  in  the  sewer  district 
that  it  could  not  connect  with  the  sewer  except  through  intervening 
property  over  which  it  had  no  control. 


474  SPECIAL   ASSESSMENTS.  §    434 

islative  power  to  establish  a  fixed  basis  of  apportionment,  such 
as  area  or  frontage,  provided  it  is  first  determined  in  each  case 
by  the  legislative  authority  that  the  method  adopted  would  pro- 
duce approximately  equality  and  that  the  resulting  benefits 
would  equal  the  cost  apportioned  to  the  several  property  owners. 
This  is  clearly  established  by  the  opinion  of  the  Supreme 
Court  of  Oregon,  which  is  quoted  in  the  opinion  of  the  Supreme 
Court  in  King  v.  Portland,  p.  67,  where  the  court,  after  describ- 
ing the  roadway  and  the  method  of  apportionment  and  showing 
that  the  cost  of  the  work  was  practically  uniform  throughout, 
so  that  the  assessment  according  to  frontage  was  as  nearly  pro- 
portional according  to  the  benefits  as  could  be  devised,  says : 

"At  least  it  is  not  apparent  that  there  is  any  substantial  ex- 
cess of  costs  above  benefits,  nor  is  there  such  a  disproportion- 
ate distribution  of  the  burden  as  to  justify  the  courts  in  declar- 
ing the  assessment  an  arbitrary  exaction  by  the  legislature. 
It  is  beyond  the  power  of  human  ingenuity  to  adopt  any  plan 
or  mode  of  assessment  that  will  operate  to  produce  exact  uni- 
formity, and  all  that  may  be  expected  is  a  reasonable  approxi- 
mation to  such  a  standard,  and  the  rule  adopted  under  the 
charter  fulfills  the  condition  as  applied  to  the  present  contro- 
versy. There  is  no  doubt  that  the  property  was  benefited  in 
excess  of  the  costs  and  expenses. ' ' 

And  in  the  same  case  it  was  said  by  the  Oregon  Supreme 
Court,  after  reviewing  the  decisions  of  the  Supreme  Court,  in- 
cluding Norwood  V.  Baker: 

"But  we  are  inclined  to  believe  that  the  better  doctrine, 
deducible  from  adjudged  cases,  including  those  of  the  Supreme 
Court  of  the  United  States,  is  that  the  assessment  will  be  up- 
held wherever  it  is  not  patent  and  obvious  from  the  nature 
and  location  of  the  property  involved,  the  district  prescribed, 
the  condition  and  character  of  the  improvement,  the  cost  and 
relative  value  of  the  property  to  the  assessment,  that  the  plan 
or  method  adopted  has  resulted  in  imposing  a  burden  in  sub- 
stantial excess  of  the  benefits,  or  disproportionate  within  the 
district  as  between  owners." 

§  434.    Accidental  or  Exceptional  Circumstances. — If  the 

rule   of   apportionment  produces   approximate    equality   as  be- 
tween the  different  parcels  of  property  in  the  district,  the  fact 


§    435  SPECIAL    ASSESSMENTS.  475 

that  it  may  work  injustice  in  the  case  of  any  one  or  more  par- 
cels in  consequence  of  exceptional  or  accidental  circumstances 
will  not  render  it  invalid,  but  the  rule  will  be  enforced  in  the 
eases  where  it  may  be  applied  and  where  such  circumstances  do 
not  exist.  This  was  directly  decided  in  the  case  last  cited,  where 
the  Supreme  Court,  after  quoting  the  language  of  the  Oregon 
court  given  above,  said:  "We  infer  that  the  plan  or  method  of 
assessment  must  have  that  result  of  itself.  If  that  result  is  pro- 
duced by  a  particular  application  of  the  plan  or  method,  the 
latter  will  not  be  enforced. ' '  In  other  words,  in  case  of  the  fail- 
ure in  any  particular  case  of  the  plan  which  gives  approximate 
equality  in  the  district,  the  court  may  grant  relief,  as  was  done 
in  Oregon,  etc.,  R.  R.  Co,  v.  Portland,  supra,  Sec.  430  note.  In 
the  language  of  the  Supreme  Court,  ''where  such  circumstances 
exist,  they  can  be  properly  dealt  with."  The  law  on  this  sub- 
ject is  clearly  summarized  by  the  Supreme  Court  of  Oregon, 
which,  after  speaking  of  the  presumptive  validity  of  the  assess- 
ment as  quoted  above,  continues  as  follows:^ 

"This  must  be  so,  logically  and  necessarily,  in  view  of  the 
broad  latitude  accorded  the  legislature,  in  its  discretion,  to 
I)rescribe  the  taxing  district  and  the  manner  and  method  of 
making  the  assessment  within  the  district,  as  it  concerns  indi- 
vidual owners  and  proprietors.  As  the  writers  say,  the  au- 
thority of  the  legislature  in  these  respects  is  almost  without 
limit ;  yet  that  there  is  a  limit  beyond  which  it  cannot  go,  all 
will  concede.  When,  however,  it  has  exercised  its  legislative 
discretion,  and  prescribed  a  district  and  adopted  a  method,  it 
ought  to  be  plain  and  indisputable  that  it  has  exceeded  its  con- 
stitutional authority,  before  the  court  should  undertake  to  set 
at  naught  its  declared  will.  Neither  ought  the  system  to  be 
condemned  because  there  may  be  exceptions  wherein  it  would 
work  a  legal  injury  to  enforce  it."^ 

§  435.    Requirements  of  "Due  Process  of  Law."  —  "Due 

process  of  law,"  therefore,  in  special  assessments  requires,  not 
necessarily  a  judicial  hearing  as  to  special  benefits,    but     some 


iKing  V.  Portland,  38  Oregon  402,  I.  c.  p.  429. 

2  See  also   Ballard  v.  Hunter,  204   U.  S.  241,  51   L.   Ed.  461    (1907), 
aflarming  74  Ark,  174. 


476  SPECIAL   ASSESSMENTS.  §    436 

hearing  before  some  authority  on  the  question,  and  this  opportu- 
nity for  hearing  must  be  given  before  the  action  is  taken  which 
makes  the  assessment  binding  upon  the  property,  unless,  in  the 
enforcement  of  the  assessment  by  suit,  the  taxpayer  is  allowed 
to  contest  the  question  of  benefit.  The  municipal  authorities 
may  apportion  the  assessment  by  a  uniform  rule  such  as  front- 
age or  area,  but  this  can  only  be  done  after  determination  that 
the  benefits  to  the  property  will  equal  the  assessment. 

Thus  is  the  statute  under  which  the  village  authorities  pro- 
ceeded in  the  case  of  Norwood  v.  Baker,  had  provided  for  notice 
and  hearing  before  them  on  the  question  of  benefits,  and  they 
had  thereupon  determined  that  the  benefits  to  the  Baker  prop- 
erty from  the  opening  of  the  street  would  equal  the  assessment  ap- 
portioned thereto,  it  is  difficult  to  see  how  the  assessment  could 
have  been  set  aside  under  the  rule  declared  in  King  v.  Portland. 
The  ownership  by  one  person  of  the  entire  tract  through  which 
the  street  was  opened  would  not  of  itself  affect  the  validity  of  the 
assessment,  neither  would  the  fact  that  the  amount  assessed  in- 
cluded the  costs  of  the  condemnation  as  well  as  the  cost  of  the 
land  appropriated,  if  it  was  determined  that  the  amount  of  ben- 
efit equaled  the  aggregate  cost.  The  real  difficulty  in  the  case 
was  that  the  procedure  was  based  on  the  arbitrary  assertion 
that  the  legislative  action  was  conclusive,  regardless  of  the  de- 
termination of  benefits. 

§  436.  Property  Incapable  of  Benefit,  Not  Lawfully  Assess- 
able.— Notwithstanding  the  broad  scope  of  the  legislative  power 
in  ordering  public  improvements,  and  in  designating  property 
in  taxing  districts,  it  is  also  true  that  where  property  is  so  situ- 
ated that  it  cannot  be  benefited  by  the  proposed  improvement, 
there  is  an  abuse  of  power  violative  of  due  process  of  law  in  at- 
tempting to  assess  such  property  for  benefit.  This  was  forcibly 
illustrated  in  a  drainage  case  from  Louisiana.^  In  this  case,  an 
island  which  was  included  in  a  drainage  district,  which  was  the 
highest  assessed  property  in  the  district,  but  which   the     court 


1  Myles   Salt  Co.  v.   Board  of  Commissioners,  239   U.   S.   478,  60   L. 
Ed.  p.  392    (1916),  reversing  134  La.  903. 


§   437  SPECIAL   ASSESSMENTS.  477 

found  never  could,  or  would  receive  any  benefit  whatever  from 
the  system,  could  not  lawfully  be  assessed  for  such  improvement. 
The  court  said  it  was  true  that  the  law  of  the  State  as  written 
was  not  attacked,  but  it  was  sufficient  that  the  law,  as  adminis- 
tered and  justified  by  the  Supreme  Court  of  the  State,  was  in- 
volved, and  that  it  presented  a  clear  Federal  question. 

The  same  principle  was  applied  in  a  street  improvement  ease 
from  St.  Louis  where,  under  the  city  charter,  one-fourth  of  the 
special  assessment  for  street  improvement  was  levied  against 
land  fronting  upon  or  adjoining  the  improvement,  and  three- 
fourths  proportionately  against  all  the  land  lying  in  the  bene- 
fited district,  to  be  fixed  as  provided  by  the  charter,  this  bene- 
fited district  being  specifically  described  in  the  charter,  and  the 
effect,  owing  to  the  fact  that  property  was  not  laid  out  into  city 
blocks,  was  to  include  in  the  taxing  district  property  which 
could  not  derive  benefit  from  the  improvement.  The  court  held 
that  the  inclusion  of  this  property,  not  upon  any  consideration 
of  difference  in  benefits,  but  mechanically  in  obedience  to  the 
criterion  of  the  charter  to-be  applied,  was  violative  of  due  proc- 
ess of  law.i 

The  court  said  that  the  legislature  could  create  taxing  dis- 
tricts to  meet  the  expense  of  public  improvements,  and  fix  the 
basis  of  taxation,  unless  its  action  was  plainly  arbitrary  or  op- 
pressive. If  there  was  no  reasonable  presumption  that  substan- 
tial injustice  would  be  done,  if  the  probabilities  are  that  the  par- 
ties would  be  taxed  disproportionately  to  each  other  and  to  the 
benefit  conferred,  the  law  could  not  stand  against  the  complaint 
of  one  so  taxed  in  fact. 

§  437.  Municipal  Bonds  for  Local  Improvements. — Under 
the  laws  of  some  States,  municipal  bonds  are  authorized  to  be 
issued  for  the  cost  of  local  improvements.  The  authorization  of 
the  issuance  of  such  bonds,  although  they  contain  no  stipulation 
limiting  the  recourse  of  their  holders  to  a  special  tax  levied  for 
sur-h  improvements,  carried  a  general  liability  of  the  city  issu- 


1  Gast  Realty  Co.  v.  Schneider  Granite  Co.,  240  U.  S.  54,  60  L.   Ed. 
523   (1916),  reversing  259  Mo.  153. 


478  SPECIxVL    ASSESSMENTS.  §    438 

ing  them.  This  rests  upon  the  principle  that  what  the  law  -re- 
quires to  be  done  can  only  be  done  by  taxation,  this  taxation  is 
authorized  to  the  extent  it  may  be  needed,  unless  otherwise  it  is 
expressly  declared.^ 

The  officers  of  a  municipality  are  authorized  and  required  to 
levy  and  collect  taxes  to  pay  such  bonded  indebtedness,  and  this 
judgment  establishes  a  perfect  cause  of  action  for  a  writ  of  man- 
damus requiring  them  to  perform  their  duties  in  levying  such 
taxes  for  the  payment  of  the  judgment.^ 

§  438.    Jurisdiction  of  Equity.~A   property    owner    who 

permits  improvements  for  which  his  property  was  subject  to  as- 
sessment to  be  made  under  a  contract,  containing  provisions 
which  increases  its  cost,  without  objection,  the  cost,  however,  be- 
ing within  the  assessment  of  benefits,  and  who  does  not  offer  to 
pay  his  share  of  the  just  cost,  has  no  standing  in  a  court  of 
equity  to  enjoin  the  collection  of  any  part  of  the  assessment. 
This  was  ruled  in  a  case  where  the  work  was  payable  in  install- 
ments, and  the  statute  provided  that  on  an  application  for  judg- 
ment on  any  subsequent  installment,  no  defense  except  as  to  the 
legality  of  the  pending  proceeding  and  amount  to  be  paid,  or 
actual  payment,  should  be  made  or  heard.  In  such  a  case  the 
judgment  in  the  first  proceeding  is  conclusive  of  the  validity  of 
the  assessment.3 

It  was  said  in  the  case  cited  that  the  decision  of  the  Supreme 
Court  of  a  State  holding  the  local  improvement  is  valid  under 
the  State  constitution,  is  binding  on  the  Federal  court  in  a  suit 
on  the  assessment  made  after  such  decision  was  rendered;  and 
decisions  approving  and  applying  its  provision,  although  made 
after  such  improvement,  will  be  held  valid,  unless  made  under 
exceptional  circumstances. 


1  United  States  ex  rel.  Kilpatrick  v.  Capdevielle,  C.  C.  A.  &th  Cir- 
cuit, 118  Fed.  809.  Certiorari  denied,  189  U.  S.  510,  citing  City  of 
Quincy  v.  United  States,  113  U.  S.  332. 

2  United  States  ex  rel.  Masselick  v.  Saunders,  C.  C.  A.  8th  Circuit, 
124  Fed.  125   (1903). 

«  Treat  v.  City  of  Chicago,  125  Fed.  644,  C.  C.  A.  7th  Circuit,  130  Fed. 
443  (1904),  affirming  125  Fed.  644. 


§    438  SPECIAL    ASSESSMENTS.  479 

The  equity  jurisdiction  conferred  on  the  Federal  courts  is  the 
same  as  that  possessed  by  the  High  Court  of  Chancery  in  Eng- 
land, and  is  universal  throughout  the  States  and  is  not  subject 
to  limitation  or  restraint  b}^  State  legislation.! 

In  this  case  where  complainant  had  no  knowledge  of  certain 
proceedings  by  the  city  to  condemn  property  for  public  uses,  and 
to  assess  the  cost  thereof  on  an  adjoining  district,  until  after  the 
time  for  appealing  from  the  assessment  had  expired,  he  was  held 
not  guilty  of  laches.  But  at  the  same  time  it  was  held  that  he 
had  an  adequate  remedy  at  law  in  the  State  court,  and  there- 
fore the  bill  was  dismissed  without  prejudice. 


■•  Union  Pac.  R.  Co.  v.  Flint,  West.  D.  of  Mo.,  180  Fed.  565   (1910). 


CHAPTER    XIV. 

DUE  PROCESS  OF  LAW  AND  THE  JURISDICTION  OF 
THE    STATES. 

439.  Tax  must  be  levied  upon  subjects  within  jurisdiction  of  State. 

440.  Limitation  of  taxing  power  by  jurisdiction  not  dependent  on 

Fourteenth  Amendment. 
44L     The  taxable  jurisdiction  of  State  over  land. 

442.  Assessment   of  land   without   deduction   of  mortgage,   not  vio- 

lative of  due  process  of  law. 

443.  Jurisdiction  of  State  in  taxation  of  property. 

444.  Jurisdiction  of  State  for  taxation  over  property  in  bonded  ware- 

houses. 

445.  A  State  has  no  taxing  jurisdiction   over  property  in   foreign 

warehouses. 

446.  State  may  tax  money  and  securities  in  its  jurisdiction  of  non- 

resident owners. 

447.  Property  in  hands  of  resident  agents  subject  to  taxing  power. 

448.  Jurisdiction  for  taxation  of  credits  not  dependent  upon   resi- 

dence of  agent  or  of  debtors. 

449.  Credits  due  foreign  life  insurance  companies. 

450.  Premiums   due   foreign   insurance   companies   subject   to   local 

taxation. 

451.  Credits  must  be  localized  in  jurisdiction  for  taxation. 

452.  Enforcement  of  taxes  against  non-resident  owners  of  property 

in  State. 

453.  Credits  under  the  Louisiana  Code  held  taxable. 

454.  Credits  held  not  localized  for  taxation. 

455.  Bank  credits  under  California  statute  held  not  taxable. 

456.  Power  of  State  in  taxing  corporation  bondholders  through  cor- 

poration. 

457.  State  cannot  compel  foreign  railroad  company  to  act  as   tax 

collector. 

458.  State  may  make  mortgages  taxable  interests  in  real  estate. 

459.  Foreign  Held  Bonds  Case  in  part  overruled. 

460.  State  may  tax  stock  of  non-resident  holders  in  domestic  corpo- 

rations. 

461.  Non-resident  stockholder  not  taxable  in  absence  of  statute. 

462.  Due  process  of  law  in  taxation  of  interstate  properties. 

463.  Due  process  of  law  in  taxation  of  corporations. 

(480) 


§    439  THE   STATE   JURISDICTION    IN    TAXATION.  481 

464.  Deposits  by  foreign  insurance  companies  taxable  by  the  State. 

465.  Jurisdiction  in  taxation  over  property  of  trustees,  receivers,  etc. 

466.  The  taxable  situs  of  stock  not  transferred  by  pledge. 

467.  ■  Situs  for  taxation  of  deposits  in  litigation. 

468.  State's  jurisdiction  over  property   for  taxation  summarized. 

469.  Taxation  of  business  and  license  taxation. 

470.  Membership  in  an  incorporated  chamber  of  commerce  taxable. 

471.  License  tax  on  emigrant  agent  sustained. 

472.  Taxation  and  regulation  under  police  power. 

473.  Special  excise  taxes  in  the  exercise  of  the  police  power,  sus- 

tained. 

474.  Limitation  of  power  to  impose  taxes  on  occupations. 

475.  Jurisdiction  over  persons  for  taxation. 

476.  Domicil  distinguished  from  residence  and  citizenship, 

477.  Right  to  change  domicil. 

478.  Motive  in  change  of  domicil  immaterial. 

479.  Term  "residence"  employed  in  sense  of  "domicil." 

480.  Due  process  of  law  and  taxation  at  domicil. 

481.  John  D.  Rockefeller  not  domiciled  in  Ohio  for  taxation. 

482.  Taxation  of  personal  property  situated  without  State  of  owner's 

domicil. 

483.  Taxation  of  citizens  at  domicil  on  mortgages  in  other  States. 

484.  State  may  tax  resident  stockholder  in  foreign  corporation  upon 

value  of  stock. 

485.  No  immunity  of  State  securities  from  taxation  in  other  States. 

486.  Domicil  and  location,  as  situs  for  taxation,  in  same  State. 

487.  Double  taxation  not  presumed. 

488.  Due  process  of  law  and  double  taxation. 

489.  Double  taxation  from  competing  State  authorities. 

490.  Interstate  comity  essential  to  avoid  double  taxation. 

491.  Double  taxation  under  the  Federal  government. 

492.  Due  process  of  law  and  inheritance  taxation. 

493.  Duplicate  inheritance  taxation. 

494.  The  Supreme  Court  on  duplicate  inheritance  taxation. 

495.  Question  one  of  construction  and  not  of  legislative  power. 

496.  Due  process  of  law  in  taxation  requires  legislative  authority. 

497.  State  construction  of  legislative  authority  conclusive. 

498.  Constitutionality  of  statutes  is  for  judicial,  not  executive,  deter- 

mination. 

§  439.  Tax  Must  be  Levied  Upon  Subjects  Within  Juris- 
diction of  State. — Due  process  of  law  requires,  not  only  that 
tlif  tax  should  he  for  a  public  purpose,  hut  also  that  it  should  be 
levied  upon  .subjects  of  taxation  which  are  within  the  State's 
lawful  jurisdiction.     In  taxation,  as  in  all  judicial  proceedings, 


482  THE   STATE    JURISDICTION    IN    TAXATION.  §    440 

the  power  of  the  State  must  be  exercised  within  its  jurisdiction. 
It  was  said  by  the  Supreme  Court^  that  no  adjudication  should 
be  necessary  to  establish  so  obvious  a  proposition  as  that  prop- 
erty lying  beyond  the  jurisdiction  of  a  State  is  not  a  subject 
upon  which  her  taxing  power  can  be  legitimately  exercised. 

This  fundamental  basis  of  the  taxing  power  was  clearly  stated 
by  Justice  Field  in  the  opinion  in  the  Foreign  Held  Bond  Case. 

*'The  power  of  taxation,  however  vast  in  its  character  and 
searching  in  its  extent,  is  necessarily  limited  to  subjects  within 
the  jurisdiction  of  the  State.  These  subjects  are  persons,  prop- 
erty, and  business.  Whatever  form  taxation  may  assume, 
whether  as  duties,  imposts,  excises,  or  licenses,  it  must  relate 
to  one  of  these  subjects.  It  is  not  possible  to  conceive  of  any 
other,  though  as  applied  to  them,  the  taxation  may  be  exer- 
cised in  a  great  variety  of  ways.  It  may  touch  property  in 
every  shape,  in  its  natural  condition,  in  its  manufactured  form, 
and  in  its  various  transmutations.  And  the  amount  of  the 
taxation  may  be  determined  by  the  value  of  the  property,  or 
its  use,  or  its  capacity,  or  its  productiveness.  It  may  touch 
business  in  the  almost  infinite  forms  in  which  it  is  conducted, 
in  professions,  in  commerce,  in  manufactures,  and  in  transpor- 
tation. Unless  restrained  by  provisions  of  the  Federal  Consti- 
tution, the  power  of  the  State  as  to  the  mode,  form,  and  extent 
of  taxation  is  unlimited,  where  the  subjects  to  which  it  ap- 
plies are  within  her  jurisdiction." 

§  440.  Limitation  of  Taxing'  Power  by  Jurisdiction  Not 
Dependent  on  Fourteenth  Amendment. — This  limitation  of  the 
taxing  power  of  the  State  to  its  lawful  jurisdiction  obviously 
does  not  depend  upon  the  Fourteenth  Amendment.  The  opinion 
quoted  made  no  reference  to  the  amendment.  Like  the  limitation 
which  requires  that  the  tax  shall  be  levied  for  a  public  purpose, 
this  limitation  by  jurisdiction  also  is  inherent  in  the  conception  of 
a  tax.  Prior  to  the  adoption  of  the  Fourteenth  Amendment  this 
limitation  of  the  taxing  power  of  the  State  was  enforced  by  both 
the  State  and  Federal  courts,    A  tax  by  a  State  upon  property 


115  Wall.  300,  1.  c.  319,  21  L.  Ed.  179  (1873),  reversiug  Supreme  Court 
of  Penn.     See  Sec.  459,  infra. 


§    441  THE    STATE    JURISDICTION   IN    TAXATION.  483 

without  its  lawful  jurisdiction  is  clearly  a  taking  of  property 
without  due  process  of  law,  and  may  also  be  obnoxious  to  other 
provisions  of  the  Constitution  of  the  United  States,  such  as  the 
national  control  over  interstate  commerce.  It  may  be  a  tax  up- 
on the  property  or  instrumentalities  of  the  United  States,  or 
violative  of  the  privileges  and  immunities  of  citizens  of  other 
States,  impair  the  obligation  of  contracts  or  deny  the  equal  pro- 
tection of  the  laws.  But  whether  such  taxes  contravene  other 
provisions  of  the  Constitution  or  not,  they  are  clearly  contrary 
to  the  requirement  of  due  process  of  law. 

The  taxing  power  of  the  State  may  be  conveniently  treated 
with  reference  to  three  distinct  subjects  of  taxation,  enumerated 
by  Justice  Field  in  the  opinion  just  cited,  property,  diisiness  and 
persons.  A  State  tax,  to  be  valid  and  to  constitute  due  process 
of  law,  must  be  levied  upon  property,  business  or  persons  within 
its  jurisdiction. 

§  441.   The  Taxable  Jurisdiction  of  the  State  Over  Land. — 

There  can  of  course  be  no  question  of  the  power  of  the  State  to 
tax  all  real  property  within  its  limits,  as  such  property  is  obvi- 
ously within  the  jurisdiction  of  the  State.  This  is  essential  in  a 
conception  of  a  sovereign  State.  It  is  so  universally  accepted  that 
it  is  seldom  that  any  judicial  controversy  arises  involving  this  ju- 
risdiction of  the  State.  Thus  where  a  court  held  that  the  land  in 
controversy,  an  island  in  the  Mississippi  River,  was  not  part  of 
the  State  of  Arkansas,  but  under  the  sovereignty  of  the  State 
of  Mississippi,  this  judgment  determined  the  taxability  of  the 
land  under  the  laws  of  Mississippi.* 

Where  the  laws  of  Idaho  exempted  from  taxation  irriga- 
tion canals  and  ditches  and  appurtenant  water  rights  used  by 
the  owner  exclusively  for  the  irrigation  of  lands  owned  by  him, 
such  exemption  was  limited  in  its  application  to  cases  where  the 
land,  on  which  the  water  was  used,  was  situated  within  the  State.^ 

1  Moore  v.  Maguire,  142  Fed.  787  (1906). 

2  Spokane  Valley  L.  &  W.  Co.  v.  Kootany  County,  Idaho,  Dist  Ct 
of  Id.,  199  Fed.  181  (1912).  Lands  lying  between  the  middle  of  New 
York  Bay  and  the  low  water  line  on  the  New  Jersey  shore,  are  taxable 
by  New  Jersey,  notwithstanding  the  provisions  of  a  compact  between 


484  THE   STATE   JURISDICTION    IN   TAXATION.  §    443 

The  taxable  jurisdiction  of  a  State  extends  to  the  State  boun- 
dary, and  if  that  boundary  is  the  middle  of  a  stream,  it  extends 
to  the  lands  under  the  water,  if  that  is  under  private  ownership. 

§  442.  Assessment  of  Land  Without  Deduction  of  Mort- 
gage, Not  Violative  of  Due  Process  of  Law. — There  was  no  vio- 
lation of  due  process  of  law  in  the  enforcement  of  a  tax  in  the 
city  of  New  York  upon  land  without  any  deduction  for  the 
mortgage  thereon.  In  other  words,  under  the  Federal  Consti- 
tution, a  man  owning  land  subject  to  a  mortgage,  can  be  taxed 
for  the  full  value  of  the  land,  while  at  the  same  time  the  mort- 
gage debt  is  not  deducted  from  his  personal  estate,^  whereas, 
in  New  York  parties  are  entitled  to  deduct  their  indebtedness 
in  the  assessment  of  their  personal  property.  The  court  said  it 
was  immaterial  that  the  party  was  not  assessed  for  personal 
property.  It  was  argued  that  the  mortgagor's  taxable  prop- 
erty interest  in  the  land  was  restricted  to  the  contingent  interest 
over  and  above  the  interest  of  the  mortgagee.  The  court  said, 
however,  that  the  taxation  of  land  was  not  based  upon  such  a  di- 
vision of  interest,  but  was  essentially  a  proceeding  in  rem.  Tax- 
ation, said  the  court,  in  most  communities  is  a  long  way  off  from 
a  logical  and  coherent  theory,  and  as  this  mode  of  taxation  was 
of  long  standing  and  upon  questions  of  constitutional  law  * '  the 
long  settled  habits  of  the  community  play  a  part  as  well  as 
grammar  and  logic." 

§  443.    Jurisdiction  of  State  in  Taxation  of  Property. — It  is 

also  clearly  established  that  all  property,  movable  as  well  as  im- 
movable, actually  located  within  the  confines  of  the  State,  is 
subject  to  its  taxing  power,  except  of  course  property  reserved 
therefrom  under  the  constitutional  provisions  already  consid- 
ered.    The  fiction  which  plays  so  important  a  part  in   other 


the  States  fixing  the  boundary  line  as  the  middle  of  New  York  Bay, 
approved  by  Act  of  Congress,  June  28,  1834,  by  which  New  York  is 
given  "exclusive  jurisdiction  of  and  over  all  the  waters  of  the  Bay  of 
New  York."  Central  R.  R.  of  N.  J.  v.  Jersey  City,  52  L.  Ed.  896,  209 
U.  S.  472  (1908),  affirming  72  N.  J.  Law  311. 

iPaddell  v.  State  of  New  York,  211  U.  S.  446,  53  L.  Ed.  275   (1908), 
affirming  187  N.  Y.  552. 


§    443  THE    STATE    JURISDICTION    IN    TAXATION.  485 

branches  of  the  law,  that  movable  property  has  its  sittis  at  the 
domicil  of  the  owner,  has  no  application  to  the  power  of  the 
State  to  subject  all  property,  movable  and  immovable,  within 
its  limits,  to  taxation.  Movables  actually  located  in  the  State, 
therefore,  may  be  taxed  there,  though  the  owner  may  be  domi- 
ciled elsewhere.     Thus  Story  says:^ 

**The  general  doctrine  is  not  controverted  that,  although 
movables  are  for  many  purposes  to  be  deemed  to  have  no  situs 
except  that  of  the  domicil  of  the  owner;  yet,  this  being  but  a 
legal  fiction,  it  yields  whenever  it  is  necessary  for  the  purpose 
of  justice  that  the  actual  situs  of  the  thing  should  be  exam- 
ined. A  nation  within  whose  territory  any  personal  property 
is  actually  situate,  has  an  entire  dominion  over  it  while  therein, 
in  point  of  sovereignty  and  jurisdiction,  as  it  has  over  immov- 
able property  situate  there." 

This  principle  of  public  law  has  been  repeatedly  declared  by 
the  Supreme  Court  in  relation  to  the  taxing  power  of  the  States. 
In  Coe  V.  Errol,^  it  was  argued  that  the  logs  claimed  to  be  in 
transit  through  New  Hampshire  were  taxed  to  their  owners  in 
Maine  as  part  of  their  general  stock  in  trade.  But  the  court 
held  that  this  would  have  no  influence  on  the  decision  of  the 
question  whether  they  were  taxable  in  New  Hampshire,  saying, 
at  page  524: 

"We  have  no  difficulty  in  disposing  of  the  last  condition  of 
the  question,  namely,  the  fact  (if  it  be  a  fact)  that  the  property 
was  owned  by  persons  residing  in  another  State;  for,  if  not 
exempt  from  taxation  for  other  reasons,  it  cannot  be  exempt 
by  reason  of  being  owned  by  non-residents  of  the  State.  We 
take  it  to  be  a  point  settled  beyond  all  contradiction  or  ques- 
tion,^ that  a  State  has  jurisdiction  of  all  persons  and  things 
within  its  territory  which  do  not  belong  to  some  other  juris- 
diction, such  as  the  representatives  of  foreign  governments, 
with  their  houses  and  effects,  and  property  belonging  to  or  in 
the  use  of  the  government  of  the  United  States.  If  the  owner 
of  personal  property  within  a  State  resides  in  another  State, 
which  taxes  him  for  that  property  as  part  of  his  general  es- 
tate attached  to  his  person,  this  action  of  the  latter  State  does 

1  story's  Conflict  of  Laws,  7th  Ed.,  Sec.  550. 

2  116  U.  S.  517,  supra,  Sec.  132. 


486  THE   STATE   JURISDICTION   IN    TAXATION.  §    445 

not  in  the  least  affect  the  right  of  the  State  in  Avhich  the  prop- 
erty is  situated  to  tax  it  also.  It  is  hardly  necessary  to  cite 
authorities  on  a  point  so  elementary." 

§  444.  Jurisdiction  of  State  for  Taxation  Over  Property  in 
Bonded  Warehouses. — As  a  State  has  the  power  to  tax  jirivate 
property  having  a  situs  within  its  territorial  limits,  it  may  re- 
quire the  party  in  possession  of  property  stored  in  warehouses 
therein  to  pay  the  taxes  thereon.  It  is  also  within  the  power  of 
the  State  to  require  the  proprietor  of  the  warehouses  to  pay  the 
taxes  on  such  property,  as  liquors  stored  therein,  although 
there  is  no  specific  provision  giving  the  proprietor,  who  pays  the 
taxes,  the  right  to  recover  interest  thereon;  and  under  Federal 
legislation,  distilled  spirits  may  be  left  in  a  warehouse  for  sev- 
eral years;  and  for  spirits  so  in  hond  negotiable  warehouse  re- 
ceipts have  been  issued.  The  court  said  that  these  facts  did  not 
affect  the  question  of  the  power  of  the  State.  A  State  is  under 
no  obligations  to  make  its  legislation  conformable  to  the  con- 
tracts, which  the  proprietors  of  bonded  warehouses  may  make 
with  those  who  store  spirits  therein,  but  it  is  their  business,  if 
they  wish  further  protection  than  the  lien  given  them  by  the 
statute,  to  make  their  contracts  accordingly.* 

§  445.  A  State  Has  No  Taxing  Jurisdiction  Over  Property 
in  Foreign  Warehouses. — A  State,  however,  cannot  tax  ware- 
house receipts  for  whiskey  or  other  commodity  deposited  in  a 
foreign  warehouse,  and  it  cannot  acquire  such  jurisdiction  by 
the  presence  of  the  warehouse  receipts  for  such  property  within 
the  State.  This  was  ruled  in  a  Kentucky  case  where  the  State 
claimed  to  recover  back  taxes  on  whiskey  deposited  in  a  Ger- 
man warehouse,  although  it  was  claimed  that  the  owner  domi- 
ciled in  the  State  had  shipped  such  property  to  Germany  and 
reshipped  to  himself  or  to  purchasers  in  the  United  States  in 
order  to  evade  taxation,  using  the  warehouse  receipts  as  collat- 


iCarstairs  v.  Cochran,  193  U.  S.  10,  48  L.  Ed.  596  (1904),  affirming 
95  Md.  488.  See  also  Thompson  t.  Kentucky,  209  U.  S.  340,  52  L.  Ed. 
822  (1908),  affirming  29  Ky.  Law  Rep.  705,  holding  valid  the  Kentucky 
statute  making  warehousemen  liable  for  the  tax,  and  giving  him  a 
lien  on  the  property  for  the  amount  paid. 


§    446  THE    STATE    JURISDICTION    IN    TAXATION.  487 

erals,  and  trading  in  them.  It  was  held  by  the  Kentucky  court 
that  while  the  whiskey  was  beyond  the  taxing  powers  of  the 
State  the  tax  was  sustainable  upon  the  warehouse  receipts,  but  the 
court  rilled  that  this  was  error,  as  the  whiskey  was  beyond  the 
taxing  jurisdiction  of  the  State.  The  warehouse  receipt  only 
imported  that  the  goods  were  in  the  hands  of  a  certain  kind  of 
bailee,  and  were  not  the  symbol  of  the  goods  in  any  sense  that 
warranted  any  basis  for  taxation.  Assuming,  as  the  Kentucky 
court  did,  that  the  whiskey  was  exempt,  as  under  the  Constitu- 
tion of  the  United  States,  the  protection  of  the  constitution  ex- 
tended to  the  warehouse  receipts  locally  present  within  the 
State.i 

§  446'.  State  May  Tax  Money  and  Securities  in  its  Juris- 
diction of  Non-resident  Owners. — Where  personal  property  is 
located  within  the  State,  whatever  its  form,  whether  evidences 
of  debt  or  otherwise,  it  may  be  subjected  to  the  State's  taxing 
power,  irrespective  of  the  residence  of  the  owner.  Thus  the 
State  may  establish  an  independent  situs  for  taxation  of  bonds, 
mortgages  and  other  securities  of  non-resident  owners,  located 
in  its  jurisdiction. 

This  principle  was  applied  in  the  Supreme  Court  in  a  case 
from  Louisiana,  where  certain  notes  and  mortgages,  which  had 
been  inherited  by  a  citizen  of  New  York  from  a  citizen  of 
Louisiana,  but  were  in  the  possession  of  an  agent,  in  New  Or- 
leans, were  declared  taxable  in  Louisiana.^  The  court  said  that 
the  maxim  mohilia  sequntur  personam,  was  at  best  only  a  legal 
fiction,  and  that  there  had  been  frequent  recognition  of  the 
power  of  a  State  to  separate,  for  the  purpose  of  taxation,  the 
situs  of  personal  property  from  the  domicil  of  the  owner.  As 
to  the  remark  in  the  State  Tax  on  Foreign  Held  Bonds  Case, 
that  personal  property  consisting  of  bonds  and  mortgages  gen- 
erally had  no  situs  independent  of  the  owner,  the  court  said: 


1  Sellinger  v.  Kentucky,  213  U.  S.  200,  53  L.  YA.  761  (1909),  reversing 
30  Ky.  Law  451. 

2  New  Orleans  v.  Stempel,  175  U.  S.  309,  44  L.  Ed.  174  (1900). 
^ Infra,  Sec.  456. 


488  THE   STx\TE   JURISDICTION    IN   TAXATION.  §    446 

"This  last  sentence,  properly  construed,  is  not  to  be  taken 
as  a  denial  of  the  power  of  the  legislature  to  establish  an  inde- 
pendent situs  for  bonds  and  mortgages,  when  those  proper- 
ties are  not  in  the  possession  of  the  owner,  but  simply  that  the 
fiction  of  law,  so  often  referred  to,  declares  their  situs  to  be 
that  of  the  domicil  of  the  owner,  a  declaration  which  the  leg- 
islature has  no  power  to  disturb,  when  in  fact  they  are  in  his 
possession." 

The  court  also  declared  that  there  was  nothing  in  the  ease  of 
Kirtland  v.  Hotchkiss,i  conflicting  with  these  decisions.  It  was 
there  held  that  "a  State  might  tax  one  of  its  citizens  on  bonds 
belonging  to  him,  although  such  bonds  were  secured  by  mort- 
gage on  property  situated  in  another  State,"  and  it  was  assumed 
that  the  situs  of  such  intangible  property  was  at  the  domicil  of 
the  owner,  as  there  was  no  legislation  in  that  State  attempting 
to  set  aside  that  general  rule  in  respect  to  the  matter  of  situs. 

It  was  further  said  that,  while,  in  the  absence  of  statute,  bills 
and  notes  are  treated  as  choses  in  action  and  are  not  subject  to 
levy  and  sale  on  execution,  yet  by  the  statutes  of  many  States 
they  are  made  so  subject  to  seizure  and  sale,  as  any  tangible 
personal  property.    And  the  opinion  concluded,  p.  322: 

"It  is  well  settled  that  bank  bills  and  municipal  bonds  are 
in  such  a  concrete  tangible  form  that  they  are  subject  to  tax- 
ation where  found,  irrespective  of  the  domicil  of  the  owner; 
are  subject  to  levy  and  sale  on  execution,  and  to  seizure  and 
delivery  under  replevin ;  and  yet  they  are  but  promises  to  pay 
— evidences  of  existing  indebtedness.  Notes  and  mortgages 
are  of  the  same  nature ;  and  while  they  may  not  have  become 
so  generally  recognized  as  tangible  personal  property,  yet  they 
have  such  a  concrete  form  that  we  see  no  reason  why  a  State 
may  not  declare  that  if  found  within  its  limits  they  shall  be 
subject  to  taxation." 

The  same  principle  was  applieds  where  the  estate  of  a  non- 
resident of  Minnesota,  who  had  loaned  to  residents  of  that  State 
large  sums  upon  notes  and  mortgages,  which  were  in  the  posses- 


■^  Infra,  Sec.  483. 

2  Bristol  V.  Washington  County,  177  U.  S.  133,  44  L.  Ed.  701   (1900). 


§    447  THE   STATE    JURISDICTION    IN    TAXATION.  489 

sion  of  a  resident  agent,  was  held  properly    chargeable     with 
taxes  on  these  securities.! 

§  447.  Property  in  Hands  of  Resident  Agents  Subject  to 
Taxing  Power.  — In  the  case  of  New  Orleans  v.  Stempel, 
supra,  the  notes,  mortgages  and  bonds  were  in  the  possession  of 
the  local  administrator.  But  the  principle  has  been  applied  in 
numerous  cases  where  money  of  non-residents  has  been  placed 
in  the  hands  of  resident  agents  for  permanent  investment  and 
reinvestment. 

Thus  it  was  held  in  a  leading  case  in  Vermont,  Catlin  v.  Hull,2 
decided  in  1849,  that  notes,  mortgages,  etc.,  in  hands  of  a  local 
agent  belonging  to  a  non-resident,  had  a  taxable  situs  in  that 
State,  the  court  saying  in  an  opinion  by  Judge  Poland : 

"We  are  not  only  satisfied,  that  this  method  of  taxation  is 
well  founded  in  principle  and  upon  authority,  but  we  think  it 
entirely  just  and  equitable,  that,  if  persons  residing  abroad 
bring  their  property  and  invest  it  in  this  State,  for  the  purpose 
of  deriving  profit  from  its  use  and  employment  here,  and  thus 
avail  themselves  of  the  benefits  and  advantages  of  our  laws 
for  the  protection  of  their  property,  their  property  should  yield 
its  due  proportion  toward  the  support  of  the  government, 
which  thus  protects  it." 

And  the  court,  referring  to  a  qualifying  provision  of  the 
statute  which  is  notable  for  its  regard  to  interstate  comity  in 
taxation,  added : 

"And  as  this  power  of  taxation  in  this  State  is  only  to  be 
exercised  in  cases,  where  such  property  is  not  shown  to  be 
taxed  to  the  real  owner,  where  he  resides,  we  think,  that  there 
is  no  reason  for  saying,  that  this  power  has  been  attempted  to 
be  exercised  in  an  unjust  spirit,  or  that  its  exercise  shows  any 
want  of  proper  comity  in  our  State  government. "» 


1  See  also  McCutchen  v.  Rice  County,  7  Fed.  558  (1881). 

2  21  Vt.  152  (1849). 

8  More  recent  judicial  utterances  in  other  States  do  not  show  this 
solifitudo  lest  the  State  be  accused  of  want  of  "proper  comity"  in  tax- 
ation.   See  Sec.  489  et  seq. 


490  THE   STATE   JURISDICTION    IN    TAXATION.  §    447 

This  principle  was  approved  by  the  Supreme  Court,  not  only 
in  New  Orleans  v.  Stempeli  but  also  in  Bristol  v,  Washington 
County.2  In  the  latter  case  a  citizen  of  New  York  had,  for 
many  years,  kept  a  sum  of  money  invested  in  Minnesota,  through 
a  local  agent.  It  was  held  that  this  investment  was  subject  to 
taxation  in  Minnesota  and  that  the  amount  of  the  tax  was  a 
claim  against  the  property  of  the  owner,  which,  after  his  death, 
could  be  proved  against  his  estate  in  that  State.  The  court 
therefore  directed  the  Circuit  Court  to  enter  judgment  for  the 
amount  of  the  taxes  which  were  unpaid,  and  which  were  not 
barred  by  the  statute  of  limitations  of  the  State.  In  its  opinion 
it  cites  a  decision  of  the  Supreme  Court  of  Minnesota,  which 
had  held  that  this  property  was  taxable  in  the  State.5  The  lat- 
ter court  in  its  opinion  said : 

"Corporeal  personal  property  is  conceded  to  be  taxable  at 
the  place  where  it  is  actually  situated.  A  credit,  which  can- 
not be  regarded  as  situated  in  a  place  merely  because  the  debt- 
or resides  there,  must  usually  be  considered  as  having  its  situs 
where  it  is  owned, — at  the  domicil  of  the  creditor.  The  cred- 
itor, however,  may  give  it  a  business  situs  elsewhere;  as  where 
he  places  it  in  the  hands  of  an  agent  for  collection  or  renewal, 
with  a  view  to  reloaning  the  money  and  keeping  it  invested  as 
a  permanent  business."^ 

So  clearly  established  is  this  right  to  tax  such  property  at 
the  place  of  its  actual  investment  and  employment,  that  it  was 
said  by  the  New  York  Court  of  Appeals  :5 


1  Supra,  Sec.  446. 

2  Supra,  Sec.  446;  see  also  Walker  v.  Jacks,  31  C.  C.  A.  462,  88  Fed. 
576,  6th  Cir.    (1898). 

3  7«.  re  Jefferson,  35  Minn.  215  (1886). 

4  To  the  same  effect  are  State  ex  rel.  Taylor  v.  St.  Louis  County 
Court,  47  Mo.  594  (1871);  People  v.  Trus.tees,  etc.,  48  N.  Y.  390  (1872); 
Wiloox  V.  Ellis,  14  Kan.  588  (1875) ;  Board  of  Supervisors  v.  Davenport, 
40  111.  197  (1866).  In  the  last  case  the  decision  is  apparently  placed  on 
the  ground  that  the  owner  of  the  property  had  a  business  residence  in 
Illinois.  But  it  appears  to  have  been  a  case  of  actual  employment  of 
the  property  in  the  State  where  taxed,  and  is  therefore  clearly  in  line 
with  the  other  cases  cited. 

5  People  ex  rel.  Jefferson  v.  Smith,  88  N.  Y.  576  (1882). 


§    448  THE   STATE    JURISDICTION    IN    TAX.\TION.  491 

''It  is  clear  from  the  statutes  referred  to  and  the  authorities 
cited  and  from  the  understanding  of  business  men  in  commer- 
cial transactions,  as  well  as  of  jurists  and  legislators,  that  mort- 
gages, bonds,  bills  and  notes  have  for  many  purposes  come  to 
be  regarded  as  property  and  not  as  the  mere  evidences  of 
debts,°and  that  they  may  thus  have  a  situs  at  the  place  where 
they  are  found  like  other  visible  tangible  chattels." 

.  The  court  held  that  under  the  New  York  statute,  which  taxed 
"all  lands  and  all  personal  estate  within"  that  State,  a  citizen 
of  New  York  could  not  be  taxed  on  money  invested  in  notes  and 
mortgages  held  by  his  agents  in  another  State.  They  said,  in 
reference  to  the  case  of  Kirtland  v.  Hotchkiss,^  that,  while  the 
State  could  have  authorized  the  taxation  of  these  securities  at 
the  domicil  of  the  owner,  according  to  their  construction  of  the 
statute,  the  legislature  did  not  intend  to  do  so,  and  that  a  more 
accurate  statement  of  the  doctrine  of  that  case  would  be  to  say, 
that  a  debt  may  have  its  situs  at  the  residence  of  the  creditor 
and  may  be  there  taxed.  In  other  words,  the  distinction  was 
between  the  existence  of  the  State  power  to  tax,  and  the  actual 
exercise  of  the  power.^ 

§  448.  Jurisdiction  for  Taxation  of  Credits  Not  Dependent 
Upon  Residence  of  Agent  or  of  Debtors. — While  the  presence 
of  a  resident  agent  is  of  service  in  enabling  the  State  to  exer- 
cise its  power  of  taxation,  its  jurisdiction  does  not  depend  upon 
that  fact,  but  upon  the  actual  situation  of  the  property  in  the 
State.  It  may  be  difficult  to  localize  the  property  for  taxation 
where  there  is  no  resident  agent,  but  that  does  not  affect  the 
fjuestion  of  the  jurisdiction  of  the  State  when  the  locality  is 
fixed. 

Thus  it  was  said  by  the  Supreme  Court  of  Indiana,^  that  the 
test  as  to  where  the  right  to  tax  property  exists  is  the  place  of 
its  location  and  use.  If  property  is  held,  owned  and  used  in  In- 
diana, it  is  taxable  there,  and  this  is  true  whether  the  business 
in  which  it  is  used  is  conducted  by  the  owner  in  person  or  by 


iSec.  483. 

2  See  infra,  Sec.  496. 

3  nuck  V.  Miller,  147  Ind.  f.Sr,  (1896).  and  ?,7  L.  R.  A.  384. 


492  THE   STATE   JURISDICTION    IN    TAXATION,  §    449 

some  one  else  for  him.  It  is  accordingly  quite  immaterial  whether 
the  notes  or  other  obligations  subjected  to  the  taxing  power  of 
the  State  have  been  executed  by  citizens  of  the  State  or  non- 
residents, i 

§  449.    Credits  Due  Foreign  Life  Insurance  Companies. — 

As  foreign  life  insurance  companies  do  business  in  the  State  and 
maintain  local  offices  therein  through  the  comity  of  the  State, 
loans  made  by  them  through  such  business  offices  and  notes 
made  in  the  regular  course  of  business  are  subject  to  State 
taxation,  where  the  interest  is  collected  in  the  State,  though  the 
notes  are  held  at  the  home  office  in  another  State.2 

But  where  the  loans  made  by  a  foreign  life  insurance  com- 
pany to  its  policy  holders,  though  represented  by  notes,  are  in 
fact  charged  against  the  reserve  value  of  the  borrowers'  policies 
under  an  agreement  in  the  policies  for  the  extinguishment  of 
the  debt  by  deducting  the  amount  of  the  loans  with  interest 
from  the  amount  of  any  claim  under  the  policy,  such  loans  can- 
not be  subjected  to  taxation  by  the  State  in  which  the  borrowing 
policy  holder  resides. ^  It  was  said  in  this  case  that  the  Louis- 
iana tax  laws  would  not  be  construed  by  the  Federal  courts  as 
taxing  bank  deposits  of  a  foreign  life  insurance  company  mad6 
solely  for  transmission  to  its  home  office,  and  not  used  or  drawn 


1  The  court  said  that  the  contrary  contention  suggests  a  most  excel- 
lent plan  by  which  the  holders  of  this  class  of  property  might  escape 
taxation  altogether.  "For  example,  let  those  in  Ohio  convert  all  their 
means  into  bonds,  stocks,  notes  and  mortgages  issued  and  executed 
by  residents  of  Ohio,  and  let  those  in  Indiana  invest  likewise  in  bonds, 
stocks,  notes  and  mortgages,  issued  and  executed  by  residents  of  Indi- 
ana; and  then  let  the  holders  of  the  Ohio  securities  move  to  Indiana, 
and  the  holders  of  the  Indiana  securities  move  into  Ohio,  and  it  is  done. 
Those  wealth-movers  must,  however,  be  careful  not  to  bring  their  dom- 
icil  along  with  them.  They  may,  of  course,  indeed  they  must,  live  and 
do  business  in  the  State  into  which  they  move;  but  they  should  be 
cautious  to  have  their  residence  and  domicil  elsewhere." 

2  Metropolitan  Life  Ins.  Co.  v.  Louisiana  Board  of  Assessors,  205  U. 
S.  395,  51  L.  Ed.  853  (1907),  affirming  116  La.  698. 

3  Board  of  Assessors  v.  New  York  Life  Ins.  Co.,  216  U.  S.  516,  54  L. 
Ed.  597   (1910),  affirming  158  Fed.  462. 


§    451  THE   STATE    JURISDICTION   IN    TAXATION.  493 

against  by  any  one  in  Louisiana,  in  the  absence  of  any  decisions 
of  the  Louisiana  court  to  that  effect. 

§  450.  Premiums  Due  Foreign  Insurance  Companies  Sub- 
ject to  Local  Taxation. — Premiums  due  a  foreign  insurance 
company  on  open  account,  though  charged  to  the  company's 
local  agent  instead  of  to  the  policy  holders,^  or  where  a  credit 
of  thirty  and  sixty  days  has  been  extended,  even  though  such 
extension  is  not  evidenced  by  a  written  statement,^  are  also  sub- 
ject to  State  jurisdiction  for  taxation. 

§  451.  Credits  Must  be  Localized  in  Jurisdiction  for  Tax- 
ation.— The  principle,  therefore,  established  in  the  construc- 
tion of  State  statutes,  taxing  all  property  within  the  scope  of 
their  operation,  is  that  the  State  can  tax  whatever  personal 
property  it  can  localize  within  its  jurisdiction.  In  the  language 
of  the  Supreme  Court  of  Pennsylvania : 

"There  is  nothing  poetical  in  tax  laws.  Wherever  they  find 
property  they  claim  a  contribution  for  its  protection,  without 
any  special  respect  to  the  owner  or  his  occupation." 

Credits  owing  from  citizens  of  the  State  to  parties  outside  of 
it  obviously  cannot  be  localized  in  the  State  of  the  debtor,  and 
for  this  reason  they  were  not  included  in  the  tax  law  of  Louis- 
iana, as  construed  by  its  Supreme  Court  in  New  Orleans  v. 
Stempel,  supra,  Sec.  446.  It  seems  that,  in  order  for  the  debt 
to  be  subject  to  the  taxing  power  of  the  State,  it  must  be  reduced 
to  a  concrete  form  and  evidenced  in  some  tangible  shape,  as  in  a 
note  or  other  written  obligation,  and  must  be  actually  in  the 
State  in  the  hands  of  an  agent,  or  otherwise  localized  within 
its  confines  for  permanent,  as  distinguished  from  temporary, 
use.  3 


1  Orient  Ins.  Co.  T.  Board  of  Assessors,  221  U.  S.  357,  55  L.  Ed.  769, 
(1911),  affirming  124  La.  72. 

2  Liverpool  Ins.  Co.  v.  Board  of  Assessors,  221  U.  S.  346,  55  L.  Ed. 
762,  affirming  122  La.  98    (1911). 

•'  As  to  the  power  of  the  State,  where  the  creditor  is  domiciled  there- 
in, to  tax  credits  and  other  personal  property  located  in  other  States, 
see  infra,  Sec.  482  et  seq. 


494  THE   STATE    JURISDICTION   IN   TAXATION.  §    452 

§  452.  Enforcement  of  Taxes  Against  Non-resident  Own- 
ers of  Property  in  State. — Taxes  are  not  debts,  as  they  are  not 
created  by  contracts,  but  are  based  upon  the  power  of  the  State 
to  enforce  contribution  from  persons  and  property  within  its 
jurisdiction  for  the  support  of  its  government.  The  point  was 
raised  in  the  case  of  Bristol  v.  Washington  County,  supra,  Sec. 
447,  that,  as  the  domicil  of  the  testatrix  against  whose  estate 
the  claim  of  the  State  for  taxes  was  proven,  and  also  the  domicil 
of  her  executor,  were  in  the  State  of  New  York,  the  power  to 
tax  could  be  exercised  only  against  the  very  property  taxed; 
that  the  assessments  did  not  constitute  judgments  in  personam, 
and  that  judgment  on  these  assessments  could  not  therefore  be 
recovered  against  the  ancillary  administrator  in  Minnesota. 

The  Supreme  Court,  following  the  Supreme  Court  of  Minne- 
sota, decided  that  under  the  statute  of  that  State  for  the  pur- 
pose of  proof  and  payment  out  of  an  estate  in  probate,  a  personal 
tax  was  a  debt,  though  not  a  debt  in  the  usual  acceptation  of 
the  term,  saying: 

''The  obligation  to  contribute  to  the  support  of  government 
in  return  for  the  protection  and  advantages  afforded  by  gov- 
ernment is  not  dependent  on  contract,  but  on  the  exercise  of 
the  public  will  as  demanded  by  the  public  welfare." 

The  claims  were  therefore  properly  allowed  against  the  es- 
tate. The  case  of  Dewey  v.  Des  Moines,  i  was  distinguished,  as 
there  the  assessment  was  levied  on  real  estate  for  a  local  im- 
provement without  service  upon  the  non-resident  or  his  volun- 
tary appearance  or  any  consent  on  his  part  to  the  jurisdiction. 

But  in  a  New  York  case  it  was  held  2  that,  while  the 
State  had  the  power  to  levy  a  tax  upon  the  personal  property  of 
a  non-resident,  in  this  case  national  bank  stock  in  a  New  York 
city  bank,  situated  within  its  boundaries  and  subject  to  its  jur- 
isdiction, and  for  that  purpose  to  separate  the  siius  of  the 
owner  from  the  actual  situs  of  the  property  within  the  State, 


1  Supra,  Sec.  397. 

2  City  of  New  York  v.  McLean,  57  App.  Div.  601   (1901). 


§    453  THE   STATE    JURISDICTION    IN    TAXATION.  495 

and  to  subject  it  to  taxation  because  it  was  within  the  State 
limits,  yet  it  could  only  enforce  payment  of  the  tax  by  virtue 
of  its  jurisdiction  over  the  property.  It  had  not  therefore  by 
virtue  of  that  jurisdiction  any  power  to  subject  the  non-resi- 
dent owner  of  the  property  to  a  personal  liability  for  the  tax, 
although  nothing  appears  to  indicate  that  there  was  not  per- 
sonal service  upon  the  defendant. i  The  court  based  its  decision 
upon  the  doctrine  of  Pennoyer  v.  Neff,2  and  Dewey  v.  Des 
Moines.3 

It  will  be  observed  that  in  the  Bristol  case,  supra,  the  State 
of  Minnesota  overcame  the  difficulty  of  securing  service  of  pro- 
cess in  enforcing  personal  tax  claims  against  a  non-resident, 
through  the  ancillary  administration  in  Minnesota  of  the  estate 
of  the  deceased  non-resident  owner. 

§  453.    Credits  Under  the  Louisiana  Code  Held  Taxable. — 

The  Constitution  of  the  State  of  Louisiana  declares  that  all 
property  shall  be  assessed  in  proportion  to  its  value,  and  the 
statute  defines  "Credits"  as  those  arising  from  business  done 
in  the  State,  as  the  business  domicil  of  the  non-resident  owner, 
his  agent  or  representative.  The  Supreme  Court  held^  that  a 
State  was  not  forbidden  by  the  Federal  Constitution  to  tax 
credits  arising  out  of  loans  on  collateral  securities  made  by  the 
local  agency  of  a  foreign  corporation,  which  retains  the  col- 
lateral, and  as  evidence  of  the  indebtedness  takes  the  customer's 
so-called  check  which  is  regarded  as  an  overdraft,  upon  which 


1  Justices  Van  Brunt  and  O'Brien  dissented,  saying:  "The  right  to 
tax  would  not  be  of  much  value  if  there  were  no  power  to  collect.  The 
tax  bears  the  same  relation  to  a  non-resident  as  to  a  resident,  and  as 
a  tax  is  a  debt  due  from  a  resident  and  is  collectible  by  suit,  it  would 
seem  to  follow  that  a  tax  against  a  non-resident  would  be  collectible  in 
the  same  manner  when  the  court  can  get  jurisdiction  of  the  non-resi- 
dent by  the  service  of  process."  It  was  also  suggested  that  a  lien 
could  not  be  enforced  against  the  stock,  as  the  owner  had  the  certifi- 
cate and  could  give  title  to  it  by  transfer  through  the  proper  power  of 
attorney. 

2  95  U.  S.  714,  24  L.  Ed.  565    (1878). 

3  .^upra,  Sec.  397. 

4  State  Board  of  Assessors  v.  Coniptoir  National  D'Escompte  de  Paris, 
191  U.  S.  388  (1903),  48  L.  Ed.  232. 


496  THE   STATE    JURISDICTION   IN    TAXATION.-  §    455 

the  customer  is  charged  interest  and  which  is  finally  sent  to  the 
home  office,  to  which  the  money  when  repaid  is  remitted  by  an 
exchange  transaction,  unless  reloaned  by  the  local  agent  or  other 
parties.  The  court  said  that  considering  the  prior  adjudica- 
tions of  such  transactions,  it  would  be  taken  as  the  settled  law 
of  the  court,  that  there  was  no  inhibition  in  the  Federal  Con- 
stitution against  the  right  of  a  State  to  tax  property  in  the 
shape  of  credits,  when  the  same  are  evidenced  by  notes  or  ob- 
ligations held  within  the  State  in'  the  hands  of  an  agent  of  the 
owner  for  the  purpose  of  collection  or  renewal,  with  the  view 
of  new  loans  and  carrying  on  such  transactions  as  a  permanent 
business. 

§  454.  Credits  Held  Not  Localized  for  Taxation.  —  The 
State  cannot  consistently  with  due  process  of  law  tax  notes  in 
the  hands  of  an  agent  who  had  no  interest  therein,  but  to  whom 
they  were  sent  merely  in  an  effort  to  escape  taxation  by  an 
agent  in  another  State.  This  was  adjudged  in  a  case  where  the 
loan  was  made  in  Ohio  secured  by  lands  there  situated  and 
there  payable,  and  sent  to  an  Indiana  agent  of  the  payee  in 
order  to  escape  taxation  in  Ohio,  there  to  be  held  by  him  until 
they  were  needed  in  Ohio  to  have  pajTuents  of  interest  en- 
dorsed thereon,  or  to  be  delivered  up  if  the  principal  was  paid.^ 
The  court  said  that  this  decision  had  no  tendency  to  aid  an 
owner  of  taxable  property  in  an  effort  to  avoid  or  to  evade 
proper  and  legitimate  taxation,  and  added : 

"The  presence  of  the  notes  in  Indiana  is  no  bar  to  the  right 
if  it  otherwise  existed,  of  taxing  the  funds  evidenced  by  the 
notes  in  Ohio.  It  does,  however,  tend  to  prevent  the  taxation 
in  one  State  of  property  in  the  shape  of  debts  not  existing 
there,  and  which,  if  so  taxed,  would  make  double  taxation  al- 
most sure,  which  is  certainly  to  be  deprecated,  and  ought, 
wherever  possible,  to  be  prevented." 

§  455.     Bank  Credits  Under  California   Statute   Held   Not 

Taxable. — The  Constitution  of  California  declared  that  all 
property  in  the  State  not  exempt  under  the  laws  of  the  United 


iBuck  V.  Beach,  206  U.  S.  392,  51  L.  Ed.  1106   (1907),  reversing  164 
Ind.  37,  Justices  Day  and  Brewer  dissenting. 


§    456  THE   STATE    JURISDICTION   IN    TAXATION.  497 

States  should  be  taxed  in  proportion  to  value  (Art.  XIII,  Sec. 
1),  and  that  the  word  "property"  should  include  all  moneys, 
credits,  etc.,  capable  of  private  ownership.  The  Code,  3617,  de- 
clared that  the  word  "Credits"  should  mean  those  solvent  debts 
not  secured  by  mortgage  or  trust  deed  owing  to  the  person  or 
corporation  assessed.  It  was  held  by  the  Circuit  Court  of  Ap- 
peals (9tli  Circuit),^  that  where  foreign  corporations  maintained 
branch  banks  in  San  Francisco,  Portland,  Oregon  and  Tacoraa, 
Washington,  and  credits  were  carried  on  the  books  of  the  other 
branches  for  their  benefit  and  charged  to  them  as  a  mere  matter 
of  book-keeping,  without  any  promise  or  obligation  on  the  part 
of  the  deputy  agencies  to  return  the  money  to  the  San  Fran- 
cisco bank,  were  not  credits  arising  in  the  State  of  California, 
or  taxable  therein.  The  court  said  that  the  authority  of  every 
State  to  tax  all  property,  real  and  personal,  within  its  jurisdic- 
tion was  unquestionable,  but  that  the  taxing  power  of  the  State 
in  a  case  of  this  character  was  limited  to  property  within  the 
State. 

§  456.  Power  of  State  in  Taxing  Corporation  Bondholders 
Through  Corporation.  —  The  practical  difficulty  of  reaching 
individual  personal  property  like  choses  in  action,  notes  and 
mortgages,  for  taxation,  has  led  to  attempts  to  reach  so  much  of 
said  property  as  was  represented  by  bonds  of  corporations.  This 
was  attempted  by  compelling  all  corporations,  having  offices  in 
the  State  which  issued  bonds,  to  pay  the  tax  on  such  bonds  and 
deduct  the  amount  from  the  interest  on  the  bonds  paid  to  the 
holder.  But  it  was  held  by  the  Supreme  Court  that  as  to  no'ii- 
residrnt  bondholders,  such  taxation  was  not  a  legitimate  exer- 


1  London  &  San  Francisco  Bank  v.  Block,  C.  C.  A.,  9th  Cir.  (1905), 
136  Fed.  138,  reversing  117  Fed.  900.  See  also  Spring  Valley  Water 
Co.  V.  City  and  County  of  San  Francisco,  225  Fed.  728  (1915),  where 
held  that  deposits  made  in  banks  pursuant  to  order  of  court  by  the 
water  company  suing  to  enjoin  the  enforcement  of  water  rights  were 
taxable  under  the  same  code.  A  deposit  in  the  bank  to  the  credit  of 
the  depositor  subject  to  his  check  is  a  debt  and  not  property  of  the 
bank,  and  its  situs  for  the  purpose  of  taxation  is  in  the  State  of  the 
depositor's  domicil.  Pyle  v.  Branneman,  Circuit  Court  of  Appeals,  4th 
Circuit.   122   Fed.   787    (1903). 


498  THE   STATE    JURISDICTION   IN    TAXATION.  §    457 

cise  of  the  taxing  power  of  tlie  State,  but  an  attempt  to  reach 
property  beyond  its  jurisdiction,  and  that  the  law  sought  to  be 
enforced  was  an  impairment  of  the  obligation  between  the  cor- 
poration and  the  bondholder.^  The  tax  laws  could  have  no  ex- 
tra-territorial operation. 

In  this  case  no  reference  was  made  to  the  Fourteenth  Amend- 
ment. But  later,^  the  Fourteenth  Amendment  was  invoked  in 
resisting  a  statute  directing  a  deduction  of  the  tax  from  the 
interest  paid  by  the  railroad  company  to  the  resident  holders  of 
bonds.  But  the  Supreme  Court  ruled  that  as  to  such  resident 
bondholders,  this  requirement  was  within  the  lawful  power  of 
the  State. 

§  457.  State  Cannot  Compel  Foreign  Railroad  Company  to 
Act  as  Tax  Collector. — In  another  case  the  State  of  Pennsyl- 
vania endeavored  to  enforce  this  tax  as  to  resident  holders  of 
the  b6nds  of  a  New  York  railroad  corporation  having  its  office 
there,  but  operating  part  of  its  road  in  Pennsylvania,  by  comj 
pelling  the  corporation  to  deduct  the  tax  from  the  interest  paid 
at  its  New  York  office  to  the  holders  of  its  bonds  who  were 
residents  of  Pennsylvania.^  •  The  court  said  that,  if  there  was 
any  question  as  to  the  deduction  of  the  tax  from  the  interest 
paid  to  non-resident  holders,  that  is,  to  bondholders  not  resi- 
dents of  Pennsylvania,  the  State  tax  on  Foreign  Held  Bonds 
Case  would  be  conclusive  against  the  State.  On  the  other  hand, 
the  court  distinguished  this  case  from  the  case  last  cited,  that 


1  State  Tax  on  Foreign  Held  Bonds,  15  "Wall.  300,  supra,  Sec.  439.  Jus- 
tices Davis,  Miller  and  Hunt  dissented,  saying  that  in  their  opinion  the 
State  legislature  was  not  restrained  by  anything  in  the  Federal  Consti- 
tution nor  by  any  principle  which  that  court  could  enforce  against  the 
State  court,  from  taxing  the  property  of  persons  which  it  could  reach 
and  lay  its  hands  on,  whether  these  persons  resided  within  or  without 
the  State.  See  also  Railroad  Co.  v.  Jackson,  7  Wall.  262,  19  L.  Ed.  88 
(1869);  Murray  v.  Charleston,  96  U.  S.  432,  24  L.  Ed.  760  (1878). 

2  Bell's  Gap  R.  R.  Co.  v.  Pennsylvania,  134  U.  S.  232,  33  L.  Ed.  892 
(1900).  See  also  Commonwealth  v.  Delaware  Div.  Canal  Co.,  123  Pa, 
St.  594,  2  L.  R.  A.  798   (1889). 

3  Erie  Railroad  Co.  v.  Pennsylvania,  153  U.  S.  628,  38  L.  Ed.  846 
(1894X 


§    458  THE    STATE    JURISDICTION    IN    TAXATION.  499 

of  Bell's  Gap  Railroad  v.  Pennsylvania,  because  that  was  a 
Pennsylvania  corporation  which  was  compelled  to  deduct  the 
tax  from  the  interest  paid  to  Pennsylvania  holders  of  its  bonds. 
Decision  was  rendered  against  the  State  on  the  ground  that  it 
had  no  right  to  make  the  New  York  railroad  company  its  tax 
collector,  that  is,  to  impose  upon  the  company  the  duty  of  col- 
lecting the  State  taxes  at  its  office  outside  of  the  jurisdiction 
of  the  Commonwealth,  and  that  it  could  not  impose  such  a  duty 
as  a  condition  of  permitting  the  New  York  railroad  company 
to  perform  its  business  as  a  common  carrier  within  the  State 
of  Pennsylvania. 

It  will  be  seen  that  these  decisions  are  applicable  only  to 
bonds  of  a  railroad  company,  which  are  treated  as  debts  having 
their  situs,  for  taxation,  at  the  residence  of  their  holders.  The 
power  of  the  State  to  make  the  mortgage  securing  the  bonds  an 
interest  in  the  property  mortgaged,  and  taxable  as  such,  was 
not  before  the  court.  It  will  be  observed  also  that  these  deci- 
sions have  no  application  to. the  case  of  corporate  stock  and  its 
liability  to  taxation  by  the  State  of  incorporation,  irrespective 
of  the  residence  of  the  holders. 

Public  stock,  which  is  the  form  in  which  the  indebtedness  of 
States  and  municipalities  is  sometimes  evidenced,  when  held  by 
parties  not  domiciled  in  the  State,  is  not  subject  to  the  taxing 
power  of  the  State.  Thus  a  resident  of  New  York  was  held 
not  taxable  in  Maryland  on  the  stock  of  the  city  of  Baltimore, 
the  court  saying  that  the  taxable  situs  of  the  stock  was  at  the 
domicil  of  the  owner.^ 

§  458.  State  May  Make  Mortgag-e  Taxable  Interest  in  Real 
Estate. — In  the  Tax  on  Foreign  Held  Bonds  Case,  supra,  See. 
439,  the  opinion  was  expressed  that  a  mortgage,  being  a  mere 


1  Mayor  v.  Hussey,  67  Md.  112  (1887),  the  court  following  the  Tax  on 
Foreign  Held  Bonds  case,  supra,  and  Murray  v.  Charleston,  96  U.  S.  432, 
supra  456.  In  this  case  the  tax  had  been  deducted  from  the  interest. 
The  court  held  that  although  there  was  no  authority  for  this  action, 
the  owner  was  estopped  by  her  acquiescence  for  several  years,  so  that 
it  was  in  effect  a  voluntary  payment,  barring  her  from  recovering  it 
back. 


500  THE   STATE   JURISDICTION   IN   TAXATION,  §    458 

security  for  a  debt,  confers  upon  its  holders  no  interest  in  the 
land,  and  when  held  by  a  non-resident  is  as  much  beyond  the 
jurisdiction  of  the  State,  as  the  person  of  the  owner.  This 
declaration  was  urged  against  the  system,  adopted  by  the  State 
of  Oregon,  of  taxing  mortgages  as  interests  in  the  real  estate. 
According  to  this  system,  the  mortgage  was  made  a  separate  in- 
terest in  the  real  estate  for  taxation,  and  was  taxed  to  the  mort- 
gagee, while  the  equity,  or  the  value  of  the  property  less  the  mort- 
gage, was  taxed  as  the  interest  of  the  mortgagor.  A  California 
corporation  owning  notes  secured  by  mortgage  upon  real  estate 
in  Oregon  filed  a  bill  against  the  enforcement  of  a  tax,  levied, 
under  this  statute,  on  their  mortgage-interest  on  the  ground 
that  the  tax  was,  in  violation  of  the  Fourteenth  Amendment,  a 
taking  of  property  without  due  process  of  law.  The  court,  in 
an  opinion  by  Justice  Gray,^  held  that  the  tax  was  valid,  and, 
after  analyzing  the  statute  and  showing  that  the  personal  ob- 
ligation of  the  mortgagor  was  not  taxed,  and  that  the  mortgagor 
as  well  as  the  mortgagee  was  entitled  to  have  deducted  from  his 
own  assessment  the  amount  of  his  indebtedness  within  the  State, 
said,  p.  425 : 

*  *  The  result  is  that  nothing  is  taxed  but  the  real  estate  mort- 
gaged, the  interest  of  the  mortgagee  therein  being  taxed  to 
him,  and  the  rest  to  the  mortgagor.  There  is  no  double  taxa- 
tion.^ Nor  is  any  such  discrimination  made  between  mort- 
gagors and  mortgagees,  or  between  resident  and  non-resident 
mortgagees,  as  to  deny  to  the  latter  the  equal  protection  of 
the  laws.    .    .    . 

''The  authority  of  every  State  to  tax  all  property,  real  and 
personal,  within  its  jurisdiction,  is  unquestionable.  4  Wheat- 
on  316,  429.  .  .  .  The  State  may  tax  real  estate  mortgaged, 
as  it  may  all  other  property  within  its  jurisdiction,  at  its  full 


1  Savings  Society  v.  Multnomah  County,  169  U.  S.  421,  42  L.  Ed.  803 
(1898),  affirming  60  Fed.  31,  Justices  Harlan  and  White  dissenting. 

2  The  statement  in  the  opinion  that  there  is  "no  double  taxation"  in 
this  taxation  of  mortgages  as  real  estate  obviously  applied  only  to  the 
State  of  Oregon.  There  was  nothing  to  prevent  the  State,  where  the 
holder  of  the  mortgage  is  domiciled,  from  taxing  him  upon  the  mort- 
gage as  part  of  his  personal  estate.  See  Kirtland  v.  Hotchkiss,  infra. 
Sec.  483. 


§    459  THE   STATE    JURISDICTION    IN    Ti\:SATION.  501 

value.  It  may  do  this,  either  by  taxing  the  whole  to  the  mort- 
gagor, or  by  taxing  to  the  mortgagee  the  interest  therein  rep- 
resented by  the  mortgage,  and  to  the  mortgagor  the  remain- 
ing interest  in  the  land.  And  it  may,  for  the  purpose  of  taxa- 
tion, either  treat  the  mortgage  debt  as  personal  property,  to 
be  taxed,  like  other  choses  in  action,  to  the  creditor  at  his 
domicil;  or  treat  the  mortgagee's  interest  in  the  land  as  real 
estate,  to  be  taxed  to  him,  like  other  real  property,  at  its 
sitiis." 

§  459.    Foreign  Held  Bonds  Case  in  Part  Overruled. — As  to 

the  Foreign  Held  Bonds  Case,^  after  stating  what  was  decided, 
the  court  said: 

"The  remarks  in  the  opinion,  supported  by  quotations  from 
opinions  of  the  Supreme  Court  of  Pennsylvania,  that  a  mort- 
gage, being  a  mere  security  for  the  debt,  confers  upon  the 
holder  of  the  mortgage  no  interest  in  the  land,  and  when  held 
by  a  non-resident  is  as  much  beyond  the  jurisdiction  of  the 
State  as  the  person  of  the  owner,  went  beyond  what  was  re- 
quired for  the  decision  of  the  case,  and  cannot  be  reconciled 
with  other  decisions  of  this  court  and  of  the  Supreme  Court 
of  Pennsylvania. ' ' 

After  citing  opinions  of  that  court  and  of  the  State  courts 
as  to  the  interest  of  a  mortgagee,  the  court  declared  that  the  case 
of  Kirtland  v.  Hotchkiss,  infra,  Sec.  483,  decided  only  that 
debts  to  persons  residing  in  one  State,  secured  by  mortgage  of 
land  in  another  State,  might  for  the  purpose  of  taxation  be  re- 
garded as  situated  at  the  domicil  of  the  creditor,  but  that  the 
question  whether  the  mortgage  could  be  taxed  there  only  was 
not  involved  in  the  case.     The  opinion  concludes: 

"The  statute  of  Oregon,  the  constitutionality  of  which  is 
now  drawn  in  question,  expressly  forbids  any  taxation  of  the 
promissory  note,  or  other  instrument  of  writing,  which  is  the 
evidence  of  the  debt  secured  by  the  mortgage ;  and,  with  equal 
distinctness,  provides  for  the  taxation,  as  real  estate,  of  the 
mortgage  interest  in  the  land.  Although  the  right  which  the 
mortgage  transfers  in  the  land  covered  thereby  is  not  the  legal 
title,  but  only  an  equitable  interest  and  by  way  of  security  for 
the  debt,  it  appears  to  us  to  be  clear  upon  principle  and  in  ac- 

1 15  Wall.  300,  supra. 


502  THE   STATE    JURISDICTION    IN    TAXATION.  §    460 

cordance  with  the  weight  of  authority,  that  this  interest,  like 
any  other  interest,  legal  or  equitable,  may  be  taxed  to  its 
owner  (whether  resident  or  non-resident)  in  the  State  where 
the  land  is  situated,  without  contravening  any  provision  of  the 
Constitution  of  the  United  States."^ 

§  460.  State  May  Tax  Stock  of  Non-resident  Holders  in 
Domestic  Corporations. — Under  the  same  principle  of  the  right 
to  tax  all  property  which  can  be  localized  in  the  jurisdiction,  a 
State  may  tax  the  capital  stock  of  its  domestic  corporations, 
either  directly  to  the  corporation,  or  through  the  corporation 
to  the  individual  shareholders,  irrespective  of  their  residence, 
whether  in  or  out  of  the  State,  the  stock  having  a  situs  for  taxa- 
tion at  the  domicil  of  the  corporation.  2  This  is  the  principle 
adopted  in  the  taxation  of  non-resident  shareholders  in  national 
banks,  taxed  by  the  States  under  the  authority  of  the  Act  of 
Congress,^  the  stock  of  the  non-resident  holders  having  a  situs 
for  taxation  at  the  domicil  of  the  bank. 

A  statute  of  Connecticut  allowing  to  resident  stockholders  a 
deduction  from  the  assessment  of  their  stock  at  its  market  value 
on  account  of  the  value  of  the  real  estate  held  by  the  corpora- 
tion, although  no  such  deduction  was  allowed  the  non-resident 


1  In  Mackay  v.  San  Francisco,  113  Cal.  392,  this  system  was  sustained; 
see  also  Dundee  Mortgage  Co.  v.  School  District  No.  1,  19  Fed.  359 
(1884),  and  21  Fed.  151  (1884). 

In  Allen  v.  National  State  Bank,  92  Md.  509  and  52  L.  R.  A.  760  (1901), 
a  statute  taxing  mortgages  as  real  estate  was  sustained,  although  no 
provision  was  made  for  deducting  the  amount  of  the  mortgage  debt 
from  any  assessment  upon  the  mortgagor,  as  in  the  Oregon  statute. 
The  court  said  (p.  515)  that  this  omission  was  "rather  an  objection 
to  its  justice  and  fairness  than  to  its  validity." 

In  the  Southern  Pacific  Railroad  cases,  13  Fed.  722  (1882),  and  18 
Fed.  385  (1883),  the  California  system  was  held  by  Justices  Field  and 
Sawyer  to  be  violative  of  the  Fourteenth  Amendment,  for  discrimina- 
tion in  exception  of  railroad  mortgages.  For  decision  of  Supreme  Court 
of  Missouri  holding  constitutional  amendment  in  that  State  introducing 
the  California  system  void  for  same  reason,  see  supra,  Sec.  336. 

2  Street  R.  R.  v.  Morrow,  87  Tenn.  406  (1889) ;  St.  Albans  v.  National 
Car  Co.,  57  Vt.  68   (1884). 

3  Tappan  v.  Merchants'  Bank,  19  Wall.  490,  22  L.  Ed.  189  (1874); 
"Taxation  of  National  Banks,"  supra.  Chap.  IX. 


§'461  THE    STATE    JURISDICTION   IN    TAXxVTION.  503 

shareholders,  was  sustained  by  the  Supreme  Court,  affirming  the 
judgment  of  the  Supreme  Court  of  Connecticut.i  The  tax  was 
objected  to  on  the  ground  that  there  was  a  discrimination  be- 
tween  the  resident  and  non-resident  stockholders,  working  a  de- 
nial of  the  equal  protection  of  the  laws;  but  the  court  said  tha,t 
the  discrimination  was  only  apparent,  as  the  non-resident  stock- 
holder paid  no  local  taxes,  but  simply  contributed  so  much  to 
the  expenses  of  the  State,  while  the  resident  stockholders  paid 
no  tax  to  the  State  but  only  to  the  municipality  in  which  they 
resided. 

The  State  of  the  residence  of  the  stockholder  may  tax  the 
same  stock  as  part  of  his  personal  property,  see  Sec.  484,  infra. 

§  461.  Non-resident  Stockholder  Not  Taxable  in  Absence 
of  Statute. — But  while  a  State  has  this  power  to  tax  non-resi- 
dent stockholders  in  domestic  corporations,  the  existence  of  such 
power  is  not  inferred,  in  the  absence  of  statute  specifically  sub- 
jecting such  stocks  to  taxation,  particularly  when  it  would  in- 
volve double  taxation,  and  is  inconsistent  with  the  general  tax 
system  of  the  State.  This  was  held  in  the  United  States  Cir- 
cuit Court  in  Californiaa  in  a  suit  brought  against  Mr.  Mackay 
after  he  had  removed  his  domicil  from  the  State,  to  recover 
taxes,  with  interest  and  penalties  aggregating  nearly  $500,000, 
assessed  against  him  on  account  of  shares  in  a  number  of  cor- 
porations organized  for  various  purposes.  These  corporations 
were  organized  under  the  laws  of  California,  and  they  had 
their  offices  in  that  State,  but  all  or  nearly  all  of  their  property- 
was  in  the  State  of  Nevada.  The  court  said  that  under  the 
laws  of  California,  as  construed  by  the  Supreme  Court  of  that 
State,  the  taxation  of  corporate  property  to  the  corporation  and 
the  shares  to  the  shareholders  was  double  taxation,  which  was 
prohibited  by  the  State  constitution.  This  ease  again  came  up 
before  the  United  States  Circuit  Court,  which  held  that  the  situs 
of  money  and  solvent  credits  for  the  purposes  of  taxation,  in 


1  Travelers'  Ins.  Co.  v.  Connecticut,  185  U.  S.  364,    46    L.  Ed.    949 
(1902),  affirming  73  Conn.  255. 

2  San  Francisco  v.  Mackay,  21  Fed.  5.'',9  (1884). 


504  THE   STATE   JURISDICTION    IN    TAXATION.  §    462 

the  absence  of  statute,  is  the  residence  of  the  owner,  and  defend- 
ant was  admitted  to  be  a  non-resident  of  California.^  As  to 
the  public  policy  which  condemned  discrimination  against  for- 
eign stockholders  in  domestic  corporations,  the  court  said: 

''The  obvious  tendency  of  discrimination, — double,  unequal, 
and  unjust  taxation, — is  to  drive  our  citizens  having  a  large 
amount  of  personal  property  out  of  the  State  to  escape  that 
kind  of  oppression.  If,  notwithstanding  their  departure,  they 
can  still  be  taxed  upon  their  incorporeal  and  intangible  prop- 
erty through  their  stock  in  domestic  corporations,  and  thereby 
be  taxed  on  the  same  property  in  both  States,  the  next  step 
will  be  for  business  men  either  to  withdraw  their  investments 
from  the  State,  or  change  them  from  domestic  into  foreign 
corporations,  as  has  sometimes  been  done,  and  the  business 
will  hereafter,  to  a  large  extent,  be  carried  on  by  non-residents 
in  their  individual  characters,  or  by  foreign  corporations  over 
which  the  State  has  little  control,  and  the  State  will  be  con- 
fined for  its  revenue  to  the  tangible  property  of  such  non-res- 
idents and  foreign  corporations  found  within  its  borders.  A 
policy  that  recognizes  the  principle  stated,  for  the  purpose  of 
taxing  the  stock  of  resident  citizens  in  foreign  corporations, 
as  following  the  person,  but  repudiates  it  for  the  purpose  of 
taxing  the  stock  of  citizens  and  residents  of  other  States  in 
domestic  corporations,  thereby  imposing  upon  them  the  bur- 
dens of  taxation  upon  the  same  property  in  both  States,  can- 
not fail  to  be  inimical  to  the  best  interests  of  the  State,  and  to 
discourage  investments  by  both  resident  and  non-resident  cap- 
italists, thereby  greatly  retarding  the  future  development  of 
its  resources.  It  also  places  foreign  on  a  better  footing  than 
domestic  corporations,  in  violation  of  the  constitution.  The 
principle  should  be  altogether  repudiated,  or  made  applicable 
both  ways.  I  cannot  impute  to  the  legislature  an  intention  to 
adopt  a  policy  so  suicidal  as  that  claimed  by  the  complainant, 
without  provisions  of  the  constitution  and  statutes,  indicating 
such  a  purpose,  far  more  specific  and  unmistakable  in  their 
import  than  any  yet  brought  to  my  attention." 

§  462.  Due  Process  of  Law  in  Taxation  of  Interstate  Prop- 
erties.— The  subject  of  the  taxation  of  interstate  carriers  has 
been  considered,  Chapter  VIII,  in  connection  with  the  regula- 

1  San  Francisco  v.  Mackay,  22  Fed.  602  (1884).  See  also  State  v. 
Thomas,  26  N.  J.  L.  181  (1857),  and  Sec.  489,  infra,  note  1. 


§    462  THE   STATE    JURISDICTION    IN   TAXATION.  505 

tiou  of  commerce.  It  was  strongly  urged  in  cases  there  referred 
to  that  the  rule  of  assessment  enforced  by  the  States  of  Ohio 
and  Kentucky  under  the  so-called  unit  rule  and  mileage  appor- 
tionment was  in  effect  a  taxing  of  property  beyond  the  jurisdic- 
tion of  the  State,  and  so  a  denial  of  due  process  of  law/  It  was 
adjudged  in  those  cases,  though  against  a  vigorous  dissent, 
that  the  valuation  of  the  property  as  a  unit  profit-producing' 
plant  did  not  violate  any  Federal  restriction  or  tax  any  prop- 
erty beyond  the  jurisdiction  of  the  State,  as  the  attempt  was 
only  to  place  a  just  value  upon  that  part  of  the  property  which 
was  within  the  State's  confines.  It  was  said,  however,  that  the 
company  had  the  right  to  show  that  it  had  property  in  other 
States,  which  was  included  in  the  total  value  and  which  did  not 
properly  fall  under  the  taxing  power  of  the  State;  and  the 
court  said  that  if  such  facts  exist  they  should  be  taken  into  con- 
sideration by  the  State  in  its  proceedings.  But  if  the  company 
does  not  make  such  disclosure,  it  cannot  complain  if  the  State 
treats  all  of  its  property  as  taxable,  that  is,  on  the  basis  of 
mileage  apportionment.  The  court  added  in  overruling  the 
motion  for  rehearing  in  the  Ohio  case : 

"It  is  said  that  the  views  thus  expressed  open  the  door  to 
possibilities  of  gross  injustice  to  these  corporations,  through 
conflicting  action  of  the  different  States  in  matters  of  taxation. 
That  may  be  so  and  the  courts  may  be  called  upon  to  relieve 
against  such  abuses." 

The  principle  is  therefore  established  that  while  a  State  can 
only  tax  that  part  of  the  property  and  franchises  of  a  railroad, 
steamboat,  telegraph  or  other  interstate  corporation  which  is 
located  within  its  limits,  it  can  in  determining  the  value  of  that 
part  consider  the  value  of  the  entire  property  in  all  the  States 
where  located  as  a  profit-producing  unit.  It  cannot,  however, 
determine  arbitrarily  that  the  ratio  of  the  mileage  in  the  State 
to  the  total  mileage  is  that  part  of  the  total  value  represented 
by  the  property  within  the  State.  It  must  consider  all  the  facts 
whifh  are  offered,  which  tend  to  show  what  part  of  the  aggre- 

1  Adams  Express  Co.  v.  Ohio,  supra,  Sec.  272;  Adams  Express  Co.  T. 
Kontuckj;,  supra,   Sec.   276. 


506  THE    STATE   JURISDICTION    IN    TAXATION.  §    462 

gate  value,  is  actually  within  that  jurisdiction.  The  so-called 
unit  and  mileage  rules  therefore  when  applied  to  the  valuation 
of  interstate  properties,  are  merely  admissible  rules  to  assist  in 
the  determination  of  the  value  of  the  property  actually  em- 
ployed in  the  State  (see  Ch.  VIII,  supra).  It  is  clear  that  if  the 
State  should  refuse  to  consider  such  facts,  or  if  for  any  reason, 
either  in  the  statute  as  construed  by  the  State  court,  or  in  the 
enforcement  of  it  b}^  the  State  officials,  it  should  appear  that 
the  value  of  the  property  outside  of  the  State  was  included  in 
the  assessment,  there  would  be  a  denial  of  due  process  of  law. 
But,  if  the  statute  as  construed  by  the  State  court  provides  for 
a  consideration  of  all  the  facts,  and  an  opportunity  is  afforded 
for  hearing,  an  erroneous  determination  of  the  effect  of  the  evi- 
dence upon  the  valuation  of  the  property  within  the  State  would 
not  present  any  Federal  question.  Indeed,  in  the  absence  of 
fraud  or  intentional  wrong  or  error,  there  is  grave  doubt 
whether  the  conclusions  of  the  assessing  boards  are  subject  to 
judicial  review  in  the  State  court,  where  there  is  no  statutory 
provision  for  review  by  certiorari  or  otherwise.^ 


1  Thus  it  was  held  by  the  Supreme  Court  of  Arkansas,  in  Wells, 
Fargo  &  Co.  v.  Crawford  County,  63  Ark.  576,  and  37  L.  R.  A.  371  (1897), 
in  applying  to  the  taxation  of  express  companies  in  that  State  the  unit 
rule  and  mileage  apportionment,  as  sustained  by  the  U.  S.  Supreme 
Court  In  the  Ohio  and  Kentucky  cases,  that  the  statute  directing  the 
board  to  make  the  assessment  by  taking  the  same  proportion  of  the 
aggregate  value  of  the  capital  stock  of  such  express  company  as  the 
number  of  miles  of  railway  in  the  State  over  which  it  carried  on  its 
business  bore  to  the  aggregate  number  of  miles  of  railway  within  as 
well  as  without  the  State  over  which  the  company  did  business,  was 
to  be  construed  as  restricting  the  board  to  this  plan  of  assessing  plain- 
tiff's property  only  in  the  absence  of  other  evidence.  It  was  the  duty 
of  the  board  to  consider  all  evidence  which  had  come  to  their  knowl- 
edge concerning  the  value  of  such  property  within  and  without  the 
State.  If,  therefore,  the  part  of  the  business  outside  of  the  State  was 
done  on  waterways,  this  fact  was  to  be  considered.  The  court  must 
presume  that  the  legislature  knew  it  could  not  tax  property  situated 
outside  the  limits  of  the  State,  and  this  would  involve  the  presumption 
that  there  was  no  intention  to  tax  such  property.  Mere  error  in  the 
finding  of  the  board  as  to  the  amount  of  the  assessment  was  not  ground 


§   463  THE   STATE    JURISDICTION    IN    TAXATION.  507 

§  463.    Due  Process  of  Law  in  Taxation  of  Corporations. — 

Coi-porations  are  persons  within  the  meaning  of  the  Fourteenth 
Amendment,  and  are  therefore  entitled  to  due  process  of  law. 
Their  property,  whether  they  are  domestic  or  foreign,  can  only 
be  taxed  like  other  property  of  the  same  class.  There  is  a  dis- 
tinction, however,  between  the  taxation  of  property  of  corpora- 
tions and  that  of  individuals,  which  has  been  already  illustrated 
in  the  power  of  the  State  to  tax  the  stock  of  non-resident  holders 
in  domestic  corporations.  The  individual  cannot  be  taxed  in 
the  State  upon  his  real  estate  located  in  other  jurisdictions,  but 
the  corporation  can  be  taxed  in  the  State  of  its  incorporation 
upon  the  full  value  of  its  capital  stock,  irrespective  of  whether 
any  part  or  all  of  that  stock  is  invested  in  real  estate  or  other 
property  in  other  jurisdictions.^ 

This  power  of  the  State  to  tax  the  corporate  capital  stock  or 
corporate  property  is  distinct  from  its  power  to  impose  a  fran- 
chise tax,  at  discretion,  upon  the  privilege  of  acting  in  a  cor- 
porate capacity  within  its  jurisdiction.  The  latter  power,  as 
applied  to  foreign  corporations,  has  already  been  considered.^ 

Some  States,  notably  New  York,  have  adopted  the  principle 
of  taxing  both  domestic  and  foreign  corporations  upon  that  part 
of  the  corporate  stock  employed  in  the  State.^ 


for  interference  by  the  courts  in  the  absence  of  fraud,  intentional 
wrong  or  error  in  the  method  of  assessment.  The  courts  are  power- 
less to  give  relief  against  the  erroneous  judgments  of  assessing  bodies, 
except  as  they  are  specially  empowered  by  law  to  do  so. 

1  As  to  double  taxation  involved  in  this  power  of  taxation,  see  Sec. 
489  et  scq.,  infra. 

2  See  supra,  Ch.  V,  where  it  was  shown  that  while  the  State  cannot 
tax  the  property  as  such  of  foreign  corporations  located  in  other 
jurisdictions,  it  can  impose  a  tax  upon  the  privilege  of  doing  business 
in  the  State,  which  may  in  effect  be  a  tax  upon  the  property  in  other 
jurisdictions. 

■^  As  to  the  construction  of  a  statute  taxing  capital  employed  in  the 
State,  see  People  ex  rel.  v.  Campbell,  138  N.  Y.  543,  and  20  L.  R.  A. 
453  (1893).  The  relator  in  that  case  was  a  New  York  corporation  holding 
stock  in  several  other  corporations,  some  domestic  and  some  foroign. 
which  it  had  received  in  compensation  for  grants  of  the  right  to  use 
certain  patents.    It  was  held  that  so  much  of  the  capital  of  the  relator 


508  THE   STATE   JURISDICTION    IN    TAXATION.  §    464 

The  reluctance  of  the  judiciary  to  infer  that  the  taxing  power 
has  been  exercised  unjustly  in  the  case  of  foreign  corporations, 
so  that  property  outside  the  jurisdiction  of  the  State  has  been 
taxed  through  the  taxation  of  the  privilege  of  doing  business  in 
the  State,  is  illustrated  by  the  opinion  of  the  Supreme  Court  of 
Pennsylvania  in  a  case  already  cited.^  The  court  said  that  it 
doubted  the  power  of  the  legislature  to  tax  the  entire  property 
and  assets,  constituting  the  entire  capital  stock,  of  a  foreign 
corporation  whose  interests  compelled  it  to  transact  a  portion 
of  its  business,  however  small,  within  the  State,  Great  and  far- 
reaching  as  is  the  taxing  power  of  the  State,  it  cannot  tax  either 
persons  or  property  not  within  its  jurisdiction. 

*'A  foreign  corporation  has  no  domicil  here,  and  can  have 
none ;  hence,  it  cannot  be  said  to  draw  to  itself  the  constructive 
possession  of  its  property  located  elsewhere." 

There  were  a  large  number  of  foreign  insurance  companies 
doing  business  under  State  license  in  Pennsylvania,  some  of 
them  having  a  very  large  capital.  Under  the  theory  of  the 
Commonwealth,  she  could  tax  the  entire  property  of  such  com- 
panies wherever  it  was  located.  The  court  said  that  certainly 
theretofore  a  sense  of  the  injustice  of  this  view,  or  perhaps  that 
courtesy  which  springs  from  the  comity  between  the  States,  had 
prevented  the  legislature  from  asserting  a  power  of  so  doubtful 
a  character,  and  that  they  would  not  impute  such  a  purpose  to 
it  then,  in  the  absence  of  clearly  expressed  intent. 

§  464.  Deposits  by  Foreign  Insurance  Companies  Taxable 
by  the  State. — It  is  customary  to  require  non-resident  foreign 
insurance  companies  doing  business  in  the  State  to  make  a  de- 
posit of  bonds  or  other  securities  with  the  Superintendent  of 
Insurance  for  the  protection  of  local  policy  holders.    Such  bonds 


as  consisted  of  stock  in  the  domestic  companies,  bonds  of  the  foreign 
companies  and  patent  rights  still  remaining  undisposed  of,  was,  for 
the  purposes  of  taxation,  capital  "employed  within  the  State;"  but 
that  stock  in  the  foreign  companies  could  not  be  properly  included  in 
that  category. 

1  Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  119  (1882) ,  supra,  Sec.  178. 


§   465  THE   STATE   JURISDICTION   IN   TxVXATION.  509 

deposited  in  Ohio  were  properly  listed  for  taxation  uuder 
the  laws  of  that  State.  While  government  bonds  which  had 
been  lawfulh^  substituted  before  the  assessment  day  were  ex- 
empt from  taxation,  other  securities  not  exempt  by  law  were 
subject  to  taxation;  but  this  exemption  of  United  States  bonds 
from  State  taxation  did  not  prevent  their  distraint  under  the 
Ohio  law  to  satisfy  taxes  lawfully  levied  on  the  unexempt  per- 
sonal property  of  the  company  owning  the  bonds.  The  court 
said  there  was  nothing  in  the  exemption  of  government  bonds 
from  taxation  which  prevented  them  from  being  seized  for 
taxes  due  upon  any  other  unexempt  property.^ 

A  State  has  the  constitutional  power  to  provide  by  statute  for 
the  taxation  of  all  personal  property  having  an  actual  situs 
within  the  State,  regardless  of  the  domicil  of  the  owner,  while 
at  the  same  time  it  taxes  other  property  not  actually  within 
the  State  but  whose  owner  resides  therein.^ 

§  465.  Jurisdiction  in  Taxation  Over  Property  of  Trustees, 
Receivers,  Etc. — The  jurisdiction  of  the  State  also  extends  to 
property  therein  in  the  hands  of  trustees,  receivers  and  others 
acting  in  a  fiduciary  capacity,  irrespective  of  the  residence  of 
the  parties  beneficially  interested  in  the  property.3 

A  claim  of  non-residents  to  distributive  shares  of  property 


1  Scottish  U.  &  M.  Ins.  Co.  v.  Bolland,  196  U.  S.  611,  49  L.  Ed.  619 
(1905). 

2  "West  Assurance  Co.  of  Toronto  v.  Halliday,  C.  C.  A.,  6th  Circuit, 
126  Fed.  257  (1903),  affirming  110  Fed.  259;  and  Same  v.  Same,  Cir- 
cuit Ct.  St.  of  Ohio,  127  Fed.  830   (1903). 

3 Baldwin  v.  State,  89  Md.  587  (1899);  Stephens  v.  Railroad  Ck>.,  13 
Blatchford,  104  (1875);  Walters  v.  Railroad  Co.,  68  Fed.  1002  (1895); 
Ex  parte  Chamberlain,  55  Fed.  704  (1893).  As  to  the  taxation  of  trust 
property,  see  People  v.  Coleman,  119  N.  Y.  137,  and  7  L.  R.  A.  407  (1890). 
In  Price  v.  Hunter,  34  Fed.  355  (1888),  a  tax  was  held  properly  levied 
upon  certain  mortgages  held  by  a  local  trust  company,  because  the 
trustee  was  domiciled  in  the  State.  As  to  procedure  for  collection  of 
State  taxes  on  property  in  possession  of  receivers  appointed  by  Federal 
courts,  see  infra,  Sec.  633.  As  to  taxation  of  property  in  the  hands  of 
receivers,  see  Midland  Guaranty  &  Trust  Co.  v.  Douglass,  217  Fed.  358 
(1914) ;  Hamilton  v.  Beggs  Co.,  171  Fed.  157  (1909) ;  Coy  v.  Title  Guar- 
anty Tru.st  Co.,  220  Fed.  90   (1915). 


510  THE   STATE   JURISDICTION    IN    TAXATION.  §   466 

Oil  final  settlement  did  not  prevent  tlie  taxation  of  funds  in  the 
hands  of  a  receiver  of  a  mutual  benefit  assessment  society  or- 
ganized under  the  laws  of  the  Statei  as  property  within  its  jur- 
isdiction, although  the  funds  had  been  collected  in  other  States 
in  which  the  company  also  did  business,  and  turned  over  by 
orders  of  the  courts  of  those  States  to  the  receiver,  with  the 
understanding  that  all  holders  of  certificates  in  the  different 
States  should  be  ratably  paid  on  final  settlement. 

Under  the  statute  of  Ohio,  1890,  Sec.  2731,  it  was  provided 
that  all  property  within  the  State,  and  all  moneys,  credits,  in- 
vestments in  bonds,  stocks  or  otherwise,  of  persons  residing  in 
the  State  shall  be  subject  to  taxation,  but  where  the  trust  es- 
tates and  the  beneficiaries  are  both  outside  of  the  State,  and  the 
trustees  did  not  act  as  trustees  in  Ohio,  the  estate  was  not  tax- 
able there  by  reason  of  the  fact  that  a  trustee  was  a  resident  of 
that  State.  2 

Property  in  the  hands  of  a  Trustee  in  Bankruptcy  is  not 
exempt  from  liability  to  State  taxation  by  the  Bankrupt  Act  of 
July  1,  1898,  and  is  subject  to  such  taxation  in  the  Trustee's 
hands.3 

§  466.  The  Taxable  Situs  of  Stock  Not  Transferred  by 
Pledge. — It  has  been  held  that  the  transfer  of  stock  in  pledge 
to  a  trustee  in  another  State  for  the  securing  of  a  debt  did  not 
operate  to  transfer  the  taxable  situs  to  the  State  where  the 
trustee  was  located.^  The  court  said  the  transaction  was  in 
legal  effect  a  mere  pledge  with  a  perfect  right  of  redemption, 
although  to  render  the  pledge  more  effective  the  title  and  pos- 
session, was  in  the  pledgee  and  the  taxable  situs  remained  there- 
fore in  the  State  of  the  pledgor.    It  was  argued  in  this  ease  that 


1  Schmidt  v.  Failey,  148  Ind.  150,  and  37  L.  R.  A.  442  (1897). 

2Goodsuter  v.  Lane,  139  Fed.  593,  C.  C.  A.  6th  Circuit  (1905). 

3  Schwartz  v.  Hammer,  194  U.  S.  441,  48  L.  Ed.  1060  (1904),  affirm- 
ing 110  Fed.  256.  See  also  In  re  Crowell,  109  Fed.  659.  As  to  priority 
of  claim  of  taxation  against  an  estate  of  a  bankrupt  corporation  in 
New  Jersey,  see  New  Jersey  v.  Anderson,  203  U.  S.  483,  51  L.  Ed. 
284   (1906),  reversing  137  Fed.  858. 

*  Central  of  Ga.  Ry.  Co.  v.  Wright,  166  Fed.  153   (1908). 


§   4G8  THE    STATE   JURISDICTION    IN    TAXATION.  511 

the  stock  was  of  an  Alabama  corporation,  and  under  the  Ala- 
bama statute  it  was  claimed  that  the  situs  of  the  stock  was  fixed 
by  tliat  statute  for  the  purpose  of  taxation  in  Alabama.  The 
court  said,  however,  that  such  a  statute  providing  for  the  taxa- 
tion in  that  State  of  the  shares  of  all  domestic  corporations 
wherever  held  had  no  effect  upon  the  right  of  another  State  in 
which  the  shares  of  such  a  corporation  were  owned  to  tax  the 
same. 

§  467.    Situs   for   Taxation   of  Deposits   in  Litigation. — 

Where  preliminary  injunctions  were  issued  on  condition  that 
the  plaintiff,  a  public  utility  corporation,  should  deposit  in  banks 
of  California  the  difference  between  the  rates  sought  to  be 
charged  and  those  actually  collected,  to  await  the  final 
outcome  of  the  litigation,  the  court  held  that  an  assess- 
ment on  these  funds  so  deposited  was  not  an  assess- 
ment against  the  bank,  but  was  one  against  funds  in  the 
hands  of  the  bank  acting  as  receiver.^  Such  an  assessment  was 
held  not  invalidated  because  of  misdescription  and  comingling 
by  taxing  officers,  as  they  related  only  to  a  matter  of  detail  in 
the  records  of  the  court,  and  the  assessment  was  of  a  fund  in  the 
possession  of  an  officer  of  the  court. 

§  468.  State's  Jurisdiction  Over  Property  for  Taxing  Pur- 
poses Summarized.— The  State  can  therefore  tax  all  property, 
real  and  personal,  which  can  be  localized  within  its  jurisdiction, 
including  money,  bank  notes  and  evidences  of  debt,  such  as 
municipal  securities,  notes  and  mortgages,  found  in  the  State 
or  in  the  possession  of  residents  of  the  State,  in  the  hands  of  the 
owners  or  their  agents  or  bailees,  whether  the  owner  is  domiciled 
in  the  State  or  not;  also  the  capital  stock  of  domestic  corpora- 
tions, irrespective  of  the  residence  of  the  stockholders  and  the 
locality  of  the  property  represented  by  such  stock.  It  may  tax 
the  property  located  in  its  jurisdiction  of  all  foreign  corpora- 
tions, including  those  doing  business  therein  either  under  au- 
thority of  Congress  or  through  the  comity  of  the  State,  regard- 

1  Spring  Valley  W.  Co.  v.  San  Francisco,  225  Fed.  728   (1915),  C.  C. 
A.  9th  Circuit. 


512  THE   STATE   JURISDICTION    IN   TAXATION.  §    469 

less  of  the  fact  that  such  corporations  are  taxable  upon  their 
capital  representing  such  property  by  the  State  of  their  incor- 
poration, and  irrespective  of  the  taxation  in  their  own  States  of 
the  non-resident  stockholders  of  such  corporations.  The  State 
may  also,  for  the  purposes  of  taxation,  treat  mortgages  on 
realty  located  in  the  State  as  interests  in  the  realty  mortgaged, 
whether  the  owners  of  such  realty  reside  in  the  State  or  not. 

This  comprehensive  power  of  taxation  over  property  found 
within  its  jurisdiction  is  within  the  broad  domain  of  legislative 
power  growing  out  of  the  sovereignty  of  the  State ;  and,  except 
as  restrained  by  the  Constitution  of  the  United  States,  the  State 
may  select  one  or  more  of  these  subjects  of  taxation  within  its 
jurisdiction  in  its  own  discretion.  It  will  be  seen,  however,  that 
there  is  a  distinction  between  property  subject  to  the  exercise  of 
this  taxing  power,  and  property  subjected  to  taxation  by  the 
lawful  exercise  of  that  power.* 

§  469.    Taxation  of  Business  and  License  Taxation. — The 

jurisdiction  of  the  State  extends  not  only  to  property  located  or 
employed  within  its  territory,  but  also  to  all  business  carried  on 
and  occupations  and  professions  practiced  therein.  The  power 
to  tax  property  employed  in  any  business  conducted  in  the 
State,  whether  by  individuals,  partnerships  or  corporations,  has 
been  already  considered.  But  the  power  of  the  State  is  not  con- 
fined to  imposing  a  tax  on  such  property.  It  can  tax  also  the 
conduct  of  business  itself  in  any  of  its  infinite  forms,  that  is, 
the  right  or  privilege  of  engaging  in  and  carrying  on  business, 
professions,  manufactures,  trades  or  transportation  within  its 
limits,  whether  by  individuals,  partnerships  or  corporations, 
residents  or  non-residents.  This  comprehensive  power  of  taxa- 
tion may  be  exercised  by  the  State  in  its  discretion,  subject 
only  to  the  restraints  of  its  own  constitution. 

Such  taxes  are  sometimes  called  by  the  generic  name  of  "busi- 
ness" or  "occupation"  taxes.  The  term  "license"  may  be  con- 
trasted with  "tax,"  in  that  a  license  is  required  under  the  police 
power  for  regulation,  its  issue  being  a  condition  precedent  to 


^  Infra,  Sec.  496. 


§   470  THE  STATE  JURISDICTION   IN   TAXATION.  513 

the  right  to  carry  on  a  business,  while,  if  the  fee  charged  for  the 
license  is  greater  than  the  expense  involved  in  the  issue  and  the 
necessary  expense  of  regulation,  its  exaction  constitutes  an  exer- 
cise of  the  power  of  taxation.  In  this  sense  therefore  a  license 
may  exist  without  the  imposition  of  a  tax,  and  a  tax  may  be 
imposed  without  the  granting  of  a  license.  But  as  business,  oc- 
cupation or  privilege  taxes  are  usually  collected  through  the 
issue  of  licenses,  which  are  made  conditions  precedent  of  the 
right  to  carry  on  the  business  or  occupation  or  to  exercise  the 
privilege,  they  are  in  effect  licenses,  and  are  commonly  so 
termed.^  It  is  in  view  of  this  distinction  between  a  license  in 
the  stricter  sense  and  a  tax,  that  the  power  is  conferred  in 
municipal  charters  to  "license,  tax  or  regulate." 

The  power  of  the  State  to  tax  foreign  corporations  for  the 
privilege  of  doing  business  in  its  jurisdiction,  irrespective  of  its 
right  to  tax  the  capital  employed  therein,  has  been  already  con- 
sidered.^ 

A  partnership,  whether  composed  of  non-residents  or  not,  if 
it  has  a  local  office  or  place  of  business,  and  so  does  business  in 
the  State,  is  clearly  subject  to  its  taxing  power,  not  only  as  to 
the  assets  employed  by  it  in  the  State  in  such  business,  but  also 
as  to  the  privilege  of  conducting  the  business  therein.  Where 
the  business  of  the  partnership  is  thus  localized  in  the  State,  and 
it  enjoys  the  protection  of  the  State's  laws,  it  is  obviously  im- 
material to  the  taxing  jurisdiction  of  the  State  where  the  own- 
ers of  the  business  are  domiciled.  The  tax  may  be  upon  the  as- 
sets employed  in  the  business  or  upon  the  privilege  of  conduct- 
ing the  business  in  the  State. ^ 

The  right  to  tax  in  such  cases  rests  not  upon  the  domicil  of 
the  partnership  or  person,  as  in  ordinary  personal  property 
taxation,  hereafter  considered,  but  upon  the  fact  that  property 
is  invested  and  business  transacted  in  the  State. 

§  470.  Membership  in  an  Incorporated  Chamber  of  Com- 
merce   Taxable. — An    interesting    illustration    of    the    taxing 

iSee  License  Tax  Cases,  5  Wall.  462,  18  L.  Ed.  497    (1867). 

2  Seo  supra,  Ch.  V. 

3  Hopkins  v.  Baker  Bros.  &  Co.,  78  Md.  363,  22  L.  R.  A.  477  (1893). 


514  THE    STATE    JURISDICTION    IN    TAXATION.  §    471 

power  of  the  State  over  business  located  in  the  State  is  afforded 
in  the  ruling  of  the  Supreme  Court  that  memberships  in  an  in- 
corporated Chamber  of  Commerce,  which  has  no  capital  stock 
and  transacts  no  business  for  a  pecuniary  profit,  but  merely 
furnishes  a  building  and  equipment  for  its  members,  who  under 
its  rules  transact  business  upon  the  trading  floor,  that  is,  a 
grain  exchange,  are  property  and  taxable  as  such,  and  are  prop- 
erly assessed  for  taxation  under  the  general  heading  in  the 
State  Statute  of  ' '  moneys  and  credits. '  '^ 

It  was  held  in  this  case  that  the  State  could  fix  the  situs  for 
taxation  of  memberships  in  such  a  Chamber  of  Commerce  at  the 
place  in  the  State  at  which  the  Exchange  is  located,  whether  such 
memberships  be  held  by  residents  or  non-residents. 

§  471.    License  Tax  on  Emigrant  Agent  Sustained. — The 

comprehensive  power  of  the  State  to  tax  employments  is  illus- 
trated by  the  decision  of  the  Supreme  Court,  sustaining 
a  license  tax  imposed  by  the  State  of  Georgia  upon  each  emi- 
grant or  employer  or  employe  of  such  agent  doing  business  in 
that  jurisdiction.2  It  was  urged  that  this  was  violative  of  the 
Fourteenth  Amendment  and  impaired  the  right  of  free  egress 
from  the  State.  The  court  held,  however,  that  it  was  a  valid 
tax  upon  the  occupation,  that  its  purpose,  connected  as  it  was 
with  the  licenses  upon  other  occupations,  was  altogether  to  gain 
revenue,  and  that  no  intention  to  prohibit  the  particular  busi- 
ness could  be  imputed.     The  licenses  only  affected  incidentally 


1  Rogers  v.  County  of  Hennepin,  240  U.  S.  184,  60  L.  Ed.  594  (1916), 
affirming  124   Minn.   539. 

It  was  subsequently  held  by  the  Supreme  Court  of  Minnesota,  in 
State  ex  rel.  Goetzman  v.  Lord,  161  N.  W.  516  (1917),  that  such  mem- 
berships, under  a  system  of  classification  in  force  in  that  State,  were 
properly  classed  as  "personal  property"  having  a  local  situs,  though 
owned  without  the  State,  and  the  assessable  value  was  found  by  ap- 
portioning the  value  of  the  membership  in  excess  of  the  value  of  the 
tangible  property  which  was  already  assessed  equally  among  the  mem- 
bership and  taxing  forty  per  cent  thereof,  under  the  State  classified  tax- 
ation system.     See  Minnesota  Tax  System,  infrn.  Appendix. 

2  Williams  v.  Pears,  179  U.  S.  270,  45  L.  Ed.  186  (1901),  affirming 
35  S.  E.    (Ga.)    699. 


§    472  THE    STATE    JURISDICTION    IN    TAXATION.  515 

and  remotely  the  volume  of  travel  from  the  State  or  the  freedom 
of  eontraet.i 

§  472.    Taxation  and  Regulation  Under  Police  Power.— The 

power  of  taxation  in  the  licensing  of  employments  is  closely  al- 
lied to  the  police  power  of  regulation.  A  license  may  be  im- 
posed for  the  purpose  of  regulating  an  employment  as  a  police 
measure  for  the  public  safety  and  also  as  a  means  of  revenue. 
Thus  the  liquor  traffic  may  be  prohibited  altogether  by  a  State, 
or  permitted  under  such  regulations  by  way  of  licenses  as  the 
legislative  power  deems  proper.2  As  the  legislature  has  the 
power  to  prohibit  absolutely  the  sale  of  intoxicating  liquors,  it 
follows  that  it  may  impose  any  conditions  or  restraints  upon 
the  traffic  which  fall  short  of  absolute  prohibition,  and  these 
conditions  and  restraints  may  take  the  form  of  a  license  fee 
exacted  as  compensation  to  the  public.3 

There  is  no  necessary  connection  between  a  license  to  engage  in 
a  business  and  a  tax  upon  the  right  to  engage  in  a  business.  The 
former  confers  a  privilege,  the  latter  is  levied  upon  the  exercise 
of  a  privilege.  But  both  taxation  and  regulation  may  be  effected 
in  the  form  of  a  license  by  the  same  statute.  This  right  to  tax 
and  regulate  occupations  for  purposes  of  revenue  and  under  the 
police  power  may  be  delegated  by  the  State  to  municipalities,  and 


1  In  Fraser  v.  McConway,  82  Fed.  257  (1907),  a  tax  levied  by  the  State 
of  Pennsylvania  upon  employers  of  foreign,  unnaturalized  males,  au- 
thorizing a  deduction  of  the  amount  of  the  tax  from  the  wages  of  the 
employes,  was  held  invalid  as  violative  of  the  Fourteenth  Amendment. 
In  Joseph  v.  Randolph,  71  Ala.  499  (1882),  a  license  tax  of  $250  exacted 
by  the  State  of  Alabama  from  all  emigrant  agents,  who  should  con- 
tract in  certain  designated  counties  with  laborers  to  remove  them 
from  the  State,  was  held  void  as  an  indirect  tax  upon  the  citizen's 
right  of  free  egress,  operating  to  hinder  his  personal  liberty,  and 
therefore  contrary  to  both  the  State  and  Federal  constitutions.  The 
court  said  that  it  was  not  a  tax  upon  the  right  of  hiring  laborers,  but 
its  purpose  was  to  prevent  a  free  egress  of  laborers  from  the  counties 
designated  in  the  act. 

2Bartemeyer  v.  Iowa,  18  Wall.  129,  21  L.  Ed.  929  (1874);  Beer  Co. 
V.  Massachusetts,  97  U.  S.  25,  24  L.  Ed.  989  (1879);  Mugler  v.  Kansas, 
12.3  U.  S.  623,  31  L.  Ed.  205    (1898). 

■■'State  v.  Bixman,  162  Mo.  1  (1901). 


516  THE   STATE   JURISDICTION   IN   TAXATION.  $   473 

the  latter  can  then  exercise  such  power  without  violation  of  due 
process  of  law. 

A  municipal  ordinance  granting  the  right  of  an  incorporated 
telephone  company  to  place  and  maintain  upon  the  streets 
poles  and  wires,  is  not  a  mere  license,  but  is  a  grant  of  a  prop- 
erty right  which  is  an  incident  to  property,  in  that  it  is  as- 
signable and  subject  to  taxation.i 

§  473.  Special  Excise  Taxes  in  the  Exercise  of  the  Police 
Power  Sustained. — It  w^as  said  by  the  Supreme  Court,  in  sus- 
taining the  ordinance  of  the  City  of  Chicago  prohibiting  the 
sale  of  cigarettes  except  under  a  license  of  $100.00,2  that  it  was 
not  a  valid  objection  to  the  ordinance,  that  it  partook  both  the 
character  of  a  regulation  and  also  that  of  an  excise  or  privilege 
tax ;  that  it  was  for  the  State  to  determine  what  such  regulation 
should  be  and  as  to  what  particular  trade,  business  or  occupa- 
tion they  should  apply;  and,  unless  they  are  utterly  extravagant 
in  their  nature  and  purpose,  they  do  not  extend  beyond  the 
power  of  the  State.  Whether  there  was  or  was  not  an  unlawful 
delegation  of  power  by  the  council  to  the  mayor  was  not  a 
Federal  question. 

Under  the  same  principle  the  court  has  sustained  special  ex- 
cise taxes  for  regulation  under  the  police  power  of  industries 
and  occupations.  Thus  it  sustained  an  Oklahoma  statute^  which 
levied  upon  every  bank  existing  under  the  laws  of  the  State  an 
assessment  of  the  percentage  of  the  bank's  average  deposits  for 
the  purpose  of  creating  a  guaranty  fund  which  made  good  the 
losses  of  the  depositors  of  insolvent  banks.  The  fund  was  thus 
created,  not  by  general  taxation,  but  by  a  special  imposition  in 
the  nature  of  an  occupation  tax  on  all  banks  existing  under  the 
laws  of  the  State.  Thus,  license  taxes  upon  motor  vehicles  grad- 
uated according  to  horse  power,  have  been  sustained  so  as  to 
secure  compensation  for  the  use  of  improved  roadways  from  a 


lOwensboro  v.  T.  &  T.  Co.,  230  U.  S.  58,  57  L.  Ed.  1389  (1913). 

sGundling  v.  Chicago,  177  U.  S.  183;  44  L.  Ed.  725   (1900). 

3  Nobel  State  Bank  v.  Haskell,  219  U.  S.  104;  55  L.  Ed.  112  (1911) 


§  474  THE  STATE  JURISDICTION   IN   TAXATION.  517 

class  of  users  for  whose  needs  they  are  essential,  and  whose 
operations  over  them  are  peculiarly  injurious. 

The  same  principle  has  been  applied  by  the  Supreme  Court  in 
sustaining  what  are  known  as  the  "Workmen's  Compensation 
Laws,"  where  employers  in  certain  industries,  without  regard 
to  any  wrongful  act  on  their  part,  are  compelled  to  make 
periodical  contribution  based  upon  the  percentages  of  their 
payrolls,  to  a  State  fund  from  which  compensation  shall  be 
made  for  injuries  received  by  employes  in  the  course  of  their 
employment  in  such  industry.  2 

The  court  said  that  such  an  exaction  was  the  valid  exercise 
"of  the  State  police  power,  there  being  no  claim  that  the  scale 
of  compensation  was  unduly  large,  and  the  schedule  of  con- 
tribution evidencing  an  intent  to  proportion  the  various  per- 
centages according  to  the  hazards  of  each  of  the  groups  into 
which  the  industries  are  divided,  and  to  limit  the  burden  of  the 
requirement  of  each  industry,  and  that  class  legislation  which, 
in  carrying  out  the  public  purpose,  is  limited  in  its  application 
within  the  sphere  of  its  operation  and  affects  alike  all  persons 
similarly  situated,  is  not  condemned  by  the  Fourteenth  Amend- 
ment. 

The  principle  thus  declared,  it  is  obvious,  may  have  a  wide 
application  to  legislation  for  the  promotion  of  social  betterment, 
where  the  taxing  power  is  used  by  the  State  in  connection  with 
the  exercise  of  the  police  power  for  the  health,  safety  and  gen- 
eral welfare  of  the  people.s  When  the  classification  involved  in 
such  taxation  is  reasonable  and  the  provisions  of  the  act  are  not 
arbitrary  or  oppressive,  the  exercise  of  the  taxing  power  is  not 
violative  of  due  process  of  law. 

§  474.  Limitations  of  Power  to  Impose  Taxes  on  Occupa- 
tions.— But  this  power  of  the  State  to  impose  license  taxes 


iHendrick  v.  Maryland,  235  U.  S.  612,  59  L.  Ed.  385  (1913). 

2  Kane  v.  N.  J.,  242  U.  S.  160.  61  L.  Ed.  p.  222  (1917). 

3  Mountain  Timber  Co.  v.  State  of  Washington,  —  U.  S.  — ,  61  L. 
Ed.  —  (March,  1917),  affirming  75  Wash.  581,  sustaining  the  constitu- 
tionality of  the  Workmen's  Compensation  Act  of  the  State  of  Washing- 
ton. 


518  THE   STATE   JURISDICTION    IN    TAXATION,  §    475 

upon  occupations  must  be  exercised  subject  to  the  prohibitions 
already  considered  against  interference  with  interstate  or  for- 
eign eominerce.  The  State  cannot  tax  the  business  of  conducting 
interstate  eominerce  as  such,  nor  the  soliciting  of  orders  through 
sales  by  samples  or  otherwise,  nor  can  it  discriminate  through 
business  or  occupation  taxes  against  the  manufacturerlS  of  other 
States.^ 

Although  the  State  may  license  occupations,  it  is  not  relieved 
from  the  restraints  of  the  Federal  Constitution  in  the  taxation 
of  the  property  employed  in  such  occupations.  This,  like  any 
other  property,  is  entitled  to  due  process  of  law  and  the  equal 
protection  of  the  laws  in  taxation  as  in  any  other  exercise  of 
State  powers. 

§  475.  Jurisdiction  Over  Persons  for  Taxation. — While  the 
State,  in  the  exercise  of  the  power  of  taxation,  may  disregard  the 
fiction  that  personal  property  has  its  situs  at  the  residence  of 
the  owner,  and  may  tax  all  property  which  it  can  find  located 
within  its  jurisdiction,  it  may  also  through  its  power  over  per- 
sons within  its  jurisdiction,  subject  credits  and  other  personal 
property  owned  by  them  to  taxation,  though  such  property  may 
be  located  in  another  State,  and,  in  the  ease  of  credits,  owed 
by  debtors  residing  in  other  States  and  secured  by  property 
situated  there. 

But  the  taxing  power  of  the  State  over  persons  obviously  de- 
pends upon  the  domicil  of  the  person,  as  domicil  is  the  test  of 
liability  for  purely  personal  taxes.^  Domicil,  or  habitation,  in 
'the  quaint  language  of  the  Massachusetts  constitution,  is  ' '  where 
a  man  dwelleth  and  hath  his  home. ' ' 

Justice  Story  says:^  "By  the  term  'domicil,'  in  its  ordinary 
acceptation,  is  meant  the  place  where  a  person  lives  or  has  his 
home.  In  this  sense  the  place  where  a  person  has  his  actual 
residence,  inhabitancy,  or  commorancy,  is  sometimes  called  his 
domicil.  In  a  strict  and  legal  sense  that  is  properly  the  domicil 
of  a  person  where  he  has  his  true,  fixed,  permanent  home  and 


1  Supra,  Chs.  Ill  to  VI. 

2  Dicey  on  Conflict  of  Laws,  Am.  Ed.   171. 

3  Conflict  of  Laws,  7tli  Ed.,  Sec.  41. 


§    475  THE    STATE   JURISDICTION    IN    TAXATION.  519 

principal  establishment,  and  to  which,  whenever  he  is  absent, 
he  has  the  intention  of  retui^ning  {animus  revertendi) ."  Fact 
and  intent  therefore  must  concur  to  constitute  a  domicil. 

It  was  said  by  the  Supreme  Court  of  Massachusetts,  by  Chief 
Justice  Shaw :^  "No  exact  definition  can  be  given  of  domicil ;  it 
depends  upon  no  one  fact  or  combination  of  circumstances,  but 
from  the  whole  taken  together  it  must  be  determined  in  each 
particular  case.  It  is  a  maxim,  that  every  man  must  have  a 
domicil  somewhere;  and  also  that  he  can  have  but  one.  Of 
course  it  follows,  that  his  existing  domicil  continues  until  he 
acquires  another;  and  vice  versa,  by  acquiring  a  new  domicil, 
he  relinquishes  his  former  one. ' ' 

It  follows  therefore  that  the  term  "resident'*  or  ''inhabit- 
ant" in  State  taxing  laws  must  be  construed  as  meaning  one 
who  has  his  domicil  in  the  State.  A  man  may  have  several 
residences,  but  he  can  have  only  one  domicil.  Where  it  is  lo- 
cated, he  may  be  taxed  upon  his  personal  property  and  his 
credits,  w'herever  that  property  or  the  property  securing  such 
credits  may  be  located.  But  obviously  this  tax  dependent  for 
its  validity  on  jurisdiction  over  the  domicil,  can  be  imposed  in 
but  one  place,  as  the  taxpayer  can  have  but  one  domicil,  al- 
though, as  we  have  seen,  the  State  having  jurisdiction  over  the 
property,  also  may  tax  it.  The  Supreme  Court  of  Massachu- 
setts said  in  construing  the  word  "habitancy"  as  meaning 
domicil  r 

"We  think,  however,  that  the  sounder  and  wiser  rule  is  to 
make    taxation   dependent  upon  domicil.     Perhaps  the  most  im- 


1  Thorndike  v.  City  of  Boston,  1  Metcalf  242,  245  (1840). 

2  Borland  v.  Boston,  132  Mass.  89  (1882).  In  this  case  Borland  left 
Boston  with  his  family  in  1876  for  Europe,  to  remain  there  an  indefinite 
time,  with  intent  to  make  some  other  place  his  home  on  his  return,  and 
while  in  Europe,  before  May  1st,  1877,  had  selected  another  city  in  an- 
other State  as  his  future  home,  but  remained  abroad,  without  actually 
going  to  his  new  home,  until  1879.  It  was  held  that  his  domicil  in 
Boston  for  taxation  still  continued  on  May  1,  1877,  no  new  domicil 
having  been  acquired.  This  principle  has  been  followed  in  other  cases. 
See  Kellogg  v.  Winnebago  County,  42  Wis.  97  (1877)  ;  Church  v.  Rowell, 
49  Me.  367  (1861). 


520  THE   STATE    JURISDICTION    IN   TAXATION.  §    477 

portant  reason  for  the  rule  is  that  it  makes  the  standard  cer- 
tain. Another  reason  is  that  it  is  according  to  the  views  and 
traditions  of  the  people. ' ' 

Thus  in  New  Jersey  a  poll  tax  levied  upon  "inhabitants" 
was  declared  to  be  properly  levied  only  upon  those  who  were 
domiciled  in  the  State,  as  the  term  "inhabitants"  implied  more 
than  mere  residents.^ 

§  476.  Domicil  Disting-uished  from  Residence  and  Citizen- 
ship.— The  domicil,  which  is  the  basis  of  personal  taxation, 
that  is,  taxation  through  the  person,  is  to  be  distinguished  from 
citizenship  on  the  one  hand  and  residence  on  the  other.  A  resi- 
dent alien,  who  never  by  naturalization,  assumes  the  obligations 
of  citizenship  or  disavows  his  allegiance  to  his  native  country, 
may  acquire  a  domicil,  and  so  subject  his  person  to  the  taxing 
power  of  the  State.  •  He  cannot  be  compelled  to  perform  other- 
wise the  duties  of  citizenship,  but  he  can  be  compelled  to  con- 
tribute to  the  support  of  the  State  under  whose  protection  he 
lives,  earns  his  livelihood  and  enjoys  his  property. 

On  the  other  hand,  the  domicil  is  distinguished  from  resi- 
dence. One  may  be  taxed  at  his  domicil,  though  at  the  time  it 
is  levied  he  is  actually  residing  in  another  State  or  a  ■  foreign 
country.  A  person,  who  in  contemplation  of  law  has  a  domicil, 
may,  nevertheless,  as  a  matter  of  fact,  be  a  mere  wanderer  and 
not  an  inhabitant  or  resident  of  any  place.^  In  the  legal  sense 
every  one  must  have  a  domicil,  which,  once  fixed,  continues  until 
a  new  one  is  acquired,  facto  et  nomine.^ 

§  477.  Right  to  Change  Domicil.  —  It  is  a  fundamental 
rule  that  the  domicil  of  an  independent  person  is  dependent 
upon  choice,  that  is,  it  is  that  place  which  he  in  fact  and  in  in- 
tent makes  his  domicil.  The  right  to  make  a  domicil  different 
from  that  originally  acquired  involves  the  right  to  make  other 
changes,  and  the  removal  may,  of  course,  be  made  from  one 
place  to  another  in  the  same  State,  or  to  another  State  or  coun- 


1  State -v.  Ross,  23  N.  J.  L.  (3  Zab.)  517  (1852). 

2  Holmes  v.  Oregon  &  Cal.  Ry.  Co.,  5  Fed.  523  (1881). 

3  Story  on  Conflict  of  Laws,  7th  Ed.,  Sec.  44. 


I   479  THE   STATE  JURISDICTION   IN   TAXATION.  521 

try.  Whether,  in  fact,  one  claiming  to  have  effected  a  change, 
has  done  so  is  a  question  of  evidence,  and  the  burden  of  proof 
is  upon  him.i 

§  478.  Motive  in  Change  of  Domicil  Immaterial. — It  is  also 
clearly  immaterial  what  was  the  motive  of  the  party  in  making 
the  change,  if  it  has  actually  been  made.  Thus  a  man  may 
change  his  domicil  from  his  city  residence  to  one  in  the  country 
or  suburbs,  in  order  to  escape  the  burden  of  what  he  deems  op- 
pressive personal  taxation.  This  he  has  a  right  to  do.  Thus  it 
was  said  by  the  Supreme  Court  of  Massachusetts :« 

**It  is  well  settled  that  a  man  may  change  his  habitancy  or 
domicil  from  one  town  to  another,  merely  because  he  wishes 
to  diminish  the  amount  of  his  taxes.  If  he  really  intends  to 
change  his  residence,  and  does  change  it,  the  motive  which 
prompts  him  to  do  so  is  not  material." 

The  same  principle  obviously  applies  as  that  announced  by 
the  Supreme  Court  in  cases  where  it  was  claimed  that  a  man 
had  changed  his  residence  for  the  purpose  of  affecting  the  juris- 
diction of  the  Federal  Court.  The  sole  question  is  whether  the 
change  was  made  in  good  faith,  that  is,  was  actually  made.* 

§  479.    Term  Residence  Employed  in  Sense  of  Domicil.  — 

The  principle  controlling  the  determination  of  the  question  of 
change  of  domicil  was  illustrated  in  a  case  in  the  United  States 
Circuit  Court  of  Minnesota.4  Suit  was  brought  to  recover  back 
personal  property  taxes  paid  under  protest,  on  the  ground  that 
the  plaintiff  had  already  changed  his  residence,  that  is,  his 
domicil,  when  the  taxes  were  levied.  The  plaintiff,  an  unmar- 
ried man,  had  been  engaged  in  business  in  a  city  of  Minnesota, 
and  being  out  of  health,  determined  to  wind  up  his  affairs  and 
move  to  New  York  where  he  intended  to  make  his  permanent 


1  Mitchell  V.  United  States,  21  Wallace  350,  22  L.  Ed.  584  (1875); 
Desmare  v.  United  States,  93  U.  S.  605,  23  L.  Ed.  959  (1877).  See  also 
Dicey  on  Conflict  of  Laws,  Am.  Ed.,  p.  131.  The  rule  stated  is  of 
course  qualified  in  cases  of  persons  under  disabilities  and  those  baring 
official   residences. 

2  Draper  v.  Hatfifld,  124  Mass.  5.3  (1878). 

8  Railway  Company  v.  Ohle,  117  U.  S.  123,  29  L.  Ed.  37   (1886). 
*McCutcben  v.  Rice  County,  7  Fed.  558  (1881). 


522  THE   STATE    JURISDICTION    IN    TAXATION.  §   480 

home.  He  left  Minnesota  in  April,  1876,  and  on  the  day  of  the 
annual  assessment,  May  1st,  he  was  in  itinere  at  Philadelphia. 
The  court  held  that  on  the  latter  date  he  was  still  a  resident  of 
Minnesota,  as  he  had  not,  in  fact,  acquired  a  new  residence,  and 
he  was  therefore  properly  taxed  as  the  owner  of  the  personalty. 
The  word  "resident"  in  this  case  is  clearly  used  in  the  sense  of 
one  domiciled;  as  the  plaintiff,  under  the  facts,  had  obviously 
changed  his  residence,  but  had  not  yet  changed  his  domicil.i 

§  480.  Due  Process  of  Law  and  Taxation  at  Domicil. — Due 
process  of  law  limits  that  personal  taxation,  which  rests  solely 
upon  the  State's  jurisdiction  over  the  person,  to  the  place  where 
that  person  is  domiciled.  No  one,  whether  citizen  or  alien,  can 
be  taxed  through  the  State's  jurisdiction  over  his  person  ex- 
cept at  the  place  of  his  domicil. 

If  a  man  has  more  than  one  residence,  as  not  infrequently 
happens,  a  country  and  a  city  residence,  for  example,  located  in 
the  same  or  different  States,  one  of  these,  and  only  one,  is  his 
domicil,  and  which  one  is  his  domicil  must  be  determined  from 
all  the  facts.  As  a  rule  it  is  that  place  which  he  himself  selects. 
No  Federal  question  is  involved  in  the  decision,  in  good  faith, 
of  this  question  as  to  which  of  two  residences  is  a  man 's  domicil, 
or  whether  he  has  changed  his  domicil.  But  on  the  other  hand, 
if  the  State  asserts  the  right  to  tax  by  virtue  of  residence,  irre- 
spective of  domicil,  the  jurisdictional  question  would  be  raised; 
provided,  of  course,  there  is  no  basis  for  the  tax  by  reason  of 
the  presence  of  the  property  within  the  jurisdiction. 

Thus  in  a  New  Jersey  case  already  citedz  a  person  domicilev.^. 
in  Georgia,  but  having  a  summer  residence  in  New  Jersey, 
which  he  occupied  with  his  family  for  several  months  in  the 
year,  was  held  not  subject  in  New  Jersey  to  a  poll  tax  levied 
upon  the  ''inhabitants"  of  the  State,  nor  was  he  taxable  there 
upon  his  bonds  or  other  securities.     He  was  taxable,  however. 


iThat  the  term  "resident"  in  the  taxing  laws  is  used  as  the  equir- 
alent  of  "one  domiciled,"  see  Eidman  v.  Martinez,  184  U.  S.  578,  46  L. 
Ed.  697  (1902),  where  the  court  distinguishes  between  the  law  of  the 
situs  and  the  law  of  the  domicil. 

2  See  Sec.  475,  supra. 


{   482  THE   STATE    JURISDICTION    IN    TAXATION.  523 

upon  his  real  estate  and  his  chattels,  permanently  used  or  kept 
in  New  Jersey,  under  a  statute  providing  that  all  lands  and  per- 
sonal effects  in  the  State  must  be  taxed.  The  court  said  that  it 
was  perfectly  immaterial  for  purposes  of  taxation,  that  is  upon 
property  localized  in  the  jurisdiction,  whether  he  made  his  tem- 
porary residence  in  his  own  dwelling  with  his  domestics  and  re- 
tinue about  him,  or  as  a  mere  lodger  in  the  house  of  another.! 

§  481.  John  D.  Rockefeller  Not  Domiciled  in  Ohio  for 
Taxation. — Under  the  statutes  of  Ohio  describing  what  should 
constitute  a  domicil  for  the  purposes  of  taxation,  it  was  held 
that  John  D.  Rockefeller  was  not  domiciled  in  Cleveland,  Ohio, 
but  in  New  York  city,  and  as  under  the  laws  of  Ohio  securities 
owned  by  a  non-resident  could  not  be  taxed,  unless  held  within 
the  State  by  a  trustee  or  agent  for  him,  the  tax  on  $311,000,- 
000.00  securities  alleged  to  be  owned  by  Mr.  Rockefeller  was  de- 
clared invalid  and  its  collection  enjoined.2 

The  court  held  that  it  was  incumbent  on  the  State  to  prove 
the  domicil  within  the  State,  and  if  there  was  any  doubt  in  the 
meaning  of  the  statute,  the  doubt  must  be  resolved  in  favor  of 
the  citizen. 

§  482.  Taxation  of  Personal  Property  Situated  Without 
the  State  of  Owner's  Domicil. — The  taxation  of  personal  prop- 
erty according  to  its  actual  situs  is  so  clearly  established  in  the 
different  States,  that  practically  no  attempt  is  made  to  assert 
the  right  to  tax  tangible  personal  property,  such  as  merchandise, 


1 A  soldier  stationed  at  Ft.  Stark  and  maintaining  apartments  in 
Portsmouth  was  held  not  to  be  subject  to  a  poll  tax  under  the  laws 
of  New  Hampshire,  Ch.  82,  Sec.  1,  Ex  parte  White,  228  Fed.  88  (1915). 

2  Rockefeller  v.  O'Brien,  224  Fed.  541  (1915).  The  court  held  that 
the  tax  on  two  automobiles  of  Mr.  Rockefeller  in  Ohio  were  taxable 
as  tangible  personal  property  under  the  laws  of  the  State.  Affirmed 
by  C.  C.  A.  6th  Circuit,  239  Fed.  127  (1917).  The  latter  court  said 
that  the  statute  was  aimed  against  citizens  of  Ohio,  who,  while  really 
domiciled  there,  pretend  to  be  domiciled  outside  the  State,  and  the 
fact  that  Mr.  Rockefeller  was  formerly  a  citizen  of  Ohio,  before  he 
rfmoved  to  New  York,  could  not  in  principle  differentiate  his  situa- 
tion from  what  it  would  bo  had  he  always  been  a  non-resident.  The 
Supreme  Court  denied  an  application   for  certiorari  in  this  case. 


524  THE   STATE    JURISDICTION    IN    TAXATION.  §    482 

live  stock,  furniture,  etc.,  at  the  domicil  of  the  owner,  when  the 
property  is  not  located  within  the  State.  The  State  statutes 
providing  for  the  taxation  of  property  ' '  within  the  State ' '  have 
been  construed  as  meaning  property  actually  situated  therein. 
Thus  it  was  held  in  New  York  that  an  assessment  of  a  citizen  or 
one  domiciled  in  that  State,  upon  capital  invested  in  business  in 
New  Orleans,  and  farm  stock  and  household  furniture  in  New 
Jersey,  was  erroneous  under  a  statute  which  provided  that  "all 
lands  and  all  personal  estate  within  this  State  .  .  .  shall  be 
liable  to  taxation."^  The  court  based  its  opinion  upon  the  lan- 
guage and  purpose  of  the  statute,  and  intimated  that  the  legis- 
lature could  have  taxed  the  property,  but  had  not  done  so.  In 
other  words,  the  question  was  one  of  construction,  and  not  of 
power. 

The  Supreme  Court  of  Missouri,  construing  the  law  of  that 
State,  in  an  opinion  notable  for  its  recognition  of  the  principle 
of  interstate  comity  in  taxation,  commented  upon  the  injustice 
of  taxing  property  in  the  State  of  the  owner's  domicil,  which  is 
properly  taxable  elsewhere;  and  suggested  that  the  rule  of  tax- 
ing at  the  actual  situs  could  not  operate  unjustly  to  Missouri,  as 
the  property  of  foreign  capitalists  in  the  State  more  than 
equaled  the  property  belonging  to  persons  domiciled  within  its 
jurisdiction  located  outside  of  the  State.^  The  court  held  that 
municipal  bonds  of  a  citizen  of  Missouri  deposited  with  a  safe 
deposit  company  in  New  York,  were  not  taxable  in  Missouri. 

It  was  held  in  the  United  States  Circuit  Court  for  IMassachu- 
setts,^  by  Justice  Gray,  that  under  the  statutes  of  Massachu- 


1  People  ex  rel,  Hoyt  v.  Commissioners  of  Taxes,  23  N.  Y.  224  (1861). 

2  State  ex  rel.  v.  County  Court,  69  Mo.  454  (1879),  followed  in  Valle  v. 
Ziegler,  84  Mo.  214.  That  the  opinion  of  legislators,  in  the  matter  of 
interstate  comity  in  taxation,  does  not  keep  pace  with  judicial  opinion, 
is  illustrated  by  the  fact  that  the  General  Assembly  of  Missouri,  after 
this  decision,  passed  an  act.  Session  Acts  of  1881,  p.  177,  specifically 
subjecting  to  taxation  in  the  State  personalty  situated  in  other  States, 
so  that  all  notes,  bonds  or  other  evidences  of  debt  held  in  any  State 
or  Territory  other  than  that  in  which  the  owner  resides  were  made 
taxable.  As  to  law  of  taxation  of  securities  in  Missouri  (1917),  see 
Appendix. 

3Dallinger  v.  Rapello,  14  Fed.  32  (1882),  see  also  15  Fed.  434  (1883). 


§   482  THE   STATE   JURISDICTION    IN   TAXATION. 


525 


setts  the  property  of  a  deceased  inhabitant  of  that  State,  after 
the  appointment  of  an  executor  and  before  distribution,  was  not 
taxable  in  the  State,  where  the  property  was  not  in  the  State 
and  neither  the  executor  nor  any  person  having  an  interest  in 
the  property  was  domiciled  therein.  The  court  expressed  a 
doubt  whether  it  was  within  the  constitutional  power  of  the 
State  to  impose  such  a  tax. 

A  State,  however,  has  no  power  to  levy  a  tax  upon  the  bonds 
and  rolling  stock  of  an  interstate  railroad  permanently  located 
in  another  State  and  employed  there  in  the  prosecution  of  its 
business.  This  was  adjudged  by  the  Supreme  Court,  which  held 
that  due  process  of  law  was  denied  a  Kentucky  corporation  by 
the  enforcement  of  such  a  tax.^ 

Nor  could  personal  property  owned  by  a  non-resident  express 
company  and  situated  outside  of  the  State  be  taken  into  account 
in  fixing  the  value  of  property  for  taxation  within  the  State  on 
the  mileage  basis,  on  the  theory  that  it  gave  a  credit  necessary 
for  carrying  on  the  business  in  the  State,  where  the  resulting 
assessment  is  greatly  in  excess  of  the  value  of  the  total  good 
will  of  the  company,  measured  by  the  business  done  or  the  rela- 
tion of  the  total  assets  to  the  total  value  of  its  stock.^ 

It  seems  definitely  established,  therefore,  certainly  as  to  in- 
terstate railroads  and  wherever  interstate  commerce  is  involved, 
that  tangible  personal  property  outside  of  the  State  is  not  sub- 
ject to  the  taxing  power  of  the  State. 

As  the  State  cannot  tax  tangible  property  permanently  out- 
side of  the  State,  and  having  no  sitv^  within  the  State,  it  can- 
not attain  the  same  end  by  taxing  the  enhanced  value  of  the 
capital  stock  of  the  corporation  which  arises  from  the  value  of 
the  property  beyond  the  jurisdiction  of  the  State.  This  prin- 
ciple was  applied  to  the  inclusion  in  the  appraisement  of  the 


1  Union  Refrigerator  &  Transit  Co.  v.  Kentucky,  199  U.  S.  194,  50  L. 
Ed.  850   (1905),  reversing  26  Ky.  L.  Rep.  25. 

2  Fargo  v.  Hirt,  193  U.  S.  491.  48  L.  Ed.  761  (1904).  See  also  Detroit 
G.  H.  &  M.  R.  Co.  V.  Fuller,  205  Fed.  86  (1913),  holding  void  an  attempt 
to  impose  a  tax  on  the  securities  owned  and  held  beyond  Its  territorial 
jurisdiction. 


526  THE   STATE   JURISDICTION    IN    TAXATION,  §   483 

capital  stock  of  a  corporation  for  the  purpose  of  taxation  the 
value  of  coal  mined  by  it  within  the  State  but  situated  in  other 
States  there  awaiting  sale,  when  the  appraisement  was  made 
and  this  was  held  to  deprive  the  corporation  of  its  property 
without  due  process  of  law.t 

§  483.  Taxation  of  Citizen  at  Domicil  on  Mortgages  in 
Other  States. — The  comprehensive  power  of  the  State  to  tax 
the  personal  property  of  its  citizens  was  pointedly  illustrated 
in  Kirtland  v.  Hotchkiss,^  where  the  court  held  that  a  citizen 
of  Connecticut  was  properly  assessed  for  taxation  in  Connecti- 
cut on  bonds,  owned  by  him,  which  were  executed  in  Chicago 
and  secured  by  a  mortgage  upon  Chicago  property.  These 
bonds  were  assessed  as  part  of  his  personal  property.  The 
court  said : 

"It  may,  therefore,  be  regarded  as  the  established  doctrine 
of  this  court,  that  so  long  as  the  State,  by  its  laws,  prescribing 
the  mode  and  subjects  of  taxation,  does  not  entrench  upon  the 
legitimate  authority  of  the  Union,  or  violate  any  right  recog- 
nized, or  secured,  by  the  Constitution  of  the  United  States, 
this  court,  as  between  the  State  and  its  citizens,  can  afford 
him  no  relief  against  State  taxation,  however  unjust,  oppres- 
sive or  onerous. ' ' 

And  it  added : 

**The  question  does  not  seem  to  us  to  be  very  difficult  of 
solution.  The  creditor,  it  is  conceded,  is  a  permanent  resi- 
dent within  the  jurisdiction  of  the  State  imposing  the  tax. 
The  debt  is  property  in  his  hands  constituting  a  portion  of 
his  wealth,  from  which  he  is  under  the  highest  obligation,  in 
common  with  his  fellow-citizens  of  the  same  State,  to  con- 
tril)ute  for  the  support  of  the  government  whose  protection 
he  enjoys. 

' '  That  debt,  although  a  species  of  intangible  property,  maj^ 
for  purposes  of  taxation,  if  not  for  all  others,  be  regarded  as 
situated  at  the  domicil  of  the  creditor.  It  is  none  the  less 
property,  because  its  amount  and  maturity  are  set  forth  in  a 


1  Delaware,  L.  &  W.  R.  R.  Co.  v.  Pennsylvania,  198  U.  S.  341,  49  L. 
Ed.  1077,  reversing  206  Pa.  645   (1905). 

2  100  U.  S.  491,  25  L.  Ed.  558   (1879). 


§    483  THE   STATE    JURISDICTION    IN    TAXATION.  527 

bond.  That  bond,  wherever  actually  held  or  deposited,  is  only 
evidence  of  the  debt,  and  if  destroyed,  the  debt — the  right  to 
demand  payment  of  the  money  loa^ned,  with  the  stipulated  in- 
terest— remains.  Nor  is  the  debt,  for  the  purposes  of  taxa- 
tion, affected  by  the  fact  that  it  is  secured  by  mortgage  upon 
real  estate  situated  in  Illinois.  The  mortgage  is  but  a  se- 
curity for  the  debt,  and  as  held  in  State  Tax  on  Foreign-Held 
Bonds  {supra),  the  right  of  the  creditor  to  proceed  against 
the  property  mortgaged,  upon  a  *  given  contingency,  to  en- 
force by  its  sale  the  payment  of  his  demands  .  .  .  has  no 
locality  independent  of  the  party  in  whom  it  resides.  It  may 
undoubtedly  be  taxed  by  the  State  when  held  by  a  resident 
therein,'  etc.  The  debt,  then,  having  its  situs  at  the  creditor's 
residence,  both  he  and  it  are,  for  the  purposes  of  taxation, 
within  the  jurisdiction  of  the  State.  It  is,  consequently,  for 
the  State  to  determine,  consistently  with  its  own  fundamental 
law,  whether  such  property  owned  by  one  of  its  residents 
shall  contribute,  by  way  of  taxation,  to  maintain  its  govern- 
ment. Its  discretion  in  that  regard  cannot  be  supervised  or 
controlled  by  any  department  of  the  Federal  goverinnent,  for 
the  reason,  too  obvious  to  require  argument  in  its  support, 
that  such  taxation  violates  no  principle  of  the  Federal  Consti- 
tution. Manifestly  it  does  not,  as  is  supposed  by  counsel,  in- 
terfere in  any  true  sense  with  the  exercise  by  Congress  of  the 
power  to  regulate  commerce  among  the  several  States.  Nor 
does  it,  as  is  further  supposed,  abridge  the  privileges  or  im- 
munities of  citizens  of  the  United  States,  or  deprive  the  citi- 
zen of  life,  liberty,  or  property  without  due  process  of  law, 
or  violate  the  constitutional  guaranty  that  the  citizens  of 
each  State  shall  be  entitled  to  all  privileges  of  citizens  in  the 
several  States. 

"Whether  the  State  of  Connecticut  shall  measure  the  con- 
tribution which  persons  resident  within  its  jurisdiction  shall 
make  by  way  of  taxes,  in  return  for  the  protection  it  affords 
them,  by  the  value  of  the  credits,  choses  in  action,  bonds,  or 
stocks  which  they  may  own  (other  than  such  as  ai'e  exempted 
or  protected  from  taxation  under  the  Constitution  and  laws 
of  the  United  States),  is  a  matter  which  concerns  only  the 
people  of  that  State,  with  which  the  Federal  Government  can- 
not rightly  interfere."^ 


1  For  an  interesting  and  vigorous  discussion  of  this  opinion  from  an 
eoonomic  point  of  view,  see  David  A.  Wells'  "Theory  and  Practice  of 
Taxation."  For  application  of  the  rule  established  in  this  case  to 
Federal  taxation,  see  infra,  Sec.  594. 


528  THE   STATE    JURISDICTION    IN    TAXATION.  §    484 

§  484.  State  May  Tax  Resident  Stockholder  in  Foreign 
Corporation  Upon  Value  of  Stock. — While  a  State  lias  the 
power  to  tax  all  shares  of  stock  in  corporations  of  its  own 
creation,  supra,  Sec.  460,  the  State  where  the  stockholder  resides 
may  also  require  him  to  list  the  same  stock  as  part  of  his  per- 
sonal property.  Personal  property  may  acquire  an  independent 
situs  for  taxation  in  the  jurisdiction  where  actually  located,  but 
this  does  not  affect  the  jurisdiction  of  the  State  to  tax  the  same 
property  through  the  person  of  its  owner.  Thus,  in  a  recent 
ease  in  Michigan,^  the  court  said  that  the  question  whether  the 
capital  stock  of  a  foreign  corporation  is  taxed  in  the  State  of 
the  corporation 's  domicil  is  immaterial,  since  the  shares  of  such 
capital  stock  in  the  hands  of  residents  acquired  a  sitiis  in  Michi- 
gan for  the  purposes  of  taxation,  and  the  law  was  not  framed 
with  reference  to  what  other  States  might  do.  It  was  said  by 
the  Supreme  Court  of  Ohio  :^ 

"The  constitutional  power  to  tax  shares  of  stock,  owned  by 
our  citizens  in  corporations  located  without  the  State,  does 
not  depend  on  whether  the  capital  of  the  corporation  is  or  is 
not  taxed  in  the  State  where  the  corporation  is  created.  The 
power  is  the  same,  whether  the  capital  of  the  corporation  is 
there  taxed  or  not ;  otherwise,  the  power  of  taxation  conferred 
by  the  Constitution  would  be  made  to  depend  upon  the  oper- 
ation of  laws  of  foreign  jurisdictions — a  proposition  so  ob- 
viously ill  founded,  that  the  moment  it  is  stated,  its  falsity  be- 
comes apparent."^ 

The  same  ruling  was  made  in  Rhode  Island,  where  stock  in  a 
manufacturing  company  of  Massachusetts,  which  was  taxed  at 
the  domicil  of  the  corporation,  was  held  taxable  at  the  domicil 
of  the  owner  in  Rhode  Island,  the  court  saying.* 


1  Bacon  v.  Board  of  State  Tax  Commissioners,  85  N.  W.  Rep.  307 
(1901). 

2  Bradley  v.  Bauder,  36  Ohio  St.  28  (1880);  see  also  Lee  v.  Sturges,  46 
Ohio  153  and  2  L.  R.  A.  556   (1889). 

3  Citing  Dwight  v.  Mayor,  etc.,  12  Allen  (Mass.)  316  (1866). 

4  Dyer  v.  Osborne,  11  R.  I.  321  (1876).  See  also  Seward  v.  City  of 
Rising  Sun,  79  Ind.  351  (1881);  Bacon  v.  Tax  Commissioners  (Mich.), 
85  N.  W.  Rep.  307  (1901)  ;  McKeen  v.  County  of  Northampton,  49  Pa.  St. 
519  (1865).  In  Ogden  v.  City  of  St.  Joseph,  90  Mo.  522  (1886),  the  court 
held,  in  construing  the  charters  of  cities  (of  the  second  class,  that  the  sitm 


§    484  THE    STATE    JURISDICTION    IN    TAXATION.  529 

"The  laAvs  of  Rhode  Island  are  parainoimt  in  Rhode  Island, 
and  all  the  inhabitants  of  the  State  are  subject  to  them  with- 
out regard  to  the  laws  of  any  other  State.  If  there  be  any 
ground  upon  which  the  defendant  is  entitled  to  exoneration 
because  of  the  Massachusetts  tax,  it  is  that  clause  of  our  Con- 
stitution which  declares  that  Hhe  burdens  of  the  State  ought 
to  be  fairly  distributed  among  its  citizens;'  and  upon  the 
claim  that  it  is  unfair  to  tax  him  in  Rhode  Island  for  prop- 
erty on  which  he  has  paid  a  tax  in  Massachusetts.  We  do  not 
think,  however,  that  the  tax  ought  to  be  declared  void  under 
that  clause  of  the  constitution.  It  would  certainly  be  going 
too  far  to  hold  that  a  man  of  wealth,  living  in  Rhode  Island, 
cannot  be  taxed  at  all  in  Rhode  Island,  if  his  property  is  all 
invested  in  the  stocks  of  a  manufacturing  corporation  of  an- 
other State,  and  there  subject  to  taxation.  And  if  such  a  man 
can  be  taxed  at  all  in  Rhode  Island,  the  question  of  how  much, 
is,  within  reasonable  limits  at  least,  a  legislative,  not  a  judicial 
question." 

The  Ohio  statute  referred  to  above  was  also  construed  and  en- 
forced by  the  Supreme  Court  in  a  case  from  the  United  States 
Circuit  Court  in  Ohio^  where  the  court  followed  the  decision 
of  the  Supreme  Court  of  that  State,  above  quoted,  and  held  that 
an  assessment  under  the  statute  upon  a  citizen  of  Ohio  on  stock 
of  the  "Western  Union  Telegraph  Company,  a  non-resident  cor- 
poration, was  valid,  although  the  corporation  paid  taxes  in 
Ohio  on  its  property  in  that  State.  It  was  necessary  for  the 
complainant  to  show  that  his  stock  was  exempted  under  the 
laws  of  Ohio.  The  court  followed  the  State  court  in  saying  that 
the  exemption  in  the  statute  only  applied  to  shares  of  corpora- 
tions which  were  required  to  return  substantially  all  their  capi- 
tal and  property  in  the  State  for  taxation,  and,  as  the  property 


of  shares  of  stock  in  a  corporation  was  the  residence  of  the  owner 
where  the  contrary  is  not  declared  by  statute;  but  in  State  ex  rel.  v. 
Lesser,  237  Mo.  310  (1911),  the  court  in  effect  overruled  this  decision 
and  held  that  shares  of  stock  in  a  foreign  corporation  owning  no 
property  in  the  State,  held  in  this  State  by  a  resident,  could  not,  under 
the  laws  of  the  State,  be  assessed  for  taxation  against  such  resident 
shareholder.  The  court  held  that  such  property  had  not  been  sub- 
jected to  taxation  under  the  laws  of  the  State. 

1  Sturges  V.  Carter,  114  U.  S.  511,  29  L.  Ed.  240  (1885). 


530  THE   STATE   JURISDICTION    IN    TAXATION.  §    485 

of  the  Western  Union  assessed  in  the  State  was  but  a  small  part 
of  all  its  property,  therefore  the  defendant  was  not  entitled  to 
the  exemption  of  his  stock.  No  Federal  question,  apparently, 
was  raised  in  this  case,  the  whole  controversy  turning  upon  the 
construction  of  the  Ohio  statute. 

These  rulings  of  the  State  courts  were  followed  by  the  Su- 
preme Court  in  holding  that  the  States  can  tax  stocks  of  foreign 
companies  held  by  its  citizens,  and  was  not  bound  to  make  its 
statutes  harmonize  in  principle  with  those  of  other  States.i 

The  same  ruling  followed  as  to  the  taxability  of  stocks  in  for- 
eign corporations  under  the  Georgia  Constitution  and  statute.2 

§  485.  No  Immunity  Under  Federal  Constitution  of  State 
Securities  from  Taxation  in  Other  States. — The  State  of  Mary- 
land included  in  the  tax  list  of  a  resident  of  Baltimore  certain 
securities  of  the  registered  public  debt  of  the  State  and  city  of 
New  York  and  other  States,  some  of  which  were  exempt  from 
taxation  in  the  State  where  issued  and  some  actually  taxed 
there.  It  was  argued  that  the  same  property  could  not  have 
at  the  same  time  more  than  one  situs  for  taxation,  and  that  the 
situs  of  this  was  in  the  State  owing  the  debt.  But  the  court 
said2  that  it  was  immaterial  whether  the  debt  was  taxed  in  the 
debtor  State  or  not,  and  that  there  was  no  immunity  from 
taxation  in  Maryland  under  Art.  IV,  Sec.  1  of  the  U.  S.  Constitu- 
tion, providing  that  full  faith  should  be  given  in  each  State  to  the 
public  acts  of  every  other  State.  No  State  can  legislate  with 
reference  to  taxation  in  other  jurisdictions  or  exempt  from  taxa- 
.tion  property  beyond  its  confines.  The  debt  still  remained  a 
chose  in  action  with  all  the  incidents  which  appertain  to  that 
species  of  property.    The  court  further  said  : 

**It  is  true,  if  a  State  could  protect  its  securities  from  taxa- 
tion everyivhere,  it  might  succeed  in  borrowing  money  at  re- 


1  Kidd  V.  Alabama,  188  U.  S.  730,  47  L.  Ed.  669  (1903),  Justices 
Harlan   and  WMte  dissenting. 

2  Wright  V.  L.  &  N.  R.  Co.,  195  U.  S.  219,  49  L.  Ed.  167  (1904),  re- 
versing 110  Fed.  1007.  See  also  Central  of  Georgia  R.  Co.  v.  Wright, 
166  Fed.  153  (1908). 

3  Bonaparte  v.  Tax  Court,  104  U.  S.  592,  26  L.  Ed.  845   (1882). 


§    486  THE    STATE    JURISDICTION    IN    TAXATION.  531 

duced  interest ;  but,  inasmuch  as  it  cannot  secure  such  exemp- 
tion outside  of  its  own  jurisdiction,  it  is  compelled  to  go  into 
the  market  as  a  borrower,  subject  to  the  same  disabilities  in 
this  particular  as  individuals.  While  the  Constitution  of  the 
United  States  might  have  been  so  framed  as  to  afford  relief 
against  such  a  disability,  it  has  not  been,  and  the  States  are 
left  free  to  extend  the  comity  which  is  sought,  or  not,  as  they 
please. 

"Taxation  of  the  debt  within  the  debtor  State  does  not 
change  the  legal  situs  of  the  debt  for  any  other  purpose  than 
that  of  the  tax  which  is  imposed.  Neither  does  exemption 
from  taxation." 

§  486.  Domicil  and  Location,  as  Situs  for  Taxation,  in  Same 
State. — The  question  of  the  situs  for  taxation  of  intangible 
personal  property,  such  as  bonds,  notes,  credits,  etc.,  has  been 
frequently  presented  to  the  State  courts,  not  only  with  refer- 
ence to  the  taxability  of  the  property  within  the  State,  but  also 
as  to  the  place  of  taxation  therein,  where  the  owner  is  domiciled 
in  one  place  and  the  property  is  localized  elsewhere  in  the  same 
State,  e.  g.,  securities  in  the  hands  of  a  local  agent  or  the  like. 
The  taxable  situs  of  such  property  may  be  and  usually  is  reg- 
ulated by  statute  of  the  State,  but  in  the  absence  of  express 
statute,  personal  property  in  the  same  State  is  usually  held  to 
be  taxable  at  the  domicil  of  the  owner.^  The  Supreme  Court 
of  Alabama  arrived  at  the  same  conclusion,^  in  deciding  a  ease 
where  the  domicil  and  the  property  were  in  different  cities  of 
the  State,  saying: 


1  The  New  York  Court  of  Appeals,  construing  the  statute  of  that 
State  and  holding  that  the  residence  of  the  owner  and  not  that  of  the 
agent,  both  of  which  were  in  New  York,  was  the  taxable  situs  of  securi- 
ties, said:  "A  person  living  in  a  city  where  taxation  was  onerous, 
would  escape  the  burden  by  placing  his  assets  in  the  hands  of  an  agent 
in  an  outlying  town,  while  the  countryman  whose  property  might,  at 
the  time  of  the  assessment,  be  in  the  hands  of  his  factor,  broker  or 
commission  agent  for  use  or  investment  would  find  it  enlarged  by  city 
valuations,  only  to  be  diminished  by  taxes  from  which  he  could  de- 
rive no  benefit."  Boardman  v.  County  Supervisors,  Sf)  N.  Y.  359, 
p.  363  (1881). 

2  Boyd  v.  Selnia,  16  L.  K.  A.  l'li\.  1.  c.  p.  732  (1892).  This  case  contains 
a  review  of  the  authorities  supporting  the  view  that  such  property 
should  be  taxed  at  the  domicil  of  the  creditor. 


532  THE    STATE   JURISDICTION    IN    TAXATION.  §    487 

"Passing  to  the  question  whether  negotiable  promissory 
notes  are  taxable  at  the  domieil  of  the  owner,  or  whether  the 
situs  of  snch  property,  and  not  the  domieil  of  the  owner,  de- 
termines the  liability  to  taxation,  we  find  irreconcilable  con- 
fusion in  the  adjudicated  cases,  as  well  as  differences  in  the 
statement  of  the  doctrine  in  the  text-books.  Much  of  this  con- 
fusion results  from  a  failure  to  observe  the  varying  phrase- 
ology of  the  different  statutes  giving  rise  to  the  decisions,  but 
in  some  instances  the  authorities  differ  in  the  statement  of  the 
general  principle  involved." 

§  487.  Double  Taxation  Not  Presumed. — While  it  is  not 
practicable  to  formulate  a  rule,  where  the  cases  depend  upon 
the  construction  of  different  State  statutes  and  involve  their 
phraseology,  both  as  to  what  shall  constitute  taxable  property 
in  the  State  and  as  to  the  place  in  the  State  where  the  per- 
sonalty shall  be  assessed,  it  has  been  frequently  held  that  where 
bonds,  notes  and  mortgages  have  had  an  independent  situs 
given  them  in  another  State  and  have  been  localized  there 
through  a  resident  agent,  or  otherwise,  so  as  to  become  subject 
to  the  taxing  power  of  that  State,  they  were  not  subject  to 
taxation  in  the  State  of  the  domieil,  unless  expressly  made  so 
by  statute.  In  other  words,  it  is  a  rule  of  construction,  repeat- 
edly recognized  by  the  courts  in  taxation  cases,  that  double  taxa- 
tion will  not  be  presumed  to  have  been  intended,  and  will  only  be 
enforced  under  express  statutory  mandate.^  This  is  only  men- 
tioned as  illustrative  of  the  complications  attending  the  attempt 
to  reach  this  class  of  property,  that  is,  notes,  bonds  and  mort- 
gages, for  assessment.  Though  often  liable  to  double  taxation 
by  the  conflicting  sovereign  claims  of  the  State  of  domieil  and 
the  State  of  location,  a  fact  to  which  we  find  frequent  reference 
in  the  decisions  of  the  court,  such  property  is  rarely  reached 
for  taxation  in  any  jurisdiction.  These  decisions  are  based  upon 
statutory  construction  and  no  principle  of  due  process  of  law  is 
involved  therein.2 


1  See  supra,  Sees.  459,  462. 

2  Thus  corporate  shares  of  domestic  corporations  are  as  a  rule  held 
not  taxable  where  the  corporate  property  is  taxed  to  the  corporation, 
this  being  an  obvious  form  of  double  taxation,  which  the  courts  say  is 


§    488  THE    STATE    JURISDICTION    IN   TAXATION.  533 

It  has  already  been  shown  that  a  State  may  tax  the  shares  of 
non-resident  stockholders  in  its  domestic  corporations,  enforc- 
ing payment  through  its  control  over  the  company;  and  may 
also  tax  the  resident  stockholders  in  foreign  corporations  upon 
the  value  of  the  stock  held  by  them,  regardless  of  the  fact  that 
the  capital  of  the  company  or  the  property  in  which  it  is  in- 
vested is  taxed  in  other  jurisdictions. 

§  488.  Due  Process  of  Law  and  Double  Taxation. — Double 
or  duplicate  taxation  may  be  enforced  by  a  State  or  may  result 
from  the  operation  of  the  tax  laws  of  a  State  without  violating 
the  constitutional  guaranty  of  due  process  of  law.  It  has  been 
repeatedly  recognized  that  duplicate  taxation,  to  a  certain  ex- 
tent, cannot  be  avoided  in  State  tax  systems.  Thus  may  be 
taxed  both  property  and  the  money  that  is  paid  for  the  prop- 
erty; land  and  the  mortgage  upon  the  land;  property  and  the 
income  from  the  property  ;^  the  capital  invested  in  a  business 
and  the  privilege  of  conducting  the  business ;  capital  stock  of  a 
corporation,  the  property  in  which  the  capital  is  invested,  and 
the  shares  in  the  hands  of  the  holders.    Some  of  these  cases  of 


not  presumed.  Thus  in  Lewiston  Water  &  Power  Co.  v.  Asotin  Co.,  24 
Wash.  371  (1901),  the  court  said  that  such  double  taxation  was  illegal  in 
the  absence  of  special  legislative  authorization,  although  double  taxation 
was  not  expressly  prohibited  by  the  Constitution.  See  also  to  the  same 
effect.  People  ex  rel.  v.  Badlam,  57  Cal.  594  (1881). 

In  Citizens'  Street  Ry.  Co.  v.  Common  Council,  125  Mich.  673  (1901), 
the  court  held,  although  there  was  no  express  constitutional  prohibition 
against  double  taxation,  that  an  act  for  assessing  corporate  property 
by  deducting  the  value  of  real  estate  from  the  market  value  of  the 
stock,  and  the  indebtedness  from  the  cash  value  of  the  personal  prop- 
erty, and  assessing  as  personalty  the  balance  so  found,  was  void.  The 
court  said  that  this  would  be  double  taxation,  because  if  the  company 
had  no  debts  or  real  estate,  all  of  the  property  would  be  taxed  twice 
as  personal  estate.  In  People  v.  Coleman,  135  N.  Y.  231,  the  court  in 
speaking  of  double  taxation,  said:  "If  that  had  been  attempted,  some 
way  would  have  been  found  to  defeat  it,  as  that  would  be  against  pub- 
lic policy,  the  purpose  of  the  laws  and  natural  justice."  See  also 
State  v.  Thomas,  26  N.  J.  L.  181  (1857).  But  see  contra  as  to  double 
taxation  of  corporate  property  and  stock.  City  of  Memphis  v.  Ensley, 
6  Baxter  (Tenn.),  553  (1873). 

I  But,  see  on  this  point,  income  tax  decision  of  1895,  Sec.  560,  infra. 


534  THE   STATE    JURISDICTION    IN    TAXATION.  §    488 

double  taxation  are  usually  avoided  by  statute  or  custom.-  Thus 
the  holders  of  shares  of  stock  and  the  capital  stock  in  domestic 
corporations  are  usually  exempted  from  taxation,  where  the 
corporate  property  is  taxed.^  In  some  States  mortgages  are 
not  taxed  where  the  property  mortgaged  is  taxed.  But  assum- 
ing that  there  is  no  discrimination  as  between  taxpayers  in  the 
same  class,  the  power  of  the  State  to  tax  twice  is  said  to  be  the 
same  as  the  power  to  tax  once,  that  is,  no  constitutional  question 
is  raised  by  the  exercise  of  that  power.  Double  taxation  does 
not  necessarily  consist  in  assessing  the  same  property ,  twice  to 
the  same  person,  but  may  consist  in  requiring  a  double  con- 
tribution to  the  same  tax  on  account  of  the  same  property, 
though  the  assessments  are  to  different  persons,^ 

Thus  in  the  taxation  of  domestic  corporations  where  the  tax 
is  levied  upon  the  capital  stock,  though  the  holders  of  the  stock 
in  the  State  may  not  be  taxed,  the  stock  of  the  corporation  only 
represents  the  property  of  the  corporation,  and  that  may  be  lo- 
cated in  different  States  and  subject  to  the  taxing  power  of 
such  States.  This  form  of  double  taxation  therefore  cannot  be 
avoided,  where  the  tax  is  on  the  corporate  stock,  as  representing 
the  property  of  the  corporation,  as  the  latter  is  subject  to  the 
taxing  power  of  other  States  where  the  property  is  located,  while 
the  former  is  not.  The  only  effective  method  therefore  of  avoid- 
ing double  taxation  in  the  taxing  of  corporations,  is  to  tax  the 
property  of  the  corporations  where  it  is  located,  exempting  indi- 
viduals from  taxation  on  their  stock,  and  if  it  is  desired  to  derive 
additional  revenue  from  the  exercise  of  the  corporate  franchise, 
to  impose  a  special  franchise  tax  upon  the  privilege  of  acting  as 
a  corporation.  Under  the  complications  resulting  from  corporate 
entities  doing  business  and  holding  property  in  different  States 
double  taxation  of  the  same  property  cannot  otherwise  be 
avoided.* 


1  See  cases  supra,  Sec.   487. 

2Germania  Trust  Co.  v.  San  Francisco,  128  Cal.  589  (1900);  see  also 
Estate  of  Pair,  128  Cal.  607  (1900). 

3  See  State  ex rel.  v.  Bodca,w  Lbr.  Co.,  194  S.  W.  692  (1917),  where  the 
Supreme  Court  of  Arkansas  held  that  the  laws  of  the  State  pro- 
hibited  double  taxation,  but  enforced   a  system   of  State  taxation  of 


§    490  THE    STATE   JURISDICTION    IN   TAXATION.  535 

§  489.  Double  Taxation  from  Competing  State  Authori- 
ties.— While  some  forms  of  double  taxation,  x>articularl3^  in 
case  of  corporations,  may  be  avoided  where  the  taxes  are  levied 
in  the  same  State,  and  usually  are  avoided,  as  in  the  case  of 
corporations  and  the  stockholders  therein,  there  is,  as  we  have 
seen,  a  continual  liability  to  double  taxation  resulting  from  the 
subjection  of  the  same  property  to  the  taxing  power  of  two  jur- 
isdictions, or  where  the  paper  evidence  of  property  is  in  one 
State  and  the  property  itself  in  another.  Thus,  we  may  have 
cases  of  double  taxation  though  the  same  may  be  directly  pro- 
hibited by  the  Constitution  and  laws  of  the  State.  These  com- 
plications grow  out  of  our  complex  form  of  government  as  well 
as  out  of  the  prevailing  use  of  the  corporate  entity  in  the  trans- 
action of  business. 

It  was  said  by  one  of  our  most  eminent  economic  authorities 
on  taxation  :^ 

' '  Amid  the  complexities  of  modem  industrial  life  equal- 
ity of  taxation  cannot  be  attained  without  a  careful  con- 
sideration of  these  problems.  Today  a  man  may  live  in 
one  State,  may  own  property  in  a  second,  and  may 
carry  on  business  in  a  third.  He  may  die  in  one  place 
and  leave  all  his  property  in  another.  He  may  spend  all  his 
income  in  one.  town  and  may  derive  that  income  from  prop- 
erty or  business  in  another  town.  He  may  carry  on  business 
in  several  States,  or  if  he  has  invested  in  corporate  securities, 
the  corporation  may  be  the  creature  of  another  State,  and  be 
situated  or  do  business  in  a  third.  All  these  cases  may  affect 
foreign  States  or  separate  commonwealths  of  the  same  Fed- 
eral State,  or  separate  cities  or  counties  of  the  same  common- 
wealth. The  possible  entanglements  are  well-nigh  innumer- 
able." 

§  490.  Interstate  Comity  Essential  to  Avoid  Double  Taxa- 
tion.— These  problems,  however,  must  find  their  solution  in 
the  elevation  of  public  opinion  bringing  about  a  recognition  of 

corporations   which   only   allowed   deduction    for   the   taxable   property 
located   in   the  State.     The  court   said   that  this   method   of  taxation 
was  consistent  with  the  ruling  of  the  Supreme  Court  in  D.  L.  &  W.  R. 
R.  Co.  V.  Pennsylvania,  supra,  Sec.  482. 
1  Seligman's  Essays  on  Taxation,  p.  107. 


536  THE   STATE   JURISDICTION    IN    TAXATION.  §    490 

interstate  comity   in   taxation   for  wliieli   the   courts  have   fre- 
quently appealed,  but  which  they  are  powerless  to  effect. 

The  Supreme  Court  has  said,  by  Justice  Miller,^  that  they 
knew  of  no  provision  of  the  Federal  Constitution  which  forbids 
a  State  from  taxing  the  same  property  twice  for  the  same  pur- 
pose. It  seems  that  the  States  can  be  restrained  from  avowedly 
taxing  property  beyond  their  jurisdiction,  for  example  that  of 
interstate  carriers  under  the  unit  and  mileage  rules.  But  they 
cannot  be  restrained  from  taxing  persons  and  property  within 
their  jurisdiction  irrespective  of  the  action  of  other  State  sov- 
ereignties upon  the  same  property.  In  other  words,  the  com- 
plications growing  out  of  the  fact,  that  the  property  may  exist 
in  one  State  and  the  paper  representing  it  in  another,  may  in- 
volve a  form  of  double  taxation  by  competing  State  sovereign- 
ties, in  which  they  cannot  be  restrained  under  the  operation  of 
the  Fourteenth  Amendment.^ 


1  Davidson  v.  New  Orleans,  96  U.  S.  97,  1.  c.  p.  106,  24  L.  Ed.  616 
(1878). 

2  This  subject  was  carefully  considered  by  the  National  Conference 
on  Taxation,  held  at  Buffalo,  New  York,  May  23,  1901,  under  the 
auspices  of  the  National  Civic  Federation,  attended  by  representatives, 
both  economists  and  men  of  large  practical  experience  in  taxation, 
appointed  by  the  governors  of  some  thirty  States.  The  Conference 
unanimously  adopted  the  following  resolution,  after  full  discussion,  as 
expressive  of  its  views: 

"Whereas,  Modern  industry  has  overstepped  the  bounds  of  any  one 
State,  and  commercial  interests  are  no  longer  confined  to  merely 
local  interests;   and 

"Whereas,  The  problem  of  just  taxation  cannot  be  solved  without 
considering  the  mutual  relations  of  contiguous  States;   be  it 

"Resolved,  That  this  Conference  recommend  to  the  States  the  recog- 
nition and  enforcement  of  the  principles  of  interstate  comity  in  taxa- 
tion. These  principles  require  that  the  same  property  should  not  be 
taxed  at  the  same  time  by  two  State  jurisdictions,  and  to  this  end  that 
if  the  title  deeds  or  other  paper  evidences  of  the  ownership  of  prop- 
erty, or  of  an  interest  in  property  are  taxed,  they  shall  be  taxed  at  the 
situs  of  the  property,  and  not  elsewhere.  These  principles  should 
also  be  applied  to  any  tax  upon  the  transfer  of  property  in  expectation 
of  death,  or  by  will,  or  under  the  laws  regulating  the  distribution  of 
property  in  case  of  intestacy." 


§   491  THE    STATE    JURISDICTION    IN   TAXATION.  537 

It  was  said  by  the  Supreme  Court  iu  a  case  from  Alabama  :i 

"No  doubt  it  would  be  a  great  advantage  to  the  country 
and  to  the  individual  States  if  principles  of  taxation  could  be 
agreed  upon  which  did  not  conflict  with  each  other,  and  a 
common  scheme  could  be  adopted  by  which  taxation  of  sub- 
stantially the  same  property  in  two  jurisdictions  could  be 
avoided.  But  the  Constitution  of  the  United  States  does  not 
go  so  far.  .  .  .  The  State  of  Alabama  is  not  bound  to  make 
its  laws  harmonize  in  principle  with  those  of  other  States. 
If  property  is  untaxed  by  its  laws,  then  for  the  purpose  of  its 
laws  the  property  is  not  taxed  at  all. ' ' 

§  491.    Double  Taxation  Under  the  Federal  Government. — 

Notwithstanding  this  possibility,  in  the  United  States,  of  double 
taxation  in  the  popular  sense?  under  the  conflicting  systems  of 
State  taxation,  where  the  property  and  its  owners  are  in  dif- 
ferent States,  it  is  nevertheless  true  that  there  is  a  very  sub- 
stantial Federal  protection  of  both  individuals  and  corporations 
against  arbitrary  abuse  of  the  State  taxing  power,  first,  in  that 
any  substantial  interference  with  interstate  commerce  is  in- 
valid, and,  second,  in  that  the  guaranty  of  due  process  of  law 
and  the  equal  protection  of  the  laws  under  the  Fourteenth 
Amendment  protect  both  the  individual  and  the  corporation 
against  any  arbitrary  discrimination;  and,  as  hereafter  shown, 
any  discrimination  not  based  upon  rational  classification  in 
taxation,  falls  under  the  Federal  condemnation. 

There  is  another  form  of  double  taxation  which  grows  out  of 
the  very  nature  of  our  Federal  system  and  was  anticipated  in 
the  discussions  of  the  "Federalist"  before  the  adoption  of  the 
Constitution,  in  the  exercise  of  the  taxing  power  upon  the  same 
subjects  by  the  State  and  Federal  governments.^  As  will  be 
hereafter  seen,  the  taxing  power  of  the  Federal  government  has 
been  vastly  expanded  under  a  broad  construction  of  the  consti- 
tutional grant,  and  especially  since  the  adoption  of  the  Six- 
teenth    Amendment,    whereunder    the    Federal     Income     Tax 


1  Kidd  V.  Alabama.  188  U.  S.  7.30,  47  L.  Ed.  669    (1903). 
2Grigsby  Construction  Co.  v.  Freeman,  108  La.  435,  58  L.  R.  A.  349 
(1902),  citing  Coe  v.   Enrol,  supra. 
8  See  Sec.  3,  supra. 


538  .  THE   STATE   JURISDICTION    IN    TAXATION.  §    492 

reaches  incomes  from  all  sources.  Federal  and  State  taxes  are 
now  levied  upon  the  same  inheritances,  the  same  incomes,  and 
other  subjects  of  taxation.  Thus  are  raised  again  the  questions 
of  expediency  regulating  the  exercise  of  these  taxing  powers, 
which  are  necessarily  referred  to  the  determination  of  those 
who  are  responsible  for  their  judicious  exercise. 

There  is  another  form  of  double  taxation  growing  out  of  the 
fact  that  not  only  are  the  Federal  and  State  Income  Taxes  levied 
upon  the  same  income,  but  the  State  Income  Taxes  may  be  levied 
upon  the  use  of  the  same  property  which  is  itself  taxable  by 
the  State.  It  was  ruled  in  the  Income  Tax  Cases  in  1895,  that 
the  taxation  of  the  income,  that  is,  on  the  use  of  property,  was 
the  legal  equivalent  of  the  tax  upon  the  property  itself. i  As 
will  be  seen  in  the  review  of  the  State  taxing  systems,  some  of 
the  States  which  have  adopted  income  taxation,  have  avoided 
this  form  of  double  taxation  by  exempting  property  from  which 
the  income  is  derived.^ 

§  492.    Due  Process  of  Law  and  Inheritance  Taxation.— 

Property  was  not  taken  without  due  process  of  law  by  imposing 
a  transfer  tax  under  the  New  York  general  transfer  tax  law 
of  1897,  upon  the  exercise  by  will  of  the  power  of  appointment 
by  a  deed  executed  prior  to  the  passage  of  such  statute.^ 

Nor  are  universal  legatees  under  a  will  and  the  transfer  by 
deed  before  the  enactment  of  the  Louisiana  inheritance  tax  law 
of  June,  1904,  deprived  of  their  property  without  due  process 
of  law  by  the  subjection  of  their  shares  to  the  tax  imposed  by 
that  statute,  although  under  the  Louisiana  Civil  'Code  the  own- 
ership of  the  property  passed  to  such  legatee  upon  the  death  of 
the  deceased.4 

A  fund  represented  by  stocks,  bonds  and  notes  kept  in  a  State 


1  See  Sec.  560,  infra. 

2  See   Massachusetts,   Missouri   and   Wisconsin    Taxing   Systems,   ap- 
pendix, infra. 

3  Chanslor  v.  Kelsey,  205  U.  S.  466,  51  L.  Ed.  882    (1907),  affirming 
183    N.   Y.    543. 

4Cahen  v.  Brewster,  203  U.  S.  543,  51  L.  Ed.  310    (1906),  affirming 
115  La.  377. 


§   493  THE   STATE    JURISDICTION    IN   TAXATION.  539 

other  than  where  the  decedent  resided,  which  he  conveyed  upon 
certain  trusts  to  a  trust  company  of  another  State,  reserving  to 
himself  an  absolute  power  of  control,  \yhich  he  exercised  during 
his  life,  by  revocation  (followed  by  a  second  conveyance  to  the 
trust  company  upon  the  same  terms)  by  taking  the  whole  in- 
come for  himself,  was  held  lawfully  subject  to  the  inheritance 
tax  in  the  State  of  his  domicil  without  violation  of  the  due  pro- 
cess of  law  or  the  contract  clause  of  the  Federal  Constitution.! 

§  493.  Duplicate  Inheritance  Taxation.  —  The  duplicate 
taxation  of  inheritances,  tliat  is  by  both  Federal  and  State  gov- 
ernments, is  a  necessary  result  of  two  sovereignties  having  jur- 
isdiction in  the  same  territory  exercising  their  taxing  power 
upon  the  same  subject. 

There  is,  however,  double  taxation  of  inheritances  in  another 
form,  where  the  decedent  domiciled  in  one  State  at  his  deatli 
owns  personal  property  in  other  States,  which  is  subject  to  the 
latter 's  taxing  laws.  Thus  a  State  may  impose  a  tax  not  only 
upon  the  inheritance  by  will,  or  its  own  intestate  laws,  of  the 
property  of  decedents  domiciled  therein,  but  may  also  impose  a 
tax  upon  the  property  located  in  its  territory  which  passes 
under  the  inheritance  laws  of  any  other  State.  Thus  the  dece- 
dent may  have  been  domiciled  in  one  State,  his  personal  prop- 
erty may  be  located  in  another  State  or  in  a  foreign  country, 
while  the  heir  or  legatee  may  live  in  a  third  jurisdiction.  Thus 
in  New  York  the  courts  have  enforced  the  inheritance  tax  of 
that  State  against  the  money  on  deposit  in  a  New  York  bank  be- 
longing to  a  citizen  of  Pennsylvania.  The  court  said  that  ''the 
case  is  one  of  some  hardship,  for  the  reason  that  the  whole  estate 
of  the  decedent  is  taxable  in  Pennsylvania,  and,  if  the  property 
referred  to  is  taxable  here,  the  right  of  succession  to  it  will  cost 
10  per  cent  of  its  value.  ...  It  is  unfortunate  that  the 
laws  of  the  different  States  relating  to  succession  taxes  are  not 
uniform  and  framed  to  prevent  double  taxation." 


1  BuUen  v.  Wisconsin,  240  U.  S.  625.  60  L.  Ed.  830  (1916),  affirming 
14.3   Wis.   512. 

a/n  rr  Burr's  Estate,  38  N.  Y.  Supp.  811  (1895),  and  cases  cited  in  the 
opinion. 


540  THE  STATE  JURISDICTION   IN  TAXATION,  §   493 

In  another  case  the  same  principle  was  extended  by  the  New 
York  Court  of  Appeals  to  bonds  of  a  foreign  corporation  and 
bonds  and  certificates  of  stock  of  domestic  corporations,  owned 
by  a  non-resident  decedent  but  deposited  in  a  safe  deposit  vault 
within  the  State.  United  States  bonds,  however,  were  held  not 
to  be  included  in  the  words  of  the  statute.  The  court  said  the 
legislature  intended  to  repeal  the  maxim  mdhilia  persmictm 
sequuntur  so  far  as  it  was  an  obstacle,  and  to  leave  it  unchanged, 
so  far  as  it  was  an  aid,  to  the  imposition  of  a  transfer  tax  upon 
all  property  in  any  respect  subject  to  the  laws  of  that  State.^ 

Under  the  same  statute  the  shares  of  the  capital  stock  of  a 
domestic  corporation,  though  the  certificates  were  in  another 
State  in  the  possession  of  a  non-resident  decedent  at  the  time  of 
his  death  were  declared  "property  within  the  State,"  while 
bonds  of  a  like  corporation  held  in  like  manner^  were  not  in- 
eluded  in  the  designation  "property  within  the  State." 

On  the  other  hand,  in  New  York  personal  property  of  a  resi- 
dent decedent,  wheresoever  situated,  whether  within  or  without 
the  State,  was  subject  to  the  inheritance  tax,^  as  this  was 
imposed  on  the  right  of  succession,  which  was  based  on  the  en- 
abling legislation  of  the  State. 


iJn  re  Whiting's  Estate,  150  N.  Y.  27,  and  34  L.  R.  A.  232  (1896); 
see  also  Hondayer's  Estate,  150  N.  Y.  37,  and  34  L.  R.  A.  235  (1896). 

2  In  re  Bronson,  150  N.  Y.  1,  and  34  L.  R.  A.  238  (1896). 

sin  re  Estate  of  Swift,  137  N.  Y.  77,  and  18  L.  R.  A.  709  (1893). 

In  Orcutt's  Appeal,  97  Pa,  179  (1881),  the  Pennsylvania  statute  was  con- 
strued as  including  only  personal  property  of  a  tangible  nature  actu- 
ally situated  or  used  for  business  purposes  within  the  State.  But  in 
a  later  case,  In  re  Lewis'  Estate,  52  Alt.  Rep.  205  (1902),  it  was  held  that 
the  intangible  personalty  of  a  non-resident  decedent  was  subject  to  the 
collateral  inheritance  tax  within  the  State,  where  the  executor  hav- 
ing taken  out  ancillary  letters  elects  to  have  full  distribution  of  the 
fund  made  there  and  this  is  acquiesced  in  by  the  legatees.  The  court 
said  the  same  result  would  follow  w-here  property  was  in  possession 
and  control  of  a  resident  agent  with  power  of  investment  and  reinvest- 
ment. For  collection  of  cases,  both  English  and  American,  on  the 
subject  of  resident  and  non-resident  decedents  in  inheritance  taxa- 
tion, see  Dos  Passos  on  Inheritance  Law,  2d  Ed.,  Sec.  47. 


§    495  THE    STATE    JURISDICTION    IN   TAXATION,  541 

§  494.  The  Supreme  Court  on  Duplicate  Inheritance  Tax- 
ation.— The  Supreme  Court  in  a  series  of  decisions  has  held 
that  each  State  has  a  right  to  tax  the  inheritance  of  its 
own  citizens,  regardless  of  the  legislation  of  other  States. 
Thus,  beneficiaries  under  the  will  of  a  non-resident  could 
not  invoke  the  Constitution  to  prevent  taxation  under  the  New 
York  inheritance  tax  law  on  the  transfer  under  such  a  will  of 
debts  due  the  decedent  by  its  citizens,  though  the  entire  in- 
heritance was  taxable  in  the  State  of  the  decedent's  domicil.^ 

It  was  held  also  that  the  transfer  tax  authorized  by  the  laws 
of  New  York  when  personal  property  is  transferred  by  a  resi- 
dent of  the  State  by  deed  intended  to  take  effect  at  her  death, 
may  validly  be  imposed,  although  at  the  time  of  the  grantor's 
death  when  the  payment  of  the  tax  is  required,  the  property  is 
in  another  State  in  the  hands  of  a  trustee  holding  the  title  and 
possession  by  virtue  of  such  deed.^ 

§  495.  Question  One  of  Construction  and  Not  of  Legisla- 
tive Power. — It  is  clear,  therefore,  that  this  question  of  dupli- 
cate taxation  under  inheritance  tax  laws  is  one  of  the  intent  of 
the  legislature  as  shown  in  the  construction  of  the  statute,  and 
not  a  question  of  the  power  of  the  State.  As  the  right  of  inherit- 
ance either  in  the  case  of  wills  or  intestacy  is  dependent  upon 
the  statute,  the  State  can  impose  conditions  upon  the  enjoyment 
of  this  right  wherever  the  personal  property  is  located.  On  the 
other  hand,  the  State  has  the  power  to  tax,  whether  in  property 
or  inheritance  taxation,  the  property  localized  within  its  juris- 
diction. The  cases  in  the  State  courts  upon  this  matter  of  dupli- 
cate taxation  are  all  dealt  with  upon  the  question  of  construc- 
tion and  not  of  power. 

This  distinction  is  clearly  illustrated  by  the  decision 
of  the  Supreme  Court  in  construing  the  inheritance  tax  law  en- 
acted by  Congress  in  1898,  as  not  including  the  personalty  in 
this  country  passing  under  will  or  intestacy  of  parties  domiciled 


1  Blackstone  v.  Miller,  188  U.  S.  189,  47  L.  Ed.  439  (190.3),  affirming 
171  N.  Y.  682. 

2Keeney  v.  New  York,  222  U.  S.  525,  56  L.  Ed.  299  (1912),  affirming 
194  N.  Y.  281. 


542  THE   STATE   JURISDICTION    IN   TAXATION.  §   496 

abroad.    While  it  was  within  the  power  of  Congress  to  tax  the 
succession  in  such  cases,  it  had  not  done  so.^ 

§  496.  Due  Process  of  Law  in  Taxation  Requires  Legisla- 
tive Authority. — Due  process  of  law  in  taxation  requires  not 
only  that  a  tax  must  be  levied  for  a  public  pui-pose  appertain- 
ing to  the  district  taxed,  and  upon  property,  business, or  per- 
sons within  the  lawful  jurisdiction  of  the  State,  but  also  that 
the  taxing  power  be  exercised  by  the  legislative  authority  of  the 
State.  The  power  of  taxation  is  a  sovereign  power  exercised  by 
the  legislative  authority  of  the  government,  and  taxes  can  only 
be  collected  when  the  property  has  been  assessed  and  taxes  col- 
lected in  the  mode  specifically  prescribed  by  law.  The  subject 
of  taxation  under  constitutional  limitations,  Federal  and  State, 
are  to  be  selected  by  the  legislative  discretion  and  the  taxes 
levied  under  a  definite  rule  of  apportionment,  with  provision 
for  valuation  and  hearing  where  taxes  are  upon  value.  The 
failure  of  the  legislature  to  exercise  this  authority  cannot  be 
supplied  by  executive  officers,  or  by  the  courts.  This  sovereign 
legislative  power  of  taxation  cannot  be  delegated,  except  to  the 
municipal  subdivisions  of  the  State. 

This  fundamental  canon  of  taxation  was  forcibly  illustrated 
in  the  decision  of  the  Supreme  Court  of  Indiana,  holding 
that  life  insurance  policies,  although  ''property"  within  the 
State  and  therefore  subject  to  the  taxing  power  of  the  State, 
had  not  been  subjected  to  taxation  by  the  General  Assembly.2 
The  State  constitution  provided  that  ''all  property  within  the 
jurisdiction  of  the  State,  not  expressly  exempted,  should  be 
subject  to  taxation;"  and  it  also  provided  that  "the  General 
Assembly  shall  .  .  .  prescribe  such  regulations  as  shall  se- 
cure a  just  valuation  for  taxation  of  all  property,  both  real  and 
pereonal,  excepting  such  only  for  municipal  .  .  .  etc  .  .  . 
purposes,  as  may  be  specially  exempted  by  law."  The  statute 
specifically  prescribed  what  "personal  property"  should  in- 
clude,  mentioning   different    classes;    and   also   provided    what 


1  Eidman  v.  Martinez,  184  U.  S.  578,  supra. 

2  State  Board  of  Tax  Commissioners  v.  HoUiday,  150  Ind.  216  (1898), 
two  of  the  five  judges  dissenting. 


§    496  THE   STATE   JURISDICTION    IN   TAXATION.  543 

should  be  included  in  the  schedule  required  to  be  filed  by  the 
taxpayer,  life  insurance  policies  not  being  mentioned  in  either 
enumeration,  although  the  latter  contained  in  the  concluding 
clause,  "all  other  goods,  chattels  and  personal  property,  not 
heretofore  specifically  mentioned,  and  their  value,  except  prop- 
erty specifically  exempt  from  taxation."  The  State  Board  of 
Tax  Commissioners  had  directed  the  local  assessor  to  include 
life  insurance  policies,  and  furnished  directions  for  their  val- 
uation. The  State  court  held  that  this  was  unauthorized  and 
illegal,  and  the  collection  of  the  tax  was  enjoined. 

In  this  ease,  and  in  other  cases^  under  similar  provisions  in 
State  constitution,  the  mandate  of  the  constitution  is  addressed 
to  the  legislative  discretion  and  necessarily  requires  legislative 
action  in  the  selection  of  the  subjects  of  taxation.  Thus  the 
court  said  in  this  case : 

"It  is,  therefore,  a  legislative  poAver  to  select  the  subjects  for 
taxation,  and  this  constitutional  provision  imposes  the  duty  and 
limitation  upon  the  legislature  of  providing  by  law  regulations 
or  methods  for  a  just  valuation  of  all  property,  both  real  and 
personal,  for  taxation.  Where  the  legislature  has  not  exercised 
this  power,  no  other  department  of  the  State  government  can 
supply  the  omission,  and  where  no  such  regulation  has  been 
prescribed  by  law  as  to  any  particular  species  of  property,  then 
such  property  cannot  be  taxed.  This  conclusion  may  rest 
either  on  the  inference  from  such  failure  to  prescribe  such  reg- 
ulations that  the  legislature  did  not  intend  to  select  that  par- 
ticular species  of  property  as  a  subject  of  taxation,  or,  regard- 
less of  the  legislative  intent,  the  failure  to  prescribe  such  reg- 
ulations leaves  such  property  unselected  as  a  subject  of  taxa- 
tion." 


1  Riley  v.  Western  Union  Tel.  Co.,  47  Ind.  511  (1874);  County  of  Erie 
V.  City  of  Erie,  113  Pa.  St.  360  (1886) ;  Louisiana  Co.  v.  New  Orleans,  31 
La.  Ann.  440  (1879);  Mississippi  Mill  v.  Cook,  56  Miss.  40  (1878); 
Maguire  v.  Board  of  Commissioners,  71  Ala.  401  (1882);  Stratton  v. 
Collins,  43  N.  J.  L.  562  (1881).  In  Loan  and  Homestead  Associa,tion  v. 
Keith,  153  111.  609  (1894),  an  act  declaring  stocks  and  notes  of  Home- 
stead and  Loan  Association  not  subject  to  taxation  was  held  to  be  un- 
constitutional as  an  exemption  prohibited  by  the  constitution.  As  to 
the  legislative  power  in  the  absence  of  constitutional  restriction,  see  the 
exhaustive  opinion  in  Wisconsin  (Antral  R.  R.  Co.  v.  Taylor  Co.,  52 
Wis.  37   (1881). 


544  THE   STATE   JURISDICTION   IN   TAXATION.  §    496 

This  principle  was  also  declared  by  tlie  Supreme  Court  of 
Missouri  in  holding  that  shares  of  stock  in  a  foreign  corpora- 
tion owning  no  property  in  Missouri,  but  held  within  the  State 
by  a  resident  of  the  State,  could  not,  under  the  laws  of  the  State, 
be  assessed  for  taxation  against  the  shareholder.  The  court 
said  that  only  property  is  taxable  which  is  required  by  law  to 
be  assessed  for  taxation,  and  that  there  was  nothing  in  the  stat- 
utes of  the  State  to  indicate  that  the  words  "subject  by  law  to 
taxation  in  this  State"  were  meant  to  include  the  stock  of  a 
foreign  corporation  which  had  no  property  in  the  State.  Tn 
other  words,  such  property  had  not  been  subjected  to  taxation 
by  the  General  Assembly .i 

The  legislative  power  of  taxation  is  inherent,  and  the  State 
constitution  is  only  operative  as  a  restraint,  not  as  a  grant  of 
power.  It  is  in  this  respect  distinguished  from  the  taxing 
power  of  Congress,  which,  as  hereafter  shown,  is  based  upon 
the  grant  of  the  United  States  Constitution.  The  mandate  of 
the  State  constitution  is  not  effective  as  a  restraint  upon  legis- 
lative power  when  it  is  made  dependent  upon  affirmative  legisla- 
tive action,  and  is  consequently  necessarily  addressed  to  legis- 
lative discretion,  as  there  is  no  method  of  enforcing  legislative 
action  by  judicial  authority,  even  in  obedience  to  such  a  con- 
stitutional mandate.  A  State  tax  therefore  does  not  require  an 
express  authorization  in  the  State  constitution,  but  it  does  re- 
quire express  legislative  authority.2 

Thus  a  constitutional  provision  that  all  laws  exempting  prop- 
erty from  taxation  shall  be  void  applies  to  affirmative  exemp- 
tions, not  to  laws  which  do  not  in  terms  exempt  certain  prop- 
erty, '  and  not  to  mere  casual  omissions.  While  the  Constitu- 
tion may  make  it  the  clear  duty  of  the  legislature  to  see  that  no 
class  of  property  in  the  State  escapes  taxation,  unless  the  legis- 
lature  exercises   its   legitimate    function    and    subjects   certain 


1  See  State  ex  ret.  v.  Lesser,  237  Mo.  310  (1911). 

2  The  cases  arising  under  constitutions  directing  legislative  action 
must  be  distinguished  from  those  under  constitutions  which  are  con- 
strued as  specifically  legislating  on  taxation,  naming  the  subjects  of 
taxation,  leaving  no  room  for  legislative  discretion,  see  People  v. 
Keith,  153  111.  609  (1894);  see  constitutions  infra,  Appendix. 


{    497  THE   STATE   JURISDICTION    IN   TAXATION.  545 

property  to  taxation,   the   constitutional  provision   cannot,  be- 
cause of  such  lack  of  legislation,  become  self-enforcing.i 

§  497.  State  Construction  of  Legislative  Authority  Con- 
clusive.— While  the  legislature  must  select  the  subjects  of  tax- 
ation and  make  that  selection  effective  by  necessary  regulations 
for  assessment,  this  does  not  mean  that  every  species  of  prop- 
erty must  be  specifically  named  for  taxation.  General  words  of 
description  are  sufficient,  as  the  question  is  one  of  determining 
the  legislative  intent  by  the  ordinary  rules  of  statutory  con- 
struction. "General  words  in  any  instrument  or  statute  are 
strengthened  by  exceptions,  and  weakened  by  enumeration.  "2 
The  courts  will  also  presume  that  the  legislature  intended  to 
carry  out  the  directions  of  the  constitution,  and  will  so  con- 
strue the  statute,  whenever  such  construction  is  admissible. 

But  "due  process  of  law"  in  this  sense,  the  exercise  of  the 
taxing  power  of  the  State  under  its  constitution  and  statutes, 
is  conclusively  determined  by  the  State  courts,  and  involves  no 
Federal  question  after  such  determination  has  been  made.  The 
taking  of  property  by  State  taxing  officials,  without  due  pro- 
cess of  State  law,  is  a  violation  of  the  Federal  as  well  as  the 
State  constitution ;  but  the  judgment  of  the  State  court  is  con- 
clusive as  to  the  construction  of  its  constitution  and  statutes; 
and  that  construction  will  be  followed  by  the  Federal  courts,  in 
whatever  form  their  jurisdiction  may  be  invoked. 

Thus  in  Arkansas  the  State  constitution  declared  that  all 
laws  exempting  property  from  taxation,  other  than  as  provided 
therein,  should  be  void ;  and  further  declared  that  all  property 
subject  to  taxation  should  be  "taxed  according  to  value  to  be 
ascertained,   in   such    manner   as   the   General   Assembly   shall 


1  Supreme  Court  of  Missouri  in  Kansas  City  v.  Building  and  Loan 
Association,  145  Mo.  50,  53  (1898).  It  was  held  in  the  same  State  that 
where  the  revenue  laws  direct  the  assessment  and  taxation  of  "all  real 
estate  not  exempt  therefrom,"  these  provisions  are  broad  enough  to 
include  property  held  by  a  municipality  as  trustee  for  charitable  uses, 
St.  Louis  V.  Wennocker,  145  Mo.  230  (1898). 

2  Supreme  Court  of  Pennsylvania  in  Sharpless  v.  Mayor  of  Phila- 
delphia, 21   Pa.  St.  147   (1853). 


546  THE   STATE   JURISDICTION    IN    T.\JCATION.  §   497 

direct,  making  the  same  equal  and  uniform  throughout  the 
State."  The  legislature  passed  an  act  directing  the  Board  of 
Railroad  Commissioners  not  to  include  in  the  schedule  of  prop- 
erty of  railroad  companies  assessed  by  them  "embankments, 
tunnels,  cuts,  ties,  trestles  or  bridges."  The  State  board  de- 
clined to  follow  this  direction,  deeming  the  act  unconstitutional, 
and  included  this  property  in  the  assessment.  The  railroad 
company  sought  in  the  State  court  to  enjoin  the  entire  assess- 
ment on  the  ground  that  the  action  of  the  board  was  not  in  con- 
formity to  the  statute,  and  that  if  the  statute  was  void,  the 
whole  assessment  fell  with  it.  The  State  court,  and  the  Su- 
preme Court  of  the  State  on  appeal,  held  that  the  act  was  un- 
constitutional, but  that  it  was  clearly  separable  from  the  rev- 
enue act,  and  that  the  assessment  was  valid.  The  suit  was  car- 
ried to  the  Supreme  Court  by  writ  of  error,  and  at  the  same 
time  was  heard  another  ease,  wherein  suit  had  been  filed  in  the 
United  States  Circuit  Court  by  the  non-resident  trustees  of  a 
mortgage  of  the  railroad  company  seeking  the  same  relief,  and 
wherein  demurrer  had  been  sustained,  and  the  bill  dismissed 
in  the  Circuit  Court. 

The  Supreme  Court^  affirmed  the  judgment  of  the  Circuit 
Court,  and  dismissed  the  writ  of  error  to  the  State  Supreme 
Court  because  there  was  no  Federal  question  involved,  saying 
on  this  latter  point : 

"The  complaint  of  the  plaintiff's  in  error  and  appellants 
is,  that  the  board  of  railroad  commissioners  did  not  follow  the 
act  of  the  legislature.  If  that  act  was  valid,  no  ground  lay  for 
complaint  that  the  State  had  done  anything  to  deprive  the 
company  of  its  property  without  due  process  of  law.  If  the 
act  was,  in  the  particulars  mentioned,  unconstitutional,  as  the 
Supreme  Court  of  the  State  afterward  held,  there  was  no  just 
ground  on  complaint  that  the  railroad  commissioners  had  re- 
fused to  follow  its  directions." 

In  affirming  the  judgment  of  the  Circuit  Court  it  was  said, 
that  under  the  State  constitution  laws  which  produce  exemp- 
tions indirectly  must  be  equally  inoperative  with  those  which 

1  Huntington  v.  Worthen,  120  U.  S.  97,  30  L.  Ed.  588    (1887). 


§    498  THE   STATE   JURISDICTION   IN   TAXATION.  547 

exempt  directly;  that  the  conflict  between  the  statute  and  con- 
stitution was  obvious,  and  the  unconstitutional  part  of  the  act 
was  clearly  separable  from  the  remainder, 

§  498.  The  Constitutionality  of  Statutes  is  for  Judicial, 
Not  Executive  Determination. — In  the  cases  cited  in  the  three 
preceding  sections,  the  action  of  the  State  taxing  board  was  in 
direct  opposition  to  the  rule  that  the  constitutionality  of  stat- 
utes is  for  judicial,  not  executive  determination.  In  the  In- 
diana case  the  taxing  board  undertook  to  supply  the  omission 
of  the  legislature  in  carrying  out  the  directions  of  the  constitu- 
tion, and  this  it  was  held  they  had  no  power  to  do.  In  the 
Arkansas  case  the  tax  commission  refused  to  follow  the  direc- 
tions of  the  legislature,  because  they  were  advised  that  the  act 
was  in  conflict  with  the  constitution.  In  this  they  were  subse- 
quently sustained  for  the  reason  that  the  act  was  held  by  the 
court  to  be  unconstitutional.  There  was,  however,  no  conflict 
v/ith  the  law  declared  in  the  Indiana  case,  as  there  is  a  clear  dis- 
tinction between  the  power  to  declare  invalid  a  legislative  act, 
conflicting  with  a  prohibitory  constitutional  provision,  and  the 
authority  of  an  executive  board  to  supply  the  omission  of  the 
legislature  to  obey  the  direction  of  the  Constitution. 

On  the  question  of  the  right  of  the  Arkansas  board  to  pass 
upon  the  validity  of  the  legislative  act,  the  Supreme  Court 
said: 

"It  may  not  be  a  wise  thing,  as  a  rule,  for  subordinate  ex- 
ecutive or  ministerial  officers  to  undertake  to  pass  upon  the 
constitutionality  of  legislation  prescribing  their  duties,  and 
to  disregard  it,  if  in  their  judgment  it  is  invalid.  This  may  be 
a  hazardous  proceedng  to  themselves,  and  productive  of  great 
inconvenience  to  the  public ;  but  still  the  determination  of  the 
judicial  tribunals  can  alone  settle  the  legality  of  their  action. 
An  unconstitutional  act  is  not  law ;  it  binds  no  one,  and  pro- 
tects no  one."^ 


1  See  State  v.  Auditor,  47  La.  Ann.  1679  (1895),  where  the  right  of  ex- 
ecutive officers  to  pass  upon  the  constitutionality  of  a  law  is  denied. 


CHAPTER    XV. 

EQUAL  PROTECTION   OF   THE  LAWS. 

499.  Immediate  purpose  of  clause. 

500.  What  is  "the  equal  protection  of  the  laws"? 

501.  Equality  in   taxation    under   Fourteenth    Amendment. 

502.  Equality  and  efficiency  in  taxation  through  diversity  of  meth- 

ods. 

503.  Classification   for  taxation. 

504.  "Equal  protection  of  the  laws"  does  not  require  iron  rule  of 

equal   taxation. 

505.  The  equal   protection   of   the   laws   in   corporate   taxation. 

506.  Foreign  corporations  and   "equal   protection  of  the  laws." 

507.  Foreign    interstate   carriers   and    the   equal    protection    of   the 

laws. 

508.  Specification  of  railroads  is  reasonable  classification  for  tax- 

ation. 

509.  Special  methods  of  assessment  of  railroad  property  sustained. 

510.  Right  of  appeal  not  essential  to  "equal  protection  of  the  laws." 

511.  Exemption   of  producers  in  license  taxation. 

512.  Classification  in  taxation  and   in  police  legislation   compared. 

513.  DiflSculty  of  classification. 

514.  Inequality  of  burden  does  not  establish  invalidity  of  tax. 

515.  Equality  iand  uniformity  in  inheritance  taxation. 

516.  "Equal  protection  of  the  laws"  in  inheritance  taxation. 

517.  The  Supreme  Court  on  inheritance  taxation  and  equal  protec- 

tion of  the  laws. 

518.  Classification  by  amount  in  license  taxation. 

519.  Property  taxation   and   inheritance  taxation   distinguished. 

520.  Classification  by  exemption. 

521.  Exemption  for  efficiency  in  taxation. 

522.  Exemption   of  certain  Michigan  telephone  companies  valid. 

523.  Conditions  which   warrant  classification. 

524.  Constitutional   amendment   held   unconstitutional. 

525.  Department   Store  Tax  held   unconstitutional. 

526.  Taxation  of  employers  of  foreign-born  persons  held  invalid. 

527.  Discriminations  between  residents  and  non-residents. 

528.  Illegal   discrimination   in  license  taxation. 

529.  Street  railroads  and   equal   protection   of  the  laws. 

530.  The  Supreme  Court  on  classification  in  license  or  occupation 

taxation. 
(548) 


§    500         EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION. 


549 


531.  Discrimination   in  expenditure  of  public   funds. 

532.  Equal  protection  of  the  laws  in  tax  procedure. 

533.  Discrimination  between  races  in  expenditure  of  school  funds. 

534.  Federal  and  State  guaranties  of  equal  taxation. 

§  499.  Immediate  Purpose  of  Clause. — The  guaranty  in 
the  Fourteenth  Amendment  of  the  equal  protection  of  the  laws 
to  all  persons  within  the  jurisdiction  of  the  State  has  been  in- 
voked in  numerous  eases  of  alleged  discrimination,  not  only  in 
taxation,  but  also  in  the  exercise  of  the  police  power  of  the 
State. 

This  phrase,  unlike  the  historic  phrase  "due  process  of  law," 
was  novel  in  American  constitutional  law,  and  its  incorporation 
in  the  amendment,  as  shown  by  the  history  of  the  time,  was 
clearly  for  the  purpose  of  emphasizing  the  principle  of  equality 
of  civil  rights  for  the  benefit  of  the  newly  enfranchised  freed- 
men.  Attention  has  already  been  called  to  the  difference  in  the 
language  of  the  two  prohibitions.  The  State  must  not  deprive 
any  person  of  life,  liberty  or  property  without  due  process  of 
law,  but  the  equal  protection  of  the  laws  is  limited  to  persons 
ivithin  its  jurisdiction,  so  that  a  foreign  corporation,  not  admit- 
ted to  do  business  in  the  State  and  therefore  not  within  its  jur- 
isdiction, could  not  claim  the  protection  of  this  clause  in  the 
Fourteenth  Amendment.  The  purpose  of  this  provision  and  its 
application  to  discriminations  in  taxation  are  clearly  shown  in 
the  Act  of  Congress  already  referred  to,^  which,  was  enacted 
to  enforce  this  primary  purpose  of  the  amendment,  and  de- 
clares that  all  persons  Avithin  the  jurisdiction  of  the  United 
States  shall  have  equal  rights  with  white  citizens,  including 
equal  rights  in  taxation. 

§  500.    What  is  "the  Equal  Protection  of  the   Laws?"— 

The  Supreme  Court  has  declined  to  define  what  is  the  equal 
protection  of  the  laws.  Thus  it  was  said  in  holding  invalid  the 
anti-trast  law  of  Illinois  i^ 


iSec.  1977,  R.  S.  U.  S.,  supra,  Sec.  332. 

^Connolly  v.   Union    Sewer   Pipe  Co.,  184  U.  S.,  1.  c.  558,  46  L.  Ed. 
679  (1902),  affirming  99  Fed.  354. 


550  EQUAL   PROTECTION   OF   THE   LAWS   IN    TAXATION.         §    501 

"What  may  be  regarded  as  a  denial  of  the  equal  protection 
of  the  laws  is  a  question  not  always  easily  determined,  as  the 
decisions  of  this  court  and  of  the  highest  courts  of  the  States 
will  show.  It  is  sometimes  difficult  to  show  that  a  State  en- 
actment, having  its  source  in  a  power  not  controverted,  in- 
fringes rights  protected  by  the  National  Constitution.  No 
rule  can  be  formulated  that  will  cover  every  case.  But  upon 
this  general  question  we  have  said  that  the  guaranty  of  the 
equal  protection  of  the  laws  means  'that  no  person  or  class  of 
persons  shall  be  denied  the  same  protection  of  the  laws  which 
is  enjoyed  by  other  persons  or  other  classes  in  the  same  place 
and  in  like  circumstances.'  " 

•  The  court  in  this  and  in  other  cases  quoted  the  language  of 
Mr.  Justice  Field  upon  the  amendment  in  one  of  the  early 
cases,^  where  he  said  ''that  equal  protection  and  security  should 
be  given  to  all  under  like  circumstances  in  the  enjoyment  of 
their  personal  and  civil  rights,"  and,  "that  class  legislation, 
discriminating  against  some  and  favoring  others,  is  prohibited, 
but  legislation  which,  in  carrying  out  a  public  purpose,  is  lim- 
ited in  its  application,  if  within  the  sphere  of  its  operation  it 
affects  alike  all  persons  similarly  situated,  is  not  within  the 
amendment. ' ' 

§  501.  Equality  in  Taxation  Under  Fourteenth  Amend- 
ment.— The  guaranty  of  the  equal  protection  of  the  laAvs, 
therefore,  is  directed  against  arbitrary  discriminations  in  taxa- 
tion, and  in  this  sense  secures  equality  in  taxation.  In  this, 
however,  no  new  right  in  relation  to  taxation  is  created.  The 
power  to  tax  was  inherent  in  the  sovereignty  of  the  States  be- 
fore, as  it  has  been  since,  the  adoption  of  the  amendment.  In 
the  language  of  the  Supreme  Court,^  the  ' '  amendment  conferred 
no  new  and  additional  rights,  but  only  extended  the  protection 
of  the  Federal  Constitution  over  rights  of  life,  liberty,  and 
property  that  previously  existed  under  all  State  constitutions." 
The  guaranty  of  equal  protection  of  the  laws  therefore  protects 
the   citizen   against   arbitrary   discriminations    effected   by   the 


iBarbier  v.  Connolly,  113  U.  S.  27,  p.  31,  28  L.  Ed.  923   (1885). 
2  Mobile  &  Ohio  R.  Co.  v.  Tennessee,  153  U.  S.,  1.  c.  506,  38  L.  Ed. 
793    (1894). 


§    601         EQUAL   PROTECTION    OF   THE   LAWS   IN    TAXATION.  551 

State  in  the  exercise  of  its  power  of  taxation,  as  it  protects  him 
against  the  arbitrary  exercise  of  any  of  the  powers  of  govern- 
ment. 

Mr.  Justice  Miller  said  in  the  opinion  in  Davidson  v.  New 
Orleans/  in  reference  to  the  claim  that  plaintiff's  property  had 
previously  been  assessed  for  the  same  purpose  and  the  assess- 
ment paid,  "if  this  be  meant  to  deny  the  right  of  the  State  to 
tax  or  assess  property  twice  for  the  same  purpose,  we  know  of 
no  provision  in  the  Federal  Constitution  which  forbids  this,  or 
which  forbids  unequal  taxation  by  the  States."  This  must, 
however,  be  construed  with  reference  to  the  facts  of  the  case 
before  the  court,  which  involved  a  special  assessment  for  a  pub- 
lic improvement.2  The  claim  of  double  and  unequal  taxation 
was  apparently  based  upon  the  levy  of  this  tax  in  addition  to 
that  for  general  public  purposes  upon  complainant's  property 
with  other  property  of  the  State.  It  is  clear  that  the  equal  pro- 
tection of  the  laws  does  not  prevent  that  form  of  double  or  un- 
equal taxation. 

The  equality,  therefore,  which  is  protected  by  the  Fourteenth 
Amendment  is  that  which  is  inherent  in  taxation,  and  is  essen- 
tial to  a  valid  exercise  of  the  taxing  power.  There  should  be, 
not  only  a  public  purpose  pertaining  to  the  district  taxed,  but 
also  an  apportionment  by  the  legislative  power  levying  the  tax 
with  reference  to  a  uniform  standard.  If  contribution  is  not 
required  according  to  this  principle  of  apportionment,  equally 
and  uniformly  from  all  of  the  same  class  of  subjects  within 
that  jurisdiction,  it  is  not  a  tax,  but  an  arbitrary  exaction.  Uni- 
formity and  equality  in  this  sense,  like  a  public  purpose,^  are 
involved  in  the  very  conception  of  taxation.  These  fundamental 
principles  are  declared  by  many  of  the  State  constitutions,  some 
of  which  contain  also  the  provision  that  taxes  shall  be  levied 
for  a  public  purpose  only;  but  such  provisions  do  little  more 
than  state  in  precise  language  the  principles  of  constitutional 


1  See  Sec.  398. 

2Ch.  XIII,  supra. 

3  Loan  Assn.  v.  Topeka,  supra,  Sec.  377. 


552  EQUAL   PROTECTION    OF   THE    LAWS   IN   TAXATION.         §    503 

law  which,  whether  declared  or  not,  would  inhere  as  essential 
limitations  in  the  power  of  taxation.^ 

§  502.  Equality  and  EfiBciency  in  Taxation  Through  Di- 
versity of  Methods. — It  is  not,  however,  necessary  to  unifor- 
mity and  equality  in  this  fundamental  sense  that  all  the  sub- 
jects of  taxation  in  the  State  should  be  taxed  in  the  same  man- 
ner or  by  the  same  system  of  assessment.  This  would  obviously 
be  impossible,  as  the  taxing  power  extends  not  only  to  prop- 
erty, but  to  occupations  and  persons  within  the  State's  jurisdic- 
tion, and  the  same  rule  of  assessment  could  not  be  applied  to 
these  different  classes  of  subjects.  Even  as  to  property  taxation 
alone,  the  complicated  conditions  of  modern  industrial  civiliza- 
tion and  the  mobility  of  many  forms  of  personal  property  which 
effectually  elude  the  tax-gatherer,  require  special  adjustment 
of  taxing  systems  to  insure  even  an  approximation  to  equality 
in  the  distribution  of  public  burdens. 

The  general  property  tax,  that  is,  the  taxation  of  everything, 
tangible  and  intangible,  seen  and  unseen,  by  one  uniform  rule, 
is  the  natural  outgrowth  of  our  political  conditions,  but  has 
proven  inadequate  in  the  complexity  of  modern  conditions  and 
often  develops  grave  inequalities.  This  has  been  pointed  out 
by  an  eminent  economist,^  who  says  that  a  tex  which  aims  to  be 
equal  but  is  ineffectual,  produces  a  kind  of  inequality,  tending 
to  increase  as  time  goes  on,  and  worse  than  all  other  kinds ;  but 
that  a  tax  which  aims  to  be  effective,  even  in  apparent  disregard 
of  equality,  tends  by  a  constant  process  of  economic  adjust- 
ment to  be  more  and  more  equal. s 

§  503.  Classification  for  Taxation. — It  necessarily  follows 
therefore  that  special  forms  of  taxation  adjusted  to  different 
classes  of  property  are  found  essential  in  the  administration  of 
State  taxing  systems,  and,  in  the  absence  of  specific  constitu- 
tional restrictions  requiring  all  property  to  be  taxed  according 


1  Cooley  on   Constitutional  Limitations,  2d  Ed.,  p.   546. 

2  President   Hadley    of   Yale   University    in    Johnson's    Encyclopedia 
title  "Taxation." 

3  See  also  the  New  York  Tax  Commissioners'  Report  of  1871;   David 
A.  Wells'  "Theory  and  Practice  of  Taxation." 


§    503         EQUAL   PROTECTION   OF   THE   LAWS   IN   TAXATION.  553 

to  the  same  method  of  assessment,  are  consistent  with  the  funda- 
mental principles  of  equality  and  uniformity  inherent  in  taxa- 
tion. Thus  it  has  been  determined  that  the  right  to  levy  special 
assessments  for  public  improvements!  is  consistent  with  these 
principles,  provided  the  assessment  is  uniform  in  the  same  tax- 
ing district,  and  the  constitutional  requirement  in  many  State 
constitutions  that  taxes  upon  property  shall  be  in  proportion 
to  value  has  been  held  not  to  apply  to  other  forms  of  taxation, 
such  as  taxes  upon  business,  incomes  and  the  like,  provided  they 
are  uniform  upon  the  same  class  of  subjects.2  A  very  large 
discretion  therefore  is  necessarily  vested  in  the  legislature,  in 
order  that,  subject  to  the  requirements  of  the  State  constitution 
in  regard  to  selecting,  specializing  and  classifying  the  subjects 
of  taxation,  it  may  adjust  the  system  of  taxation  to  local  condi- 
tions, so  as  to  assure  the  nearest  approximation  to  equality. 
This  right  to  select,  specialize  and  classify  is  for  the  purpose  of 
best  securing  equality  in  taxation  through  the  efficiency  of  the 
system  adopted,  and  is  clearly  distinguished  in  its  very  nature 
from  discriminations  in  classification  which  are  made  for  the 
very  purpose  and  which  have  the  necessary  result  of  imposing 
upon  obnoxious  classes  a  burden  from  which  favored  classes 
are  relieved. 

The  right  to  specialize  and  classify  for  taxation  must  be  exer- 
cised subject  to  the  restrictions  in  the  State  constitution,  which 
in  many  cases  requires  all  property  to  be  taxed  according  to  a 
uniform  rate,  and  thus  precludes  the  subjection  of  any  prop- 
erty to  a  different  rate. 3    Under  such  constitutional  restrietions 


1  Supra,  Ch.  XIII. 

2  Glasgow  V.  Rowse,  43  Mo.  479  (1869). 

3  Thus  it  was  held  in  Oregon,  Ellis  v.  Frazier,  53  L.  R.  A.  454  (1901), 
that  the  imposition  of  a  specific  tax  of  $1.25  upon  each  bicycle  regardless 
of  value,  for  the  construction  of  bicycle  paths,  violated  a  constitu- 
tional requirement  that  the  rates  of  taxation  must  be  equal  and  uni- 
form. In  Smith  v.  County  Commissioners,  117  Ala.  196,  a  tax  of  one 
dollar  upon  each  road  wagon,  for  the  benefit  of  public  roads,  was  held 
to  violate  a  similar  constitutional  provision.  And  in  Pittsburgh,  etc., 
Railroad  Co.  r.  State,  49  Ohio  St.  189,  and  16  L.  R.  A.  380  (1892),  a  stat- 
ute requiring  railroads  to  pay  a  dollar  a  mile  for  each  mile  of  track  was 
held  invalid  under  the  State  Constitution. 


554  EQUAL   PROTECTION    OF   THE   LAWS   IN    TAXATION.         §    504 

it  may  become  important  to  determine  whether  a  tax  is  levied  as 
a  property  tax  or  as  a  license  tax  upon  the  business  conducted 
or  privilege  exercised.  If  a  property  tax,  it  must  be  levied, 
under  the  rule  of  uniformity,  according  to  the  rate  limited  by 
the  constitution;  while,  if  a  business  or  privilege  tax,  it  is  not 
subject  to  such  requii'ement,  though  it  must  be  uniform  upon 
all  of  the  same  class  of  subjects. i  The  equal  protection  of  the 
laws  guaranteed  by  the  Federal  constitution  has  of  course  no 
relation  to  such  specific  restrictions  in  State  constitutions.  It 
recognizes  the  right  to  specify  and  classify  whether  in  property 
or  business  taxation,  ^and  only  requires  that  the  classification 
be  on  a  reasonable  basis  and  that  the  tax  be  uniform  and  equal 
as  to  all  of  the  same  class.2 

§  504.  Equal  Protection  of  the  Laws  Does  Not  Require  Iron 
Rule  of  Equal  Taxation. — The  Supreme  Court  has  uniformly 
observed  the  distinction  between  the  equality  in  taxation,  which 
is  inherent  in  the  conception  of  a  tax,  and  that  which  is  en- 
forced by  the  requirement  that  everything  shall  be  taxed  in  the 
same  manner,  and  has  in  a  number  of  cases  affirmed  the  power 
of  the  State  to  make  reasonable  classifications  in  the  adjustment 
of  its  system  of  taxation  according  to  its  own  judgment  of  the 
public  needs.  The  leading  case  on  this  subject  is  Bell's  Gap 
Railroad  Co.  v.  Pennsylvania,3   wherein  the  court  affirmed  on 


iSee  State  ex  rel.  v.  Stephens,  146  Mo.  662  (1898). 

2  In  State  v.  Travelers'  Ins.  Co.,  73  Conn.  255,  there  being  no  pro- 
vision in  the  State  Constitution  restricting  the  legislative  power  of 
taxation,  the  court  denied  that  the  Constitution  of  the  United  States 
contains  any  provision,  express  or  implied,  requiring  taxation  to  be 
equal  and  uniform.  The  question  involved  was  as  to  the  validity  of 
the  classification  for  taxation  of  resident  and  non-resident  corpora- 
tion stockholders,  and  the  decision  was  affirmed  by  the  Supreme  Court, 
185  U.  S.  364,  46  L.  Ed.  949  (1902),  supra,  Sec.  460,  as  not  involving 
any  discrimination.  The  State  court  said  in  its  opinion  that  the  legis- 
lature could  not  make  any  exaction  it  pleased  under  the  form  of  a 
tax,  as  an  arbitrary  exaction  would  be  neither  taxation  nor  legisla- 
tion. "Such  guaranties  are  not  limitations  upon  the  power  of  taxa- 
tion, but  on  all  power." 

3134  U.  S.  233,  33  L.  Ed.  892    (1890). 


§    505         EQUAL   PROTECTION    OF   THE    LAWS   IN   TAXATION.  555 

motion  the  judgment  of  the  Supreme  Court  of  Pennsylvania. 
This  case  involved  the  validity  of  a  law  of  Pennsylvania,  sub- 
jecting all  moneyed  securities  to  a  tax  at  the  rate  of  three  mills 
on  the  dollar  of  their  actual  value,  except  bonds  and  other  se- 
curities issued  by  corporations,  which  were  taxed  at  three  mills 
on  the  dollar  of  their  nominal  or  par  value.  The  Supreme  Court, 
through  Mr.  Justice  Bradley,  declared  that  this  was  not  an  un- 
just discrimination.  The  presumption  is  that  corporate  securi- 
ties are  worth  their  face,  and  under  the  law  the  persons  who 
held  them  were  not  affected  by  the  tax  unless  they  received  the 
interest  from  which  the  tax  was  paid. 

The  court  said  that  the  provision  in  the  Fourteenth  Amend- 
ment that  no  State  shall  deny  to  any  person  within  its  jurisdic- 
tion the  equal  protection  of  the  laws  was  not  intended  to  com- 
pel the  State  to  adopt  an  iron  rule  of  equal  taxation,  or  to  pre- 
vent the  State  from  adjusting  its  system  of  taxation  in  all 
proper  and  reasonable  ways.  All  such  regulations  were  within 
the  discretion  of  the  State  legislature  and  of  the  people  of  the 
State  in  framing  their  constitution,  but  clear  and  hostile  demon- 
strations against  particular  persons  and  classes  especially  such  as 
are  of  an  unusual  character  unknown  to  the  practice  of  our 
governments  might  be  obnoxious  to  the  constitutional  provision. 
It  would  be  impracticable  and  unwise,  however,  to  attempt  to 
lay  down  any  definite  rule  or  definition  on  the  subject  that 
would  include  all  cases.  They  must  be  decided  as  they  arise. 
The  States  differed  materially  in  their  systems  of  taxation,  and 
it  would  have  worked  a  marked  revolution,  if  this  section  of  the 
Fourteenth  Amendment  had  been  construed  as  compelling  a 
cast  iron  rule  of  equal  taxation.  Doubtless  it  would  prohibit  a 
State  from  casting  the  sole  burden  of  taxation  upon  some  ob- 
noxious person  or  persons,  but  did  not  prevent  the  State  from 
exercising  its  judgment  as  to  the  property  to  be  taxed,  and  the 
mode  of  taxation  providing  that  all  property  similarly  situated 
was  treated  in  the  same  way. 

§  505.  The  Equal  Protection  of  the  Laws  in  Corporate  Tax- 
ation.— As  the  C(iual  protection  of  the  laws  allow  a  legit iinatc 
classification  in  the  exercise  of  the  power  of  taxation  as  distin- 


556  EQUAL   PROTECTION    OF   THE   LAWS   IN    TAXATION.  §    505 

gui'shed  from  arbitrary  selection,  as  it  has  been  repeatedly 
recognized  by  the  Supreme  Court,  a  State  is  not  precluded  from 
taxing,  apart  from  the  corporate  property,  the  franchise  of  or- 
ganizing and  doing  business  in  a  corporate  capacity.  It  is  for 
the  State  to  determine  how  such  a  tax  shall  be  levied.  Such  a 
classification  is  recognized  as  not  involving  double  taxation  in 
any  sense.  Such  a  corporate  franchise  tax  is  in  force  in  many 
States;  and  where  it  is  levied  without  discrimination  upon  all 
of  the  same  class,  it  is  consistent  with  the  equal  protection  of  the 
laws.^ 

The  Federal  Constitution  does  not  forbid  State  taxation  of 
the  franchise  of  a  domestic  coi'poration  at  a  different  rate  than 
is  assessed  upon  its  tangible  property  in  the  State. ^ 

This  right  to  levy  a  franchise  or  corporate  tax  may  include 
in  the  classification  subject  to  such  tax  not  only  domestic  cor- 
porations of  all  kinds,  but  also  foreign  corporations  that  are 
organized  under  the  laws  of  other  States,  who  do  business  in  the 
State  only  through  the  comity  of  the  State.  A  State  in  grant- 
ing the  privilege  of  doing  business  as  a  corporation  within  its 
limits  can  obviously  require  that  the  corporation  which  is  admit- 
ted shall  pay  the  franchise  corporate  tax,  which  is  exacted  of 
domestic  corporations.^  The  State  may  go  further  and  exact 
a  further  tax  from  a  foreign  corporation,  though  this  does  not 
mean  that  the  State  can  deny  any  contract  rights  secured  to  the 
corporation  by  its  admission,  nor  can  it  impose  a  tax  upon  the 
corporation's  rights  beyond  the  jurisdiction  of  the  State. 

Thus,  a  foreign  corporation  which  has  paid  all  the  local  taxes 
and  has  secured  a  leasehold  for  a  storeroom  in  a  State,  was  not 
denied  the  equal  protection  of  the  laws  by  exaction,  under  the 
authority  of  the  Massachusetts  statutes,  of  an  excise  tax  for  the 
privilege  of  doing  business  in  the  State,  although  it  was  claimed 
that  domestic  corporations  were  favored  by  this  form  of  taxa- 


1  There  is  one  exception  to  this  power  of  the  State  to  tax  the  cor- 
porate privilege,  and  that  is  it  cannot  tax  the  corporate  franchises 
of  Federal  corporations,  such  as  national  banks.     See  Sec.  285,  supra. 

2  Coulter  V.  L.  &  N.  R.  R.  Co.,  196  U.  S.  599,  49  L.  Ed.  615  (1905), 
reversing  131  Fed.  282. 

3  See  Ch.  V,  supra. 


§    506         EQUAL    PROTECTION    OF   THE   LAWS   IN   TAXATION. 


557 


tion.i  Ij^  l-lijs  case  the  excise  tax  was  imposed  by  taking  a  per- 
centage of  the  entire  authorized  capital  of  the  company,  and  the 
court  held  that  this  was  no  objection. 

There  is  no  denial  of  the  equal  protection  of  the  laws  in  the 
taxing  of  shares  of  foreign  corporations  when  owned  by  the  in- 
habitants of  the  State,  although  no  allowance  was  made,  as  in 
case  of  domestic  corporations  where  the  corporation  has  prop- 
erty taxed  within  the  State.^  It  seemed  that  the  Indiana  stat- 
utes taxed  all  shares  in  foreign  corporations,  except  national 
banks,  owned  by  inhabitants  of  the  State,  and  all  shares  in 
domestic  corporations,  when  the  property  of  such  corporation 
was  not  exempt  or  was  not  taxable  to  the  corporation  itself. 
The  court  said  that  this  was  consistent  with  substantial  equality. 

§  506.  Foreign  Corporations  and  "Equal  Protection  of  the 
Laws." — The  equal  protection  of  the  laws  is  not  denied  in  the 
imposition  by  a  State  of  terms  and  conditions  in  admitting  for- 
eign corporations  to  do  business  in  its  jurisdiction.  The  State 
has  a  right  to  classify  foreign  corporations  for  purposes  of 
taxation  as  a  condition  of  doing  business  in  the  State  provided 
no  contract  rights  are  violated  and  the  taxation  is  equal  upon 
all  of  the  same  class.^ 

This  power  of  the  State,  however,  is  subject  to  qualification 
in  the  case  of  interstate  carriers  as  to  their  right  to  invoke  the 
equal  protection  of  the  laws,  where  it  has  been  held 
that  the  equal  protection  of  the  laws  may  forbid  any 
discrimination  between  foreign  and  domestic  companies  in 
the  imposition  of  franchise  taxes  when  they  are  carrying  on  a 
precisely  similar  business.  The  right  to  invoke  the  equal  pro- 
tection of  the  laws  in  such  case  is  really  based  upon  the  inter- 
ference with  interstate  commerce,  which  is  involved  in  such  dis- 
crimination.* 


1  Baltic  Mining  Co.  v.  Massachusetts,  231  U.  S.  68,  58  L.  Ed.  127 
(1913). 

u  Darnell  v.  Indiana,  226  U.  S.  390,  57  L.  Ed.  267  (1912),  affirming 
174  Ind.  143. 

3  Sees.  180,  199,  supra. 

♦  Sees.  254,    supra. 


558  EQUAL    PROTECTION    OP    THE   LAWS   IN   TAXATION.  §    507 

Subject  to  this  qualification  wherein  precisely  similar  condi- 
tions prevail  in  the  case  of  corporations  engaged  in  interstate 
commerce,  the  classification  of  foreign  corporations  for  special 
taxation  imposed  as  a  condition  for  doing  business  in  the  State 
involves  no  denial  of  the  equal  protection  of  the  laws. 

There  is,  however,  a  distinction  between  the  power  of  the 
State  to  exclude  a  foreign  corporation  not  engaged  in  interstate 
commerce  and  to  impose  special  and  peculiar  taxation  upon  such 
corporations  upon  the  condition  to  do  business  in  the  State,  and 
the  imposing  of  such  taxation  upon  such  corporations  after  they 
have  been  admitted  to  the  State  and  have  lawfully  acquired 
valuable  property  interests  therein. i 

The  classification  of  foreign  corporations  and  the  levy  of  a 
franchise  tax  as  a  condition  of  doing  business  in  the  State  does 
not  of  itself  constitute  double  taxation  and  involves  no  denial 
of  the  equal  protection  of  the  laws,  if  there  is  a  reasonable  and 
sufficient  basis  whereon  the  classification  rests. 2 

§  507.  Foreign  Interstate  Carriers  and  the  Equal  Protec- 
tion of  the  Laws. — Though  the  power  of  the  State  over  foreign 
corporations  is  not  limited  in  the  case  of  ordinary  business  cor- 
porations by  that  exercised  over  domestic  corporations  of  the 
same  class,  it  is  also  true  that  an  interstate  earner  who  comes 
Into  the  State  in  compliance  with  the  laws  of  the  State  and  ac- 
quires therein  property  of  a  fixed  and  permanent  nature  on 
which  it  conducts  the  business  of  interstate  commerce,  is  a  per- 
son within  the  jurisdiction  of  the  State,  and,  as  such,  is  pro- 
tected under  the  equal  protection  of  the  laws  against  discrim- 
inating taxation  When  no  such  tax  is  imposed  upon  domestic 
corporations  of  the  same  class  carrying  on  a  precisely  similar 
business. 

This  was  forcibly  illustrated  in  a  case  from  Alabama,  where 


1  Supra,  Sec.  182. 

2  Ohio  Tax  Cases,  Sec.  254,  supra.  As  to  the  subject  of  corporate 
classification,  see  Home  Ins.  Co.  v.  New  York,  134  U.  S.  594,  33  L.  Ed. 
1025  (1890);  Philadelphia  Fire  Ins.  Co.  v.  New  York,  119  U.  S.  110, 
30  L.  Ed.  342  (1886);  Manchester  Ins.  Co.  v.  Herriott,  91  Fed.  711 
(1899.) 


§    507         EQUAL   PROTECTION   OF   THE   LAWS   IN   TAXATION.  559 

the  railway  corporation  had  come  into  the  State  in  compliance 
with  its  laws,  and  acquired  property  of  a  fixed  and  permanent 
nature ;  and  the  Supreme  Court  held  that  the  imposition  of  an 
additional  franchise  tax,  that  is,  in  addition  to  the  regular 
property  tax,  for  the  privilege  of  doing  business  within  the 
State,  where  no  such  tax  was  imposed  upon  domestic  corpora- 
tions conducting  a  similar  business,  was  violative  of  the  equal 
protection  of  the  laws.  The  court  said  arbitrary  selection  could 
not  be  justified  by  calling  it  classification. 

Fi^rther  referring  to  the  fact  that  domestic  railroad  corpora- 
tions were  carrying  on  the  same  business,  the  court  said : 

"It  w^ould  be  a  fanciful  distinction  to  say  that  there  is  any 
real  difference  in  the  burden  imposed  because  the  one  is  taxed 
for  the  privilege  of  a  foreign  corporation  to  do  business  in  the 
State,  and  the  other  for  the  right  to  be  a  corporation.  The  fact 
is  that  both  corporations  do  the  same  business  in  character  and 
kind,  and  under  the  statute  in  question  a  foreign  corporation 
may  be  taxed  many  thousands  of  dollars  for  the  privilege  of 
doing,  within  the  State,  exactly  the  same  business  as  the  do- 
mestic corporation  is  permitted  to  do  by  a  tax  upon  its  privi- 
lege, amounting  to  only  a  few  hundred  dollars.  We  hold,  there- 
fore, that  to  tax  the  foreign  corporation  ior  carrying  on  busi- 
ness under  the  circumstances  shown,  by  a  different  and  much 
more  onerous  rule  that  is  used  in  taxing  domestic  corporations 
for  the  same  privilege,  is  a  denial  of  the  equal  protection  of  the 
laws,  and  the  plaintiff  being  in  position  to  invoke  the  protec- 
tion of  the  Fourteenth  Amendment,  that  such  attempted  taxa- 
tion under  a  statute  of  the  State  does  violence  to  the  Federal 
Constitution."^ 

The  classification  in  this  ease,  therefore,  failed  because  it  did 
not  include  others  in  similar  conditions.  Had  all  corporations, 
or  even   all  railroad   corporations  been   included   in  the   same 


1  Southern  R.  R.  Co.  v.  Green,  216  U.  S.  400,  54  L.  Ed.  536  (1910), 
reversing  160  Ala.  396.  See  also  Meyer  v.  Wells  Fargo  Co.,  223  U.  S. 
297,  56  L.  Ed.  445  (1912),  as  to  law  of  Oklahoma.  Also',  as  to  law  of 
Colorado,  see  Atch.,  etc.,  R.  Co.  v.  O'Connor,  223  U.  S.  280,  56  L.  Ed. 
436  (1912);  and  also  as  to  law  of  South  Dakota,  see  Johnson  v.  Wells 
Fargo  Co.,  239  U.  S.  234,  60  L.  Ed.  62  (1916),  affirming  214  Fed.  180. 
See  also  supra.  Sec.  199,  and  also  infra.  Sec.  510. 


560  EQUAL   PROTECTION    OF    THE   LAWS   IN    TAXATION.         §    508 

classification,  it  would  doubtless  have  been  sustained,  as  will  be 
seen  in  the  cases  cited. 

§  508.  Specification  of  Railroads  is  Reasonable  Classifica- 
tion for  Taxation. — This  principle  of  classification  has  been  ap- 
plied to  railroads  by  the  Supreme  Court  in  a  number  of  cases, 
and  the  power  of  the  States  to  specify  railroads  as  a  class  for 
taxation  has  been  upheld.  This  was  declared  in  a  decision  sus- 
taining a  sitatute  of  Florida,^  whereby  a  reassessment  of  rail- 
roads was  ordered  for  certain  years  in  which  taxes  had  not  been 
paid,  while  no  provision  was  made  in  regard  to  reassessment 
of  other  property  which  had  been  under-assessed  during  the 
same  period.  The  court  said  that  taxes  are  not  debts  in  the 
ordinary  sense  of  the  term. 

If  the  State  had  deemed  it  necessary  to  encourage  the  build- 
ing of  railroads,  it  would  have  had  the  power  to  exempt  their 
property;  and,  conversely,  the  State  might  have  subjected  rail- 
roads to  taxation  while  exempting  some  other  classes  of  prop- 
erty. Since  it  had  this  power  to  classify  in  the  first  instance,  it 
had  the  same  power  as  to  property,  which  in  past  years  had  es- 
caped taxation.  Classification  is  a  matter  of  State  policy  to  be 
determined  by  the  State,  and  the  Federal  government  is  not 
charged  with  the  duty  of  supervising  the  State's  action.  It 
might  have  been  found  that  the  railroad  delinquent  tax  was 
large  and  that  on  the  other  property  was  small,  not  worth  the 
trouble  of  special  provision  therefor.     The  court  added : 

"If  taxes  are  to  be  regarded  as  mere  debts,  then  the  effort  of 
the  State  to  collect  from  one  debtor  is  not  prejudiced  by  its 
failure  to  make  like  effort  to  collect  from  another.  And  if  re- 
garded in  the  truer  light  as  a  contribution  to  the  support  of 
government,  then  it  does  not  lie  in  the  mouth  of  one  called 
upon  to  make  his  contribution  to  complain  that  some  other  per- 
son has  not  been  coerced  into  a  like  contribution.  "2 


1  Florida  Central  &  P.  R.  Co.  v.  Reynolds,  183  U.  S.  471,  46  L.  Ed. 
283   (1902),  affirming  28  Sou.  Rep.  861. 

2  Justice  Brown  dissented,  saying  that  he  did  not  think  that  a  par- 
ticular species  of  property  could  be  arbitrarily  taken  and  subjected 
to  a  specific  tax  for  a  series  of  years  on  the  ground  that  the  State 


§    509         EQUAL    PROTECTION   OF   THE   LAWS   IN   TAXATION.  561 

§  509.  Special  Methods  of  Assessment  of  Railroad  Prop- 
erty Sustained. — The  law-making  power  determines  all  ques- 
tions of  discretion  or  policy  in  ordering,  assessing  and  collecting 
taxes,  and  determining  the  necessary  rules  and  regulations.  The 
mere  fact  that  a  special  procedure  is  provided  for  the  taxation 
of  a  certain  class  of  property,  different  from  that  provided  for 
another  class  or  from  the  general  procedure  in  taxation,  will 
not  make  the  act  providing  such  special  procedure  invalid.  These 
are  matters  of  detail,  within  the  legislative  discretion.^ 

The  power  to  classify  property  for  taxation  on  any  reasonable 
basis  includes  also  the  power  to  provide  special  methods  of  as- 
sessment for  the  different  classes.  Thus  a  statute  of  a  State 
assessing  railroad  property,  which  requires  the  company  to  re- 
turn the  length  of  the  road  within  and  without  the  State,  values 
the  property  within  as  an  entirety,  and  distributes  to  each 
county  and  city  along  the  line  its  mileage  proportion,  is  valid. 
The  court  said,^  that  there  was  no  merit  in  the  objection  that 
the  defendants  were  denied  the  equal  protection  of  the  laws. 
The  Constitution  does  not  forbid  the  classification  of  property 
for  the  purposes  of  taxation  and  the  valuation  of  different 
classes  by  different  methods.  The  fact  that  the  legislature  had 
chosen  to  call  a  railroad,  for  the  purposes  of  taxation,  real  es- 
tate' did  not  identify  it  mth  farming  lands  and  town  lots  in 
such  a  sense,  as  to  require  the  employment  of  the  same  methods 
and  machinery  of  the  law  to  ascertain  the  value  for  t-axation. 

In  a  later  case,^  the  court  sustained  a  statute  of  the  State  of 
Georgia,  which  enacted  a  system  of  taxing  railroads,  whereby 
the  rolling  stock  and  other  unlocated  personal  property  of  the 
railways  was  distributed  for  taxation  purposes  to  and  for  the 
benefit  of  the  counties  traversed  by  the  railroad.  The  argument 
was  advanced  that  this  was  an  unjust  discrimination,  because 


officers  had  neglected  their  duty,  and  added  that  this  kind  of  dis- 
crimination seems  to  be  measured  only  by  the  rapacity  of  the  legis- 
lature. 

1  Thomas  v.  Gay,  169  U.  S.  283,  42  L.  Ed.  740   (1898). 

2  Kentucky  Railroad  Tax  Cases,  115  U.  S.  321,  supra. 

■1  Columbus  Southern  R.  Co.  v.  Wright,  151  U.  S.  470,  38  L.  Ed.  238 
(1894).  affirming  89  Ga.  574. 


562  EQUAL    PROTECTION    OP    THE   LAWS   IN    TAXATION.  §    509 

other  personal  property,  both  tangible  and  intangible,  was  taxed 
in  and  by  the  county  where  the  owner  resided.  There  was  in 
this  no  violation  of  the  Federal  Constitution,  the  court  said, 
adding,  1.  c.  p.  478: 

*'This  is  hardly  an  open  question.  Various  modes  of  taxing 
railroad  property  are  adopted  by  the  different  States.  In 
some,  railroad  companies  are  taxed  upon  their  property  as  a 
unit.  In  others,  the  road  and  the  property  in  each  county  are 
separately  assessed,  and  in  still  others,  the  whole  road  is  as- 
sessed, and  then  the  assessment  apportioned  among  the  several 
counties  and  towns.  These  and  all  similar  modes  of  taxation 
are  subject  to  the  legislative  discretion  of  the  respective  States, 
and  do  not  ordinarily  present  any  Federal  question  whatever. 
But  the  mode  of  distribution  of  the  unlocated  or  transitory  per- 
sonal property  is  a  matter  of  regulation  by  the  State  legisla- 
ture, which  in  no  way  involves  a  violation  of  the  Fourteenth 
Amendment. ' ' 

The  court  declared  that  it  was  clearly  within  the  province  of 
the  legislature  of  Georgia  to  give  such  property  a  different 
situs  for  taxation  from  that  of  the  company's  principal  office. 

The  Supreme  Court  also  sustained  an  act  of  South  Carolina 
assessing  against  a  railroad  its  proportion  of  the  salary  and  ex- 
penses of  the  railroad  commissioners  of  the  State,  under  the 
provisions  of  the  general  railroad  law  thereof.^  There  was  no 
denial  of  the  equal  protection  of  the  laws,  although  the  railroads 
in  addition  to  this  burden  imposed  upon  them  alone,  were  also 
taxed  equally  with  other  property.  They  received  special  privi- 
leges from  the  State,  their  business  was  affected  with  a  public 
use,  and  they  were  properly  charged,  in  the  legislative  discre- 
tion, with  their  share  of  the  expenses  incurred  by  the  State  in 
connection  with  their  business. 

This  raling  was  reaffirmed  in  sustaining  the  Arkansas  fran- 
chise tax  law  of  1911.2     This  franchise  tax  was  a  specified  per- 


1  Charlotte  Railroad  Co.  v.  Gibbes,  142  U.  S.  386,  35  L.  Ed.  1051 
(1892). 

2  St.  L.  &  S.  W.  R.  Co.  V.  Arkansas,  ex  rel.,  235  U.  S.  350,  59  L.  Ed. 
265  (1914),  affirming  106  Ark.  321.  The  court  said  that  the  forfeiture 
clause  of  the  act,  in  the  absence  of  any  State  decisions  to  the  con- 


§    510         EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.  563 

centage  of  the  outstanding  capital  stock  of  the  corporation  rep- 
resented by  property  owned  and  used  in  business  transacted  in 
the  State.  The  court  said  that  as  long  as  there  was  no  discrim- 
ination in  favor  of  domestic  corporations,  the  classification 
adopted  was  not  unreasonable  and  there  was  no  denial  of  the 
equal  protection  of  the  laws.  It  was  no  objection  to 
this  tax  that  the.  property  was  subject  to  the  general  prop- 
erty tax,  as  long  as  there  was  no  discrimination  in  favor  of  do- 
mestic corporations.  The  decision  in  C.  C.  C.  &  St.  L.  v. 
Backus,!  did  not  mean  as  contended,  that  because  of  the  Four- 
teenth Amendment  the  State  may  not  in  addition  to  the  imposi- 
tion of  an  ordinary  property  tax  upon  an  interstate  carrier  im- 
pose a  franchise  tax  ascertained  by  reference  to  the  property  of 
the  corporation  within  the  State,  including  that  employed  in 
interstate  commerce.  It  was  permissible,  said  the  court,  to 
value  the  property  and  what  it  was  worth  in  view  of  its  use 
in  interstate  commerce,  as  long  as  no  added  burden  was  im- 
posed as  a  condition  of  the  use. 

§  510.  Right  of  Appeal  Not  Essential  to  "Equal  Protection 
of  the  Laws." — While  due  process  of  law  requires  that  there 
shall  be  opportunity  for  hearing  at  some  stage  in  the  valuation 
of  the  property,2  a  right  of  appeal  is  not  necessary,  nor  is  there 
any  denial  of  the  equal  protection  of  the  laws  because  an  ap- 
peal with  a  second  hearing  is  permitted  to  one  class  of  tax- 
payers while  not  allowed  to  another. 

Thus  it  was  said  by  the  Supreme  Court  in  the  Indiana  rail- 
road oases  :3 

"Equally  fallacious  is  the  contention  that,  because  to  the 
ordinary  taxpayer  there  is  allowed  not  merely  one  hearing  be- 
fore the  county  officials,  but  also  a  right  of  appeal  with  a  sec- 
ond hearing  before  the  State  board,  while  only  the  one  hearing 

trary,  would  be  held  as  applicable  only  to  the  privilege  of  doing  an 
intrastate  business  and  also  be  held  as  separable  from  the  other  pro- 
Tisions  of  the  act. 

i.  Supra,  Sec.  263. 

2  See  supra.  Sec.  343. 

8  See  supra.  Sec.  346. 


564  EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.         §    511 

before  the  latter  board  is  given  to  railroad  companies  in  respect 
to  their  property,  therefore  the  latter  are  denied  the  equal  pro- 
tection of  the  laws.  If  a  single  hearing  is  not  due  process, 
doubling  it  will  not  make  it  so;  and  the  power  of  a  State  to 
make  classifications  in  judicial  or  administrative  proceedings 
carries  with  it  the  right  to  make  such  a  classification,  as  will 
give  to  parties  belonging  to  one  class  tFO  hearings  before  their 
rights  are  finally  determined,  and  to  parties  belonging  to  a  dif- 
ferent class  only  a  single  hearing.  Prior  to  the  passage  of  the 
Court  of  Appeals  act  by  Congress,  in  1891,  a  litigant  in  the  Cir- 
cuit Court,  if  the  amount  in  dispute  was  less  than  $5,000,  was 
given  but  a  single  trial  and  in  that  court,  while  if  the  amount 
in  dispute  was  over  that  sum  the  defeated  party  had  a  right  to 
a  second  hearing  and  in  this  court.  Did  it  ever  enter  into  the 
thought  of  any  one  that  such  classification  carried  with  it  any 
denial  of  due  process  of  law?"^ 

On  the  other  hand,  there  is  no  denial  of  the  equal  protection 
of  the  laws  in  the  fact  that  the  law  gives  the  assessors  in  cases 
of  corpora;tions  two  chances  to  arrive  at  the  correct  valuation  of 
real  estate,  when  they  have  but  one  in  the  case  of  individuals.^ 

§  511.    Exemption  of  Producers  in  License  Taxation. — The 

principle  of  classification  in  taxation  was  applied  by  the  court 
to  an  aot  of  Louisiana  imposing  a  license  tax  of  $3,500  on  the 
business  of  refining  sugar  and  molasses,  and  exempting  planters 
and  farmers  refining  these  products  for  themselves.  The  court, 
sustaining  the  Supreme  Court  of  Louisiana,  held  that  this  dis- 
crimination did  not  violate  the  Fourteenth  Amendment.^ 

It  said  that  on  the  question  whether  the  sugar  company  was  a 
manufacturer,  within  the  meaning  of  the  Louisiana  constitu- 
tion, it  was  bound  by  the  decision  of  the  Louisiana  court,  but 
that  it  might  properly  consider  whether  the  company  Avas  de- 
nied the  equal  protection  of  the  laws. 

On  the  question  whether  the  sugar  company  was  a  manu- 


1 154  U.  S.,  p.  427,  supra. 

2  New  York  v.  Barker,  179  U.  S.  279,  45  L.  Ed.  190  (1900),  afflrming 
158  N.  Y.  709. 

3  American  Sugar  Refining  Co.  Louisiana,  179  U.  S.  89,  45  L.  Ed. 
102  (1900),  affirming  51  La.  Ann.  563.  Justice  Harlan  concurred  in 
the  result. 


§    512         EQUAL    PROTECTION    OF    THE   LAWS   IN   TAXATION.  565 

facturer  within  the  meaning  of  the  Louisiana  constitution,  the 
decision  of  the  Louisiana  court  was  conclusive,  and  on  the 
further  question  whether  there  was  a  violation  of  the  equal 
protection  of  the  laws,  the  court  said  that  there  was  an  un- 
doubted discrimination  in  favor  of  a  certain  class  of  refiners, 
but  it  was  none  the  less  valid  if  it  rested  upon  a  reasonable  dis- 
tinction upon  principle.  The  court  said  that  a  different  ques- 
tion might  arise,  if  the  act  was  one  exempting  planters  who  used 
their  sugar  in  other  articles  of  manufacture,  while  other  manu- 
facturers of  such  articles  were  subjected  to  a  tax,  that  is,  where 
none  of  the  articles  manufactured  were  the  natural  products 
of  the  farm.  Refined  sugar,  however,  was  the  natural  and  ul- 
timate product  of  the  cane,  and  the  various  steps  taken  to  per- 
fect the  product  are  but  incident  to  the  original  growth. 

The  court  said  that  similar  discriminations  in  Acts  of  Con- 
gress had  been  sustained,  and  that  the  one  in  question  was 
obviously  intended  as  an  encouragement  to  agriculture  and  did 
not  deny  to  persons  and  corporations  engaged  in  the  general  re- 
fining business  the  equal  protection  of  the  laws. 

§  512.  Classification  in  Taxation  and  in  Police  Legislation 
Compared. — In  the  case  last  cited  the  court  sustained  the  right 
of  the  State  to  discriminate  in  taxation  by  exempting  a  certain 
class  of  producers,  for  the  reason  that  the  exemption  was  not 
pure  favoritism,  but  was  based  upon  legitimate  considerations 
of  public  policy.  The  question  is  thus  left  open  for-  determina- 
tion, in  every  ease  of  classification  for  taxation,  whether  the 
discrimination  is  arbitrary  and  oppressive,  or  natural  and  rea- 
sonable. This  decision  sustaining  the  Louisiana  tax  was  strongly 
urged  at  the  following  term  in  defense  of  the  anti-trust  law  of 
Illinois.^  The  court,  however,  held  the  law  invalid  on  the 
ground  that  agricultural  products  or  live  stock  in  the  hands  of 
the  producer  or  raiser  were  exempted  from  the  operation  of  the 
statute,  which  prohibited  the  recovery  of  the  price  of  the  ar- 
ticle sold  by  any  trust  or  combination  formed  in  restraint  of 
trade  or  competition  in  violation  of  the  act.     This  diserimina- 


1  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  540,  supra. 


566  EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.         §    513 

tion  was  held  to  be  a  denial  of  the  equal  protection  of  the  laws; 
and,  answering  the  argument  that  the  ease  was  controlled  by 
the  decision  in  the  case  last  cited  and  that  of  Bell's  Giap  R.  Co. 
V.  Pennsylvania,  supra,  Sec.  504,  the  court  said : 

' '  There  was  no  conflict  in  the  cases.  There  was  a  distinction 
between  tax  laws  and  laws  enacted  in  the  exercise  of  the  po- 
lice power.  It  was  one  thing  to  exercise  the  power  of  taxation 
so  as  to  meet  the  expense  of  the  goverimient,  at  the  same  time 
indirectly  building  up  the  protection  of  particular  interests,  and 
quite  a  different  thing  to  discriminate  in  the  exercise  of  the 
police  power  b}^  declaring  that  certain  classes  should  be  ex- 
empt from  the  general  operation  of  criminal  statutes.  The 
court  said  further  that  it  did  not  mean  to  concede  that  the  de- 
nial of  the  equal  protection  of  the  laws  could  never  arise  under 
the  taxing  statutes  of  the  State.  On  the  contrary,  the  power  to 
tax  is  so  far  limited  that  it  cannot  be  used  to  destroy  rights 
thereof  given  or  secured  by  the  supreme  law  of  the  land.  It 
only  meant  to  say  that  the  constitutional  validity  of  the  Illi- 
nois statute  involved  was  not  necessarily  to  be  determined  by 
the  same  principle  that  applied  to  tax  laws." 

§  513.  The  Difficulty  of  Classification.  —  The  difficulty  in 
drawing  the  line  between  reasonable  and  unreasonable  classi- 
fication is  illustrated  by  two  decisions  of  the  Supreme  Court, 
one  holding  void  and  the  other  holding  valid  under  the  guar- 
anty of  equal  protection  of  the  laws  legislation  of  different 
States  concerning  the  taxation  of  attorney's  fees  as  costs  in 
certain  railroad  cases,  neither  involving  a  case  of  taxation 
proper.  In  the  one  case  an  act  of  the  State  of  Texas  requiring 
railroad  companies  in  all  cases  of  claims  under  $50.00  to  pay 
an  attorney's  fee  of  not  exceeding  $10.00  to  the  successful  plain- 
tiff provided  the  suit  was  brought  30  days  after  the  refusal  of 
the  company  to  pay  the  claim. ^ 


iGulf  C.  &  S.  F.  R.  Co.  V.  Ellis,  165  U.  S.  150,  41  L.  Ed.  666  (1897), 
reversing  87  Tex.  19.  Chief  Justice  Fuller  and  Justices  Gray  and 
White  dissenting,  saying  that  costs  in  civil  actions  at  law  are  the 
creature  of  statute;  and  that  there  was  a  reasonable  basis  for  the 
classification,  as  railroads  might  vexatiously  refuse  to  pay  such  claims. 
As  to  the  regret  expressed  in  the  opinion  that  the  court  was  not 
favored  with  a  brief  from  the  claimant,   that  is,  the  plaintiff  below. 


§    513         EQUAL   PROTECTION    OF    THE   LAWS   IN    TAXATION.  567 

The  court  said  this  wels  an  arbitrary  selection  and  there  was 
no  reasonable  ground  to  call  it  a  classification. 

In  the  other  case  a  statute  of  Kansas  providing  that  in  all 
actions  brought  for  damages  caused  by  fire  from  the  operation 
of  a  railroad,  the  court  should  allow  the  plaintiff  on  recover}-  a 
reasonable  attorney's  fee  which  should  become  a  part  of  the 
judgment.  1  Justice  Brewer,  who  rendered  the  opinion  of  the 
court  in  the  Ellis  case,  supra,  also  wrote  this  opinion  holding 
that  there  was  a  reasonable  basis  for  this  legislation  which  fact 
distinguished  it  from  the  Texas  statute.  There  was  a  peculiar 
danger  of  fire  from  the  running  of  a  railroad  train  especially 
in  the  prairie  State  like  Kansas,  so  the  classification  rested  upon 
a  reasonable  basis,  the  court  saying : 

"Many  cases  have  been  before  this  court,  involving  the 
power  of  State  legislatures  to  impose  special  duties  or  liabili- 
ties upon  individuals  and  corporations,  or  classes  of  them,  and 
while  the  principles  of  separation  between  those  cases  which 
have  been  adjudged  to  be  within  the  power  of  the  legislature 
and  those  beyond  its  poAver,  are  not  difficult  of  comprehension 
or  statement,  yet  their  application  often  becomes  very  trouble- 
some, especially  when  a  case  is  near  to  the  dividing  line.  It  is 
easy  to  distinguish  between  the  full  light  of  day  and  the  dark- 
ness of  midnight,  but  often  very  difficult  to  determine  whether 
a  given  moment  in  the  twilight  hour  is  before  or  after  that  in 
which  the  light  predominates  over  the  darkness.  The  equal 
protection  of  the  law  which  is  guaranteed  by  the  Fourteenth 
Amendment  does  not  forbid  classification.  That  has  been  as- 
serted in  the  strongest  language.  "^ 


the  dissent  said:  "It  is  hardly  surprising  that  the  owner  of  a  claim 
for  fifty  dollars  only,  having  been  compelled  to  follow  up  through  all 
the  courts  of  the  State  the  contest  over  this  ten-dollar  fee,  should  at 
last  have  become  discouraged  and  unwilling  to  undergo  the  expense 
of  employing  counsel  to  maintain  his  rights  before  this  court."  In 
Louisiana  Liquidation  Commissioners  v.  Marrero,  106  La.  130  (1901),  a 
provision  allowing  an  attorney's  fee  to  the  attorney  for  the  tax-gatherer, 
to  be  paid  by  the  unsuccessful  tax  resistant,  was  held  not  violative 
of  the  equality  clause  of  the  Fourteenth   Amendment. 

1  Railroad  Co.  v.  Mathews,  174  U.  S.  96.  43  L.  Ed.  909  (1899),  affirm- 
ing 58  Kan.  447,  Justices  Harlan,  Peckham  and  McKenna  dissenting. 

2  Justice   Harlan,   with    whom   concurred   Justices   Brown,   Peckham 
and   McKenna,   dissented,   saying   that   the   case   could   not   be  distin- 


568  EQUAL   PROTECTION    OF    THE   LAWS   IN   TAXATION.         §    514 

§  514.  Inequality  of  Burden  Does  Not  Establish  Invalidity 
of  Tax. — The  inequality  of  burden  resulting  from  the  enforce- 
ment of  a  tax  does  not  necessarily  establish  that  the  tax  itself 
is  unequal  and  a  denial  of  the  equal  protection  of  the  laws. 
Thus  an  act  of  Pennsylvania  allowing  banks  to  collect  from 
their  stockholders  and  pay  eight  mills  upon  the  dollar  of  the 
par  value  in  lieu  of  all  other  taxes,  instead  of  being  subject  to 
the  ordinarj^  rate  of  four  mills  upon  the  actual  value  of  the 
stock  and  surplus,  was  sustained.^  The  Supreme  Court  said 
that  there  was  no  discrimination  and  therefore  no  denial  of  the 
equal  protection  of  the  laws,  as  the  right  of  election  was  offered 
all  banks,  State  and  national,  and  that  a  State  has  the  right  to 
exempt  certain  corporations  from  all  taxation,  and  the  indirect 
result  that  other  property  has  to  pay  a  larger  per  cent  does 
not  invalidate  the  tax  on  it  or  give  any  right  to  challenge  the 
law,  as  obnoxious  to  the  pro^dsions  of  the  Federal  Constitution. 
In  this  case  the  inequality  of  the  result  came  from  the  election 
of  certain  taxpayers  to  avail  themselves  of  privileges  offered 
to  all,  and  the  case  was  therefore  analogous  to  that  incidental 
inequality  resulting  from  taxpayers  availing  themselves  of  the 
discount  offered  for  payment  before  a  specified  time.  The  court 
quoted  approvingly^  the  language  of  the  Supreme  Court  of  Peim- 
sylvania:  ''the  argument  is  that  inequality  of  burden  estab- 
lishes the  unconstitutionality  of  the  law  under  which  the  tax 


guished  from  the  Ellis  case,  and  adding  at  page  111:  "I  am  not  astute 
enough  to  perceive  that  the  Kansas  statute  is  consistent  with  the 
Fourteenth  Amendment,  if  the  Texas  statute  is  unconstitutional." 
He  concluded:  "In  my  opinion  the  statute  of  Kansas  denies  to  a 
litigant  upon  whom  no  duty  has  been  imposed  by  statute  and  whose 
liability  for  wrongs  done  by  it  depends  upon  general  principles  of 
law  applicable  to  all  alike,  that  equality  of  right  given  by  the  law 
of  the  land  to  all  suitors,  and  consequently  it  should  be  adjudged  to 
deny  the  equal  protection  of  the  laws."  In  Iowa  Life  Ins.  Co.  v. 
Lewis,  187  U.  S.  335,  47  L.  Ed.  204  (1902),  the  Texas  statute  author- 
izing a  recovery  of  damages  and  attorney's  fees  for  failure  of  life 
and  health  insurance  companies  to  pay  losses  was  held  not  repugnant 
to  the  equal  protection  of  the  laws. 

iMerchants'   Bank  v.    Pennsylvania,    167   U.    S.    461,    42   L.    Ed.    236 
(1897),  affirming  168  Pa.  309. 


§    515         EQUAL    PROTECTION    OF    THE   LAWS   IN   TAXATION.  569 

is  levied.  If  the  validity  of  our  tax  laws  depends  upon  their 
ability  to  stand  successfully  this  test,  there  are  none  of  them 
that  can  stand." 

§  515.    Equality  and  Uniformity  in  Inheritance  Taxation. — 

The  relation  of  the  Federal  guaranty  of  equal  protection  of  the 
laws  to  the  requirement  of  uniformity  and  equality  in  the  State 
constitutions  is  illustrated  in  the  decisions  of  the  Supreme  Court 
and  some  of  the  State  Supreme  courts  relating  to  the  classifica- 
tion allowable  in  inheritance  taxation. 

In  the  courts  of  Ohio,^  Missouri,^  and  Minnesota,^  classifica- 
tions and  exemptions  based  upon  the  value  of  the  estate  or  the 
inheritance,  were  held  to  violate  constitutional  requirements  of 
equality  and  uniformity  in  taxation. 

In  the  Ohio  ease,  the  Supreme  Court  (of  the  State)  said  that 
a  progressive  rate  of  taxation,  according  to  the  values  of  the 
estate,  was  in  conflict  with  the  provision  of  the  Ohio  constitu- 
tion, that  government  was  instituted  for  the  equal  benefit  and 
protection  of  the  people.  It  was  said  that  the  scope  of  the  pro- 
vision for  equal  protection  of  the  laws  under  the  Fourteenth 
Amendment  was  not  broader  than  the  State  Bill  of  Rights, 
and  that  a  statute  authorized  by  the  latter  would  not  be  in  con- 
flict with  the  Constitution  of  the  United  States. 

In  Missouri  the  court  said  that  the  mere  calling  of  a  tax  in 
a  statute  a  succession  tax  did  not  make  it  such,  when  in  fact 
in  its  effect  and  operation  it  was  a  property  tax,  as  it  was  levied 
upon  the  whole  estate  of  the  decedent,  and  as  a  property  tax  the 
graduated  progressive  rates  violated  the  constitutional  require- 
ment of  uniformity  in  the  same  class  of  subjects. 

In  Minnesota  a  probate  tax,  graduated  according  to  the  value 
of  the  estate,  violated,  according  to  the  State  court,  two  pro- 
visions of  the  State  constitution,  one  guaranteeing  "justice 
freely   and   without   purchase,   promptly   and   without   delay," 


1  State  ex  rel.  Schwartz  v.  Ferris.  53  Ohio  St.  314,  and  30  L.  R.  A. 
218  (1895). 

2  State  ex  rel.  v.  Switzler,  143  Mo.  287  (1898). 

•'State  V.  Gorman,  40  Minn.  232  (1889).     See  also  State  v.  Mann,  76 
Wis.  469   (1890). 


570      EQUAL  PROTECTION  OF  THE  LAWS  IN  TAXATION.    §  516 

and  the  other  providing  that  ''all  taxes  are  to  be  as  nearly 
equal  as  may  be,  and  all  property  on  which  taxes  are  to  be 
levied  shall  have  a  cash  valuation  and  be  equalized  and  uni- 
form throughout  the  State." 

The  Supreme  Court  of  New  Hampsliire  went  further/  and 
held  that  the  exemption  of  husband,  wife,  children  and  grand- 
children was  violative  of  the  rule  in  the  constitution  of  the 
State  requiring  proportional  and  reasonable  taxes.  This  ruling 
has  not  been  followed  in  other  States ;  and  it  is  held  that  clas- 
sification in  inheritance  taxation,  based  wholly  upon  the  degree 
of  relationship,  so  that  the  tax  is  levied  at  a  uniform  rate  upon 
those  bearing  the  same  relationship  to  the  testator,  is  reason- 
able and  open  to  no  constitutional  objection.  In  the  language 
of  the  Supreme  Court  of  Massachusetts,  such  a  classification 
has  a  sanction  in  reason,  for  the  moral  claim  of  collaterals  and 
strangers  is  less  than  that  of  kindred  in  the  direct  line,  and  the 
privilege  is  therefore  greater.^  But  a  discrimination  between 
residents  and  non-residents  of  the  State,  by  imposing  an  inher- 
itance tax  upon  certain  collaterals  when  non-residents  of  the 
State,  has  been  held  an  illegal  classification.3 

§  516.  "Equal  Protection  of  the  Laws"  in  Inheritance  Tax- 
ation.— The  Supreme  Court,  however,  affirming  the  judgment 
of  the  Supreme  Court  of  Illinois,^  sustained,  as  valid  under  the 


1  Curry  v.  Spencer,  61  N.  H.  624  (1882). 

2Minot  v.  Winthrop,  162  Mass.  113  (1894),  one  judge  dissenting  on  the 
ground  that  the  exemption  of  estates  not  exceeding  $10,000  in  value 
was  unreasonable;  State  v.  Alston,  94  Tenn.  674  (1895) ;  State  v.  Hamlin, 
86  Me.  495  and  25  L.  R.  A.  632  (1894);  Thyson  v.  State,  28  Md.  577 
(1868);  Eyre  v.  Jacob,  14  Grattan  (Va.)  422  (1858);  Billings  v.  Peo- 
ple, 189  111.  472  (1901);  State  v.  Henderson,  160  Mo.  190  (1901);  Gells- 
thorpe  V.  Fernell,  20  Mont.  299  (1897). 

37n  re  Mahoney's  Estate,  133  Cal.  180  (1901).  The  decision  was  based 
on  the  ground  that  the  discrimination  was  in  violation  of  Article  IV, 
Section  2,  of  the  Constitution  of  the  United  States,  that  the  citizens 
of  each  State  shall  be  entitled  to  all  the  privileges  and  immunities 
of  citizens  in  the  several  States,  and  also  violative  of  Sec.  1977,  R.  S. 
of  U.  S.,  supra,  Sec.  332. 

4Magoun  v.  Illinois  Trust  &  Savings  Bank,  170  U.  S.  283,  42  L.  Ed. 
1037   (1898),  affirming  167  111.  122. 


§    516         EQU.\X,   PROTECTION   OP    THE   LAWS   IN    TAXATION  571 

Fourteenth.  Amendment,  the  inheritance  tax  of  that  State, 
which  was  levied  at  discriminating  progressive  rates  graduated 
according  both  to  the  degrees  of  relationship  and  to  the  amounts 
inherited.  The  court  said  that,  as  to  the  equal  protection  of 
the  laws,  what  affords  this  equality  has  not  been  and  probably 
never  can  be  precisely  defined;  and,  after  citing  former  opin- 
ions of  the  court,  that  it  does  not  prohibit  legislation  which 
is  limited  either  in  the  objects  to  which  it  is  directed  or 
by  the  territory  in  which  it  is  to  operate,  continued  at  page 
293: 

"It  merely  requires  that  all  persons  subjected  to  such  legis- 
lation shall  be  treated  alike  under  like  circumstances  and  con- 
ditions, both  in  the  privilege  conferred  and  the  liabilities  im- 
posed. Hayes  v.  Missouri,  120  U.  S.  68.  Similar  citations  could 
be  multiplied.  But  what  is  the  test  of  likeness  and  unlikeness 
of  circumstances  and  conditions'?  These  expressions  have  al- 
most the  generality  of  the  principle  they  are  used  to  expound, 
and  yet  they  are  definite  steps  to  precision  and  usefulness  of 
definition,  when  connected  with  the  facts  of  the  cases  in  which 
they  are  employed.  With  these  for  illustration  it  may  be 
safely  said,  that  the  rule  prescribed  no  rigid  equality  and  per- 
mits to  the  discretion  and  wisdom  of  the  State  a  wide  latitude 
as  far  as  interference  by  this  court  is  concerned.    .    .    . 

"The  rule,  therefore,  is  not  a  substitute  for  municipal  law; 
it  only  prescribes  that  that  law  have  the  attribute  of  equality 
of  operation,  and  equality  of  operation  does  not  mean  indis- 
criminate operation  on  persons  merelj^  as  such,  but  on  persons 
according  to  their  relations.  In  some  circumstances  it  may  not 
tax  A  more  than  B,  but  if  A  be  of  a  different  trade  or  profes- 
sion than  B,  it  may.    .    .    . 

"In  other  words,  the  State  may  distinguish,  select  and  clas- 
sify objects  of  legislation,  and  necessarily  this  power  must 
have  a  wide  range  of  discretion.  It  is  not  without  limitation, 
of  cour.se.  'Clear  and  hostile  discriminations  against  particu- 
lar persons  and  clas.ses,  especially  such  as  are  of  unusual  char- 
acter, unknown  to  the  practice  of  our  governments,  might  be 
obnoxious  to  the  constitutional  prohibition.'     .    . 

"There  is,  therefore,  no  precise  application  of  the  rule  of 
reasona])lene.ss  of  classification,  and  the  rule  of  equality  per- 
mits many  practical  inequalities.  And  necessarily  so;  in  a 
classification  for  govern  mental  purposes  there  cannot  be  an  ex- 
act exclusion  or  inclusion  of  persons  and  things." 


572      EQUAL  PROTECTION  OF  THE  LAWS  IN  TAXATION.    §  516 

In  reference  to  the  cases  from  the  State  courts,  above  cited, 
it  was  said,  1.  c.  p.  292 : 

"They  are  authority  against  the  Illinois  statute.  But  it  is 
not  necessary  to  dwell  on  the  points  of  agreement  of  the  cases. 
Our  inquiry  must  be  not  what  will  satisfy  the  provision  of  the 
State  constitutions,  but  what  will  satisfy  the  rule  of  the  Fed- 
eral Constitution.  The  power  of  the  State  over  successions  may 
be  as  plenary  in  the  abstract  as  appellee  contends  for.  Never- 
theless, it  must  be  exerted  within  the  limits  of  that  constitu- 
tion. If  the  power  of  devise  or  of  inheritance  be  a  privilege,  it 
must  be  conferred  or  regulated  by  equal  laws. ' ' 

Applying  these  principles  to  the  statute,  it  was  held  that  the 
classification  of  the  Illinois  law  was  within  the  power  of  the 
legislature  to  make  and  was  reasonable ;  and  that  the  State  had 
the  power  to  regulate  successions.  It  was  true  that  the  amount 
of  the  exemption  (estates  under  $20,000  were  not  taxed)  was 
greater  in  the  Illinois  law  than  in  any  other,  but  this  was  a 
matter  depending  upon  the  judgment  of  the  legislature  in  each 
State  and  could  not  be  subjected  to  judicial  review.  The  court 
followed  the  Illinois  corrt  in  holding  that  the  tax  was  imposed 
on  the  succession,  which  is  to  be  regarded  as  ''new  property"^ 
of  the  legatee  or  distributee. 


1  Justice  Brewer  dissented  from  the  opinion,  so  far  as  it  sustained 
that  part  of  the  law  which  graded  the  rate  of  the  tax  upon  legacies 
to  strangers  by  the  amount  of  such  legacies,  saying,  1.  c.  p.  301:  "If 
this  were  a  question  in  political  economy,  I  should  not  dissent,  but  it 
is  one  of  constitutional  limitations.  Equality  in  right,  in  protection 
and  in  burden  is  the  thought  which  has  run  through  the  life  of  this 
nation  and  its  constitutional  enactments  from  the  Declaration  of  Inde- 
pendence to  the  present  hour."  Again,  at  p.  302:  "It  seems  to  be  con- 
ceded that  if  this  were  a  tax  upon  property,  such  increase  in  the  rate 
of  taxation  could  not  be  sustained,  but,  being  a  tax  upon  the  succes- 
sion, it  is  held  that  a  different  rule  prevails;"  and  concluded:  "But 
whatever  may  be  the  power  of  the  legislature,  Illinois  had  regulated 
the  matter  of  descents  and  distributions  and  had  granted  the  right 
of  testamentary  disposition.  And  now  by  this  statute  upon  property 
passing  in  accordance  with  its  statutes  a  tax  is  imposed;  a  tax  un- 
equal because  not  proportioned  to  the  amount  of  the  estate;  unequal 
because  based   upon   a  classification   purely   arbitrary,   to-wit,   that   of 


§    517         EQUAL    PROTECTION    OF   THE   LAWS   IN    TAXATION. 


573 


§  517.  The  Supreme  Court  on  Inheritance  Taxation  and 
Equal  Protection  of  the  Laws. — The  Supreme  Court  has  uni- 
formly sustained  the  right  of  a  State  to  make  exemptions  and 
discriminations  based  on  relationship  and  on  the  amounts  in- 
volved in  the  inheritance  tax  laws  of  the  State.  Thus,  it  was 
held  that  the  Illinois  law  which  excluded  foreign  corporations 
from  the  exemption  in  favor  of  property  devised  for  educa- 
tional or  religious  uses,  did  not  abridge  privileges  or  immuni- 
ties of  citizens  of  the  United  States  or  deny  the  equal  protec- 
tion of  the  laws;^  nor  was  there  any  denial  of  the  equal  pro- 
tection of  the  laws  in  the  provision  of  the  inheritance  tax  law 
of  New  York  of  1887,  where  a  tax  was  imposed  upon  certain 
bequests  of  personalty  by  a  non-resident  decedent  owning  both 
real  and  personal  property  in  the  State,  because  under  the  stat- 
ute, as  construed  by  the  State  court,  a  tax  could  not  be  col- 
lected if  the  only  property  belonging  to  the  decedent,  situated 
in  the  State,  was  personalty  ;2  nor  was  the  equal  protection  of 
the  law  denied  in  the  case  of  the  California  law,  which  sub- 
jected brothers  and  sisters  to  an  inheritance  tax,  but  did  not 
impose  any  tax  on  strangers  to  the  blood,  such  as  the  wife  or 
widow  of  a  son  or  the  husband  of  a  daughter.^  The  court  said 
that  in  this  case  they  had  no  concern  with  the  motives  of  public 
policy  which  may  induce  a  State  to  prefer  new  relatives  by 
affinitv  to  collateral  relatives. 


wealth — a  tax  directly  and  intentionally  made  unequal.     I  think  the 
Constitution  of  the  United   States   forbids  such   inequality." 

After  the  decision  in  the  Magoun  case,  the  Supreme  Court  of  Penn- 
sylvania, In  re  Estate  of  Cope,  191  Pa.  1,  and  45  L.  R.  A.  316  (1899),  held 
the  inheritance  tax  of  that  State,  which  exempted  $5,000  from  the  two 
per  cent  inheritance  tax  on  all  personal  property  passing  by  will,  etc., 
after  deducting  debts,  was  in  violation  of  the  constitution  requiring 
all  taxes  to  be  uniform  upon  the  same  class  of  subjects,  and  prohibit- 
ing exemptions.  The  court  in  this  opinion  quotes  approvingly  the 
dissenting  opinion  of  Justice  Brewer  in   the  Magoun  case. 

1  Board  of  Education  v.  Illinois,  203  U.  S.  553,  51  L.  Ed.  314  (1906), 
affirming  216   111.  23. 

2  Beers  v.  Glynn,  211  U.  S.  477,  53  L.  Ed.  290  (1909),  affirming  186 
N.  Y.  449. 

"Campbell  v.  State  of  California,  200  U.  S.  87,  50  L.  Ed.  382  (1906), 
affirming  143  Cal.  627. 


574  EQUAL   PROTECTION    OF    THE   LAWS   IN   TAXATION.  §    518 

Neither  is  there  any  merit,  the  court  held,  in  the  distinction 
sought  to  be  made  between  an  inheritance  tax  and  one  on  trans- 
fers inter  vivos.  The  court  said  that  the  privilege  of  acquiring 
property  by  such  deed  was  as  much  dependent  upon  the  law 
as  acquiring  property  by  inheritance,  and  that  transfers  by 
deed,  to  take  effect  at  death,  had  frequently  been  classed  with 
death,  duties,  legacies,  and  inheritance  taxes.  The  court  said 
that  the  State  had  not  only  the  right  to  tax  such  transfers,  but 
it  had  the  right  to  fix  the  rate,  and  state  when  and  how  the 
amount  should  be  ascertained  and  paid.  The  fact  that  the  lia- 
bility was  imposed  when  the  transfer  was  made,  and  that  pay- 
ment was  not  required  until  the  death  of  the  grantor,  did  not 
present  any  Federal  question,  and  there  was  no  denial  of  the 
equal  protection  of  the  laws.^ 

Neither  was  there  any  denial  .of  the  equal  protection  of  the 
laws  under  the  Louisiana  Inheritance  Tax  Law  of  June,  1904, 
whereunder  successions  which  had  been  finally  closed  and  ad- 
ministered upon  were  exempted,  where  the  highest  State  court 
had  made  the  validity  of  the  tax  depend  upon  this  classifica- 
tion by  deciding  that  the  State  can  tax  the  property  until  it 
has  passed  out  of  the  succession  of  the  testator.^  The  court 
said : 

**It  was  certainly  not  an  improper  classification  to  make  the 
tax  depend  upon  a  fact  without  which  it  would  have  been  in- 
valid. In  other  words,  those  who  are  subject  to  be  taxed  cannot 
complain  that  they  are  denied  the  equal  protection  of  the  laws 
because  those  who  can  not  be  legally  taxed  are  not  taxed.'* 

§  518.     Classificatiwi  by  Amount  in  License  Taxation. — The 

Supreme  Court^  in  a  later  case  extended  the  application  of  this 
principle  of  classification  by  amount  to  license  taxation  upon 
business,  and  affirmed  the  constitutionality  of  a  city  ordinance 
imposing  a  license  tax  upon  merchants.  Under  this  ordinance  per- 


iKeaney  v.  New  York,  222  U.  S.  525,  56  L.  Ed.  299  (1912),  affirming 
194  N.  Y.  281. 

2Cahen  v.  Brewster,  203  U.  S.  543,  51  L.  Ed.  310  (1906),  affirming 
115  La.  377. 

3  Clark  V.  Titusville,  184  U.  S.  329,  46  L.  Ed.  569   (1902). 


§    519  EQUAL    PROTECTION    OP    TUB   LAWS   IN    TAXATION.  575 

sons  ill  different  occupations  paid  different  amounts,  and  persons 
in  some  occupations  were  classified  by  the  maximum  and  mini- 
mum amount  of  sales.  It  was  urged  in  this  case  that  the  deci- 
sion in  Magoun  v.  The  Bank  was  not  controlling,  as  that  in- 
volved only  the  State  power  over  inheritances.  But  the  court 
said  that  it  was  decided  in  that  case  that  the  inequality  between 
the  members  of  the  different  classes  did  not  constitute  a  case 
of  discrimination  under  the  Fourteenth  Amendment,  that  the 
same  principle  controlled  the  case  at  bar,  and  that  the  equality 
between  tlie  members  of  the  same  class  was  sufficient  to  satisfy 
the  Fourteenth  Amendment.  It  was  contended  that  the  tax  was 
really  a  tax  on  property,  as  the  final  incidence  of  the  tax  was 
on  the  merchant.  But  the  court  replied  that  "every  tax  had 
its  final  incidence  on  some  individual, ' '  and  that  ' '  that  principle 
could  not  be  urged  to  destroy  well  recognized  distinctions." 
The  tax  was  on  the  privilege  of  doing  business  and  regulated 
by  the  amount  of  sales,  and  was  not  repugnant  to  the  Consti- 
tution of  the  United  States. 

§  519.  Property  Taxation  and  Inheritance  Taxation  Distin- 
guished.— The  principle  of  classification  by  amount  thus  en- 
forced in  the  case  of  inheritance  taxation,  and  extended  to 
license  taxation,  has  not  been  applied  to  the  case  of  property 
taxation.  The  right  to  be  secure  in  the  possession  of  property 
when  once  acquired  is  admittedly  distinct  from  the  right  to 
inherit  property,  although  it  must  be  conceded  that  the  tax- 
ation of  a  business  is  in  effect  and  incidence  a  tax  upon  the 
property  employed  in  the  business.  It  was  argued  in  the  Ma- 
goun case  that  an  inheritance  tax  is  not  on  pi-operty,  but  on 
the  succession,  and  that  the  right  to  take  property  by  devise 
or  descent  is  a  creature  of  the  law,  not  a  natural  right,  but  a 
privilege.  The  authority,  therefore,  which  confers  it  may  im- 
pose conditions  upon  the  privilege  thus  granted.  It  was  argued 
on  the  one  side  that  the  State  could  exercise  its  power  to  the 
extent  of  making  itself  the  heir  of  everyone,  and  on  the  other 
that  there  was  a  natural  right  in  the  children  to  inherit.  The 
court  did  not  distinctly  pass  upon  these  pi-oposilions,  but  based 
its  decision  upon  the  right  of  the  State  to  make  reasoiiable  clas- 


57 (i  EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.  §    520 

sifications  in  taxation.  Justice  Brewer  remarked  in  his  dis- 
senting opinion  that  it  seemed  to  be  conceded  that,  if  the  tax 
was  one  upon  property,  the  progressive  increase  of  the  rate 
could  not  be  sustained. 

The  expressions  in  the  opinions  of  the  Supreme  Court,  al- 
ready referred  to,  concerning  the  large  discretion  of  the  States 
in  the  exercise  of  the  taxing  powder,  to  vary  the  rates  or  forms 
of  taxation,  clearly  refer  to  discretion  in  the  adjustment  of 
taxation,  so  as  to  better  approximate  the  equal  distribution  of 
the  public  burdens.  To  avoid  disturbing  this  adjustment,  the 
court  has  sustained  the  exercise  of  the  State's  discretion  and 
has  been  reluctant  to  disturb  State  classification  in  inheritance 
and  license  taxation.  The  court  has  also  reiterated  in  these 
recent  opinions  the  words  of  Mr.  Justice  Bradley,  in  the  Bell 
Gap  Railroad  case,  that  "clear  and  hostile  discriminations  of 
an  unusual  character,  unknown  to  the  practice  of  our  govern- 
ment, might  be  obnoxious  to  the   constitutional  prohibition."^ 

The  considerations  which  would  justify  and  even  require 
graded  classifications  in  taxation  through  business  licenses,  such 
as  were  sustained  in  Clark  v.  Titusville,  do  not  exist  in  ordinary 
property  taxation.  The  proportional  burden  of  fixed  charges 
for  the  privilege  of  conducting  business  diminishes  as  the  vol- 
ume of  business  increases,  and  a  business  tax,  which  would  be 
trifling  in  a  large  business,  would  be  an  intolerable  burden  in 
a  small  one.  Graded  classification,  therefore,  which  would  be 
in  accord  with  usual  practice  in  inheritance  or  license  taxation, 
would,  in  property  taxation,  be  ''of  an  unusual  character"  and 
"unlaiown  to  the  practice  of  our  government." 

§  520.  Classification  by  Exemption. — The  right  of  special- 
izing and  classifying  for  taxation  obviously  includes  the  right 
to  make  reasonable  exemptions  from  taxation.  Thus  property 
may  be  exempted  from  considerations  of  public  policy,  for  ex- 
ample, that  held  for  religious,  educational  and  charitable  uses, 


1  Bell's  Gap  Railroad  Co.  v.  Pennsylvania,  supra,  Sec.  504.  Upon 
this  subject  of  discriminating  taxation  as  violative  of  the  Fourteenth 
Amendment,  see  Guthrie's  Lectures  on  the  Fourteenth  Amendment, 
page  120  et  seq. 


§    520         EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.  577 

and  that  which  is  of  so  little  value  in  proportion  to  the  amount 
of  the  tax  to  be  secured,  that  it  would  not  justify  the  expense 
of  assessment  and  collection.  Certain  exemptions  of  this  char- 
acter are  customary  in  systems  of  taxation,  and  to  these  the 
court  refers  in  the  Bell's  Gap  Railroad  ease,  supra,  Sec.  504. 
In  many  States  the  right  of  exemption  is  controlled  by  the 
State  constitutions,  which  in  some  cases  limit,  and  in  other 
cases  distinctly  prohibit,  legislative  exemptions.  In  the  absence 
of  such  constitutional  restrictions,  the  right  of  the  State  to 
make  exemptions,  or  contracts  for  exemption,  when  it  deems 
them  expedient  according  to  its  own  public  policy,  has  been 
sustained  by  the  Supreme  Court. 

In  the  taxation  of  occupations,  the  selection  of  those  which 
are  taxed  involves  the  exemption  of  others  which  are  not ;  but 
it  is  obvious  that  the  discretion  of  the  taxing  power,  in  the  mat- 
ter of  its  selection,  cannot  be  reviewed.  Because  the  State  taxes 
some  occupations,  it  need  not  tax  all ;  but  if  it  taxes  any  occu- 
pation, it  must  tax  all  engaged  therein,  and  it  cannot  make  an 
arbitrary  classification  of  occupations  to  be  taxed.^ 

In  other  words,  reasonable  classification  is  required  in  mak- 
ing exemptions  from  taxation.  The  right  to  classify  here,  as  in 
any  other  form,  must  be  distinguished  from  arbitrary  discrim- 
ination. If  the  limit  of  exemptions,  $20,000,  fixed  in  the  Illinois 
inheritance  tax  laws  sustained  by  the  Supreme  Court  in  the 
]\[agoun  case,  supra,  Sec.  516,  should  be  applied  in  property 
taxation,  it  would  exempt,  in  most  communities,  all  but  a  very 
few  taxpayers,  and  since  such  an  exemption  could  only  pro- 
coed  from  a  purpose  to  shift  the  entire  burden  of  government 
upon  a  few,  it  would  be  a  clear  violation  of  the  equality  of  right 
guaranteed  by  the  Federal  Constitution. 

This  distinction  was  illustrated  in  the  United  States  Circuit 
Court  in  North  Dakota,  where  it  was  held,  in  an  opinion  by 
Judge  Caldwell,  that  it  was  not  competent  for  the  State,  either 
under  the  organic  act  whoreunder  it  was  admitted  to  the  Union, 
or  the  Fourteenth  Amendment,  to  classify  the  lands  in  the  Ter- 
ritory for  the  purposes  of  taxation   into  those  owned  by  the 


1  See  Department  Store  case,  infra,  Sec.  525. 


578  EQUAL   PROTECTION    OP    THE   LAWS   IN    TAXATION.  §    521 

railroad  companies  and  those  owned  by  all  other  persons,  and 
declare  that  the  former  should  not  and  the  latter  should  be 
taxed.  The  prohibition  in  the  organic  act  against  making  ' '  any 
discrimination  in  taxing  different  kinds  of  property"  neces- 
sarily implies  a  prohibition  against  any  discrimination  in  tax- 
ing the  same  kind  of  property.  The  court  said;  "It  estab- 
lishes the  just  and  reasonable  rule,  which  is  becoming  funda- 
mental in  our  American  system  of  taxation,  that  the  burdens 
of  taxation  shall  fall  equally  upon  all  owners  of  the  same  kind 
of  property."!  In  this  case,  a  corporation  claimed  its  lands 
were  exempt,  in  other  words,  claimed  a  discrimination  in  its 
own  favor  against  individuals;  but  the  equality  of  right  en- 
forced by  the  constitution  applies  to  all  persons,  corporate  and 
individual,  within  the  jurisdiction  of  the  State. 

But  the  State  may  classify  railroads  for  taxation,  and  apply 
to  them  a  special  method  of  assessment,  e.  g.,  according  to  their 
gross  earnings,2  as  it  may  exempt  them  from  taxation  alto- 
gether, if  it  deems  wise ;  that  is,  if  it  determines  that  the  benefit 
to  be  derived  from  such  exemption  is  equivalent  to  the  tax  that 
would  otherwise  be  exacted,  and  that  the  property  exempted  is 
used  for  the  promotion  of  the  public  welfare. 3  This  determina- 
tion, subject  to  the  restriction  of  the  State  constitution,  is  a 
legislative  and  not  a  judicial  question. 

§  521.  Exemption  for  Efficiency  in  Taxation. — An  interest- 
ing illustration  of  the  necessity  of  apparent  discriminations,  in 
adjusting  a  taxing  system  to  modern  conditions,  is  presented 
in  a  Maryland  case.     A  statute  of  that  State  subjected  to  tax- 


1  Northern  Pac.  R.  R.  Co.  v.  Walker,  47  Fed.  681  (1891).  The  exemp- 
tion was  held  violative  of  the  Fourteenth  Amendment,  as  well  as  of  the 
organic   act  of  the  Territory. 

2  Northern  Pac.  R.  R.  Co.  v.  Barnes,  2  N.  D.  310  (1892). 

3  See  Norhern  Pac.  R.  R.  Co.  v.  Garland,  5  Mont.  146  (1884).  It  was 
held,  in  South  Dakota,  In  re  Assessment,  4  S.  D.  6  (1893),  that  under  the 
State  constitution  requiring  uniformity  and  equality  in  taxation,  an  act 
permitting  the  deduction  of  debts  from  the  amount  of  credits  and  per- 
sonal property,  while  making  no  deduction  from  the  value  of  real 
estate,  was  invalid,  and  also  invalid  in  that  it  prohibited  deductions 
of  debts  within  the  State,  but  not  of  debts  without  the  State. 


§    522         EQUAL   PROTECTION    OF    THE   LAWS   IN    TAXATION.  579 

ation  bands  of  a  corporation  held  by  residents  and  secured  by 
mortgage  upon  property  wholly  within  its  jurisdiction,  but 
exempted  mortgages  by  individuals  and  building  associations, 
and  the  non-interest  bearing  bonds  of  corporations.  It  was 
held  by  the  highest  court  of  the  State*  that  these  were  not  arbi- 
trary discriminations,  but  valid  under  the  constitution  of  the 
State  and  under  the  Fourteenth  Amendment.  The  State  was 
not  obliged  to  tax  every  form  of  property.  An  individual's 
true  wealth,  for  the  pui-poses  of  taxation,  consists  of  his  real 
and  personal  property,  but,  in  the  case  of  a  corporation,  its 
franchises,  its  borrowing  power,  its  earning  power,  its  real 
wealth,  are  not  represented  merely  by  its  visible  property  and 
shares  of  stock.  Its  taxable  value  is  its  bonded  indebtedness 
together  with  its  stock.^  There  was  reason,  therefore,  for  the 
exemption.  The  exemption  of  non-interest  bearing  bonds  was  not 
arbitrary,  but  based  upon  sound  reasoning,  as  the  true  test  of 
a  taxable  value  is  the  producing  value  to  the  owner.  The  court 
held  that  these  are  discriminations  which  the  best  interests  of 
society  require,  within  the  principle  laid  down  by  the  Supreme 
Court  in  the  Bell's  Gap  Railroad  case.^ 

§  522.  Exemption  of  Certain  Michigan  Telephone  Compa- 
nies Valid. — The  State  of  Michigan  levied  tax  on  telephone 
companies,  exempting  the  companies  whose  gross  receipts  did 
not  exceed  $500,  and  it  was  contended  that  the  act  offended 
against  the  equal  protection  clause  of  the  constitution.  This 
was  not  a  tax  on  the  occupation,  but  on  property.  The  court 
said  that  this  exemption  was  not  an  arbitrary  discrimination, 
but  was  based  on  the  fact  that  the  use  of  the  smaller  lines  was 
merely  private,  and  but  a  trifling  part  of  the  whole.  While  the 
basis,  that  of  amount  of  earnings,  might  not  have  been  exact, 


1  Simpson  v.  Hopkins,  82  Md.  478  (1896). 

2  Citing  Mr.  Justice  Miller  in  the  Illinois  railroad  tax  cases,  supra. 
Sec.  260. 

3  The  report  of  this  case  is  interesting  as  showing  the  relation  of 
law  to  economics  on  this  subject,  as  briefs  of  counsel  cite  such  eco- 
nomic authorities  as  Professor  Seligman  and  David  A.  Wells. 


580  EQUAL   PROTECTION   OP    THE   LAWS   IN    TAXATION.  §    523 

the  court  adopted  the  view  of  the  District  Court  that  the  ex- 
emption was  not  invalid.  1 

§  523.  Conditions  Which  Warrant  Classification. — The  con- 
ditions of  which  the  courts  take  notice  as  warranting  classifica- 
tion for  taxation  are  illustrated  in  a  Pennsylvania  case,^  where 
it  was  held  by  the  Supreme  Court  of  that  State  that  a  consti- 
tutional requirement  of  uniformity  upon  the  same  class  of  sub- 
jects was  not  violated  by  a  statute  which  made  all  interest-bear- 
ing indebtedness  of  private  corporations  a  separate  class  for 
the  purposes  of  taxation,  and  required  assessment  upon  their 
nominal  value,  while  all  mortgages  and  money  paid  by  solvent 
debtors,  etc.,  were  taxable  at  a  certain  rate  upon  their  value. 
The  court  said  this  classification  was  justified  by  the  peculiar 
nature  of  corporate  securities,  the  great  fluctuations  in  their 
value  and  the  difficulty  of  reaching  them  by  a  general  system 
of  taxation.  Classification  should  be  made  according  to  some 
reasonable  practical  rule  drawn  from  experience  which  would 
prevent  a  gross  inequality  in  the  burdens  of  taxation.  Abso- 
lute equality  is,  of  course,  unattainable ;  a  mere  approximate 
equality  is  all  that  can  reasonably  be  expected.  The  mere  diver- 
sity in  the  methods  of  assessment  and  collection,  however,  if 
these  methods  are  provided  by  general  law,  violates  no  rule  ol 
right,  if  when  tliese  methods  are  applied  the  results  are  prac- 
tically uniform.  If  there  is  a  substantial  uniformity,  however 
different  the  procedure,  there  is  a  compliance  with  the  consti- 
tutional provision ;  even  w^hen  there  may  be  some  disparity  of 
results,  if  uniformity  is  the  purpose  of  the  legislature,  there  is 
a  substantial  compliance. 

Classification  for  taxation  is  not  necessarily  based  upon  any 
essential  difference  in  the  nature  or  condition  of  the  various 
subjects.  It  may  be  based  as  well  upon  the  want  of  adaptabil- 
ity to  the  same  methods  of  taxation,  or  upon  the  impractica- 
bility of  applying  to  the  various  subjects  the  same  methods  so 


1  Citizens   Telephone   Co.  v.   Fuller,   229   U.    S.    322,    57   L.    Ed.    1206 
(1913),  affirming  185  Fed.  634. 

2  Commonwealth    of   Pennsylvania   v.    Delaware    Division    Canal    Co., 
123  Pa.  594,  2  L.  R.  A.  798  (1889). 


§    524         EQUAL   PROTECTION   OP   THE   LAWS   IN   TAXATION.  581 

as  to  produce  just  and  uniform  results,  or  it  may  be  based  upon 
just  and  well  grounded  considerations  of  public  policy. 

§  524.     Constitutional  Amendment  Held    Unconstitutional. 

— "While  classification  may  thus  be  based  upon  differences  in 
the  nature  or  condition  of  the  subjects  of  taxation,  or  their 
want  of  adaptability  to  the  same  methods  of  taxation,  it  must 
rest  on  some  other  reason  than  that  of  mere  ownership.  Thus 
it  was  held  in  Missouri,  in  a  notable  case,  that  while  property 
owned  and  used  by  a  railroad  company  in  its  equipment  as  a 
common  carrier  can  probably  be  separately  classed  for  taxa- 
tion, a  discrimination  excepting  all  property  of  every  descrip- 
tion owned  by  any  quasi  public  corporation  and  resting  upon 
no  other  reason  than  that  of  mere  ownership  is  a  discrimina- 
tion violative  of  the  Fourteenth  Amendment.^  The  case  is  an 
interesting  one,  as  it  involved  the  decision  that  a  constitutional 
amendment  adopted  in  that  State  for  the  taxation  of  mortgages 
was  invalid.  The  amendment  was  substantially  copied  from 
the  California  constitution  and  was  adopted  at  the  general  elec- 
tion in  November,  1900.  It  provided  that  a  mortgage  should 
be  taxable  as  an  interest  in  the  property  affected  thereby,  "ex- 
cept as  to  railroads  and  other  quasi  public  corporations  for 
which  provision  has  already  been  made  by  law." 

This  method  of  taxing  mortgages  had  been  held  not  violative 
of  the  Constitution  of  the  United  States  in  Savings  Society  v. 
]\Iultnomah  County,  a  case  from  "Washington.^  The  exception 
of  railroads  and  other  quasi  public  corporations  from  the  pro- 
visions of  the  act  was  held  by  Justices  Field  and  Sawyer  in  the 
United  States  Circuit  Court,  in  the  case  of  the  Southern  Pacific 
Company,^  to  be  an  unlawful  discrimination,  but  it  was  sug- 
gested by  Mr.  Justice  Field,  in  his  opinion,  that  the  constitu- 
tional provision  of  California  could  be  sustained  by  eliminating 
the  exception.  The  judgment  in  this  case  invalidating  the  as- 
sessment complained  of  was  affirmed  by    the    Supreme    Court* 


1  Russell  V.  Croy,  164  Mo.  69   (1901)   opinion    by   Valliant,    J.,    three 
judges  dissenting. 

2  t>upra.  Sec.  458. 

3  fiupra,  Sec.  332   et   acq. 

*118  U.  S.  394,  30  L.  Ed.  118  (1886). 


582  EQUAL    PROTECTION   OF   THE   LAWS   IN    TAXATION.  §    524 

on  another  ground,  and  the  point  in  question  has  never  been 
decided  by  that  court,  although  it  has  upheld,  as  stated,  the 
power  of  the  States  to  tax  mortgages  as  real  estate. 

The  Missouri  court  said  that  the  discrimination  in  excepting 
railroad  and  other  qiiasi  public  corporations  was  not  in  accord 
with  the  uniformity  and  equality  in  taxation  required  by  the 
State  constitution,  but  that,  of  course,  that  was  no  legal  objec- 
tion to  its  validity  as  a  constitutional  amendment,  ''as  the  very 
purpose  of  the  amendment  is  to  make  some  change  in  the  orig- 
inal." But  it  was  also  violative  of  the  equal  protection  of  the 
laws  secured  by  the  Fourteenth  Amendment  of  the  Federal  Con- 
stitution. 

It  was  admitted  that  the  State  could  classify  property  for 
taxation,  but  it  was  said  that  the  classification  must  rest  on 
some  reason  other  than  mere  ownership,  and  that  different 
pieces  of  property  of  the  same  kind  held  or  used  for  the  same 
purposes  within  the  same  jurisdiction  could  not  lawfully  be  so 
classified,  as  that  one  is  subject  to  the  tax  and  the  other  exempt, 
merely  because  one  belongs  to  a  natural  person  and  the  other 
to  a  corporation,  or  that  one  is  the  obligation  of  a  corporation 
and  the  other  that  of  a  natural  person,  or  one  that  of  a  large 
concern  and  the  other  that  of  a  small  one.  The  words  of  the 
exception  were  applicable  to  all  mortgaged  property  of  every 
class  owned  by  railroads  or  other  qvasi  public  corporations,  and 
the  discrimination  put  mortgage  securities  issued  by  these  cor- 
porations in  a  position  of  advantage  over  such  securities  made 
by  individuals,  so  that  the  money  lender  could  afford  to  lend 
his  money  to  a  quasi  public  corporation  at  a  less  rate  of  inter- 
est than  to  others.  The  court  also  cited  and  quoted  from  the 
opinion  of  the  United  States  Circuit  Court  in  the  Northern 
Pacific  Railroad  case,  and  the  opinion  of  Mr.  Justice  Field  in 
the  Southern  Pacific  Railroad  case,  also  from  Mr.  G-uthrie  on 
the  Fourteenth  Amendment,  as  follows:^ 

"Indeed,  in  one  of  the  early  cases,  the  extreme  statement  was 
made  that  'the  Federal  Constitution  imposes  no  restraints  on 

iPp.  117,  118. 


§    525         EQUAL    PROTECTION    OF    THE   LAWS   IN    TAXATION, 


583 


the  States'  in  regard  to  unequal  taxation.^  If  this  language 
means  that  the  amendment  does  not  prohibit  legitimate  classi- 
fication, and  that  it  does  not  require  all  kinds  of  property  to 
be  taxed  at  the  same  rate,  the  statement  is  correct.  Certain 
kinds  of  property  and  certain  classes  of  persons  can  be  singled 
out  for  taxation,  even  though  this  may  result  in  exempting 
other  property  and  other  classes  from  any  tax  burden.  But 
the  statement  is  too  broad,  and  is  misleading.  Unequal  taxes 
may  not  be  imposed  upon  property  of  the  same  kind,  in  the 
same  condition  and  used  for  the  same  purposes.  'Equality  is 
of  the  very  essence  of  the  taxing  poAver  itself. '  The  Fourteenth 
Amendment  does  impose  a  practical  and  effective  .restraint 
against  such  taxes." 

The  constitutional  amendment  was  therefore  declared  void,^ 
as  violative  of  the  Fourteenth  Amendment. 

§  525.  Department  Store  Tax  Held  Unconstitutional. — ^An- 
other decision  of  the  Supreme  Court  of  Missouri  declared  in- 
valid  another  example  of  illegitimate  classification  for  tax- 
ation,^ known  as  the  Department  Store  Tax  ease.  This 
act  imposed  a  license  of  not  less  than  $300  nor  more  than 
$500  for  each  of  the  classes  or  groups  of  goods  sold  by  each, 
merchant  employing  more  than  fifteen  persons.  It  was  declared 
invalid  on  other  grounds,  but  also  because  it  was  unwarranted 
class  legislation  violative  of  the  natural  rights  of  the  citizen. 
The  court  based  its  decision  principally  upon  the  provisions  of 
the  ]\Iissouri  Bill  of  Rights,  that  all  persons  have  a  natural 
right  to  life,  liberty  and  the  enjoyment  of  the  gains  of  their 
industry,  and  that  no  person  shall  be  deprived  of  life,  liberty 
or  property  without  due  process  of  law,  and. said  that  the  clas- 
sification in  the  act  was  wholly  without  reason  or  necessity,  and 
was  truly  "classification  run  wild."     .     .     . 

"To  have  made  the  act  apply  to  all  merchants  of  a  given 
avoirdupois  or  to  these  employing  clerks  of  a  designated  stat- 


1  Justice  Miller  in  Davidson  v.  New  Orleans,  supra.  Sec.   397. 

2  For  decision  of  the  United  States  Circuit  Court  of  Oregon  in  rela- 
tion to  the  same  system  of  taxing  mortgages,  see  Dundee  Mortgage  & 
Trust  Co.  v.  Parrish,  24  Fed.  197  (188.5). 

3  State  ex  rel.  v.  Ashbrook,  154  Mo.  375  (1900). 


584  EQUAL   PROTECTION    OF    THE   LAWS   IN   TAXATION.  §    526 

ure,  or  to  those  doing  business  in  buildings  of  a  special  archi- 
tectural design,  would  have  been  as  natural  and  as  reasonable 
a  classification  for  the  purpose  in  view,  as  the  classification 
made  by  this  act." 

§  526.  Taxation  of  Employers  of  Foreign  Born  Persons 
Held  Invalid.— Both  the  Supreme  Court  of  Pennsylvania  and 
the  United  States  Circuit  Court  in  that  State  held  invalid  an 
act  of  its  legislature,  imposing  on  employers  of  foreign-born 
unnaturalized  male  persons  over  twenty-one  years  of  age  a  tax 
of  three  cents  a  day  for  each  day  that  each  of  such  persons 
should  be  employed,  and  authorizing  the  deduction  of  that  sum 
from  their  wages.  It  was  held  by  both  tribunals  that  this  act 
deprived  the  employes  of  the  equal  protection  of  the  laws,  in 
violation  of  the  Fourteenth  Amendment.^  The  U.  S.  court  said, 
and  its  language  was  quoted  by  the  State  court : 

**It  is  idle  to  suggest  that  the  case  in  hand  is  one  of  proper 
legislative  classification.  A  valid  classification  for  the  purposes 
of  taxation  must  have  a  just  and  reasonable  basis  for  taxation, 
which  is  lacking  here.  The  tax  is  of  an  unusual  character  and 
is  directed  against  and  confined  to  a  particular  class  of  persons. 
Evidently  the  act  is  intended  to  hinder  the  employment  of  for- 
eign-born, unnaturalized  persons  over  twenty-one  years  of  age. 
The  act  is  hostile  to  and  discriminates  against  such  persons.  It 
interposes  to  the  pursuit  by  them  of  their  lawful  avocation  ob- 
stacles to  which  others  in  like  circumstances  are  not  subjected. 
It  imposes  upon  those  persons  burdens,  which  are  not  laid  upon 
others  in  the  same  calling  and  condition.  The  tax  is  an  arbi- 
trary deduction  from  the  daily  wages  of  a  particular  class  of 
persons.  The  equal  protection  of  the  laws  declared  by  the 
Fourteenth  Amendment  to  the  Constitution,  secures  to  each 
person  within  the  jurisdiction  of  a  State  exemption  from  any 
burdens  or  charges  other  than  such  as  are  equally  laid  upon 
all  others  under  like  circumstances." 

The  Supreme  Court  of  Pennsylvania  held  that  the  act  was 
not  only  violative  of  the  Federal  Constitution,  but  also  of  the 
State  constitution,  which  provided  that  all  taxes  should  be  uni- 
form upon  the  same  class  of  subjects. 


iFraser  v.  McConway,  82  Fed.  257  (1897);  Juniata  Limestone  Co.  v. 
Fagley,  187  Pa.  St.  193,  42  L.  R.  A.  442  (1898). 


§   527        EQUAL  PROTECTION   OF   THE  LAWS  IN  TAXATION.  585 

§  527.  Discriminations  Between  Residents  and  Non-resi- 
dents.— Ally  form  of  discrimination  in  taxation  in  favor  of  res- 
idents and  against  non-residents  is  void,  not  only  on  the  ground 
alreadj^  considered,^  that  such  discrimination  is  an  interference 
with  interstate  commerce  and  violates  the  privileges  and  immu- 
nities of  citizens  of  other  States,^  but  on  the  further  ground 
that  such  classification  in  taxation  is  unreasonable  and  viola- 
tive of  equality  and  uniformity,  and  of  the  equal  protection  of 
the  laws. 

In  a  Vermont  case,^  this  principle  was  applied  to  a  discrim- 
ination in  favor  of  non-residents,  that  is,  of  goods  not  manu- 
factured in  the  State. 

The  statute  which  imposed  a  tax  upon  peddlers  selling  goods, 
which  were  the  manufacture  of  'the  State,  was  held  to  effect  a 
discrimination  in  favor  of  foreign  goods  and  to  be  therefore  a 
denial  to  persons  "within  its  jurisdiction  of  the  equal  protec- 
tion of  the  laws."  The  court  said  that  the  question  was  one  of 
classification,  and  that  it  must  appear  in  every  such  ease  that 
the  classification  is  based  on  some  reasonable  ground,  some  dif- 
ference which  bears  a  just  and  proper  relation  to  the  attempted 
classification  and  not  a  mere  arbitrary  selection.^  Applying  this 
rule,  there  was  no  sufficient  ground  in  this  case. 

"It  cannot  be  based  an  any  difference  in  the  goods  them- 
selves, for  they  are  precisely  alike ;  nor  on  the  fact  that  they 
were  made  in  different  States,  for  that  bears  no  just  and 
proper  relation  to  a  classification,  but  is  purely  arbitrary.  It 
cannot  be  based  on  public  policy ;  for  it  is  not  reasonable  to 
say  that  it  is  for  our  interest  to  encourage  the  introduction 

1  Supra,  Ch.  IV. 

2  See  Beeson  v.  Johns,  124  U.  S.  56,  31  L.  Ed.  360  (1888).  The  dis- 
crimination in  this  case  was  claimed  to  violate  the  ordinance  of  1787, 
and  the  act  of  admission  of  Iowa  into  the  Union.  The  court  held  that 
the  evidence  did  not  show  any  discrimination  against  non-residents 
as  such. 

3  State  V.  Hoyt,  71  Vt.  59  (1898). 

<  It  was  held  in  Cribbs  v.  Benedict,  64  Ark.  555  (1897),  that  the  differ- 
ence in  manner  of  enforcement  of  a  ditch  tax,  between  residents  and 
non-residents,  the  tax  being  the  samo  in  amount  and  a  lien  on  the  land 
in  both  cases,  was  not  an  unreasonable  discrimination. 


586  EQUAL   PROTECTION    OF   THE   LAWS   IN    TAXATION.  §    528 

and  sale  of  the  goods  of  the  non-resident  manufacturer,  when 
thereby  the  manufacturer  and  sale  of  the  goods  of  the  resident 
manufacturer  would  be  discouraged,  and  perhaps  prevented 
altogether.  Nor  can  it  be  based  on  the  difference  of  residence 
of  the  manufacturers ;  for  that,  as  in  case  of  the  goods,  would 
be  purely  arbitrary,  and,  besides,  would  alloAV  a  State  to  dis- 
criminate against  its  own  citizens  in  favor  of  the  citizens  of 
other  States,  which  it  cannot  do  any  more  than  it  can  discrim- 
inate in  favor  of  its  own  citizens  against  the  citizens  of  other 
States,  for  the  equality  clause  of  said  amendment  includes 
everybody.  No  State  shall  'deny  to  any  person  within  its 
Jurisdiction  the  equal  protection  of  the  laws'  is  its  language, 
and  its  universality  of  inclusion  has  been  often  adjudged. 
Yick  Wo  V.  Hopkins,  118  U.  S.  356,  369.  If  a  classification  can 
be  based  on  none  of  these  grounds,  we  see  no  ground  on  which 
it  can  be  based."* 

§  528.  Illegal  Discrimination  in  License  Taxation. — "While 
the  State  may  classify  for  the  purposes  of  license  taxation,  that 
is,  taxation  upon  business  or  occupations,  and  may  thus  tax 
one  business  without  taxing  another,  it  cannot  make  a  classi- 
fication which  is  arbitrary  and  has  no  just  and  reasonable  basis. 
This  was  illustrated  in  the  Department  Store  case,  supra, 
Sec.  525.    Where  a  license  tax  is  imposed  upon  those  of  a  cer- 


iln  Gilman  v.  Sheboygan,  2  Black  510,  17  L.  Ed.  305  (1863),  the 
court  followed  the  Supreme  Court  of  Wisconsin,  holding  that  under 
the  constitution  of  that  State  a  tax  upon  "all  the  real  estate"  of  the 
city  for  the  payment  of  a  railroad  subscription  was  an  illegal  dis- 
crimination, there  being  some  three  or  four  hundred  thousand  dol- 
lars of  personal  property  in  the  city  subject  to  taxation. 

For  other  illustrations  of  classifications  adjudged  illegal,  see  State 
V.  Hubbard,  12  Ohio  Circ.  Dec.  87  (1901),  holding  that  taxation  of  teach- 
ers as  a  class  of  citizens,  for  the  purpose  of  raising  a  Teachers'  Pension 
Fund,  was  void.  An  act  dividing  the  counties  of  the  State  into  classes 
and  the  lands  thereof  into  sub-classes  according  to  quality,  fixing  a  maxi- 
mum and  minimum  value  for  taxation  of  the  lands  in  the  several 
classes,  and  confining  the  assessor  to  the  limits  so  fixed,  was  held 
violative  of  uniformity  and  equality  in  taxation.  Hawkins  v.  Man- 
gum,  78  Miss.  97  (1900).  Also  State  v.  Benzenberg,  101  Wis.  172  (1898) ; 
State  V.  Gardner  (Ohio),  51  N.  E.  136  (1898) ;  Walsh  v.  Denver,  11  Colo. 
App.  523  (1898);  State  v.  Willingham  (Wyo.),  62  Pac.  Rep.  797,  9  Wyo. 
290  (1900). 


5    528         EQUAL   PROTECTION    OF    THE    LAWS    IN    TAXATION.  587 

taiu  business,  it  must  be  levied  without  discrimination  upon  all 
engaged  therein,  within  the  jurisdiction  of  the  authority  levy- 
ing the  tax.  This  is  essential  in  order  that  the  tax  may  be  equal 
and  uniform  as  required  by  the  State  constitutions,  as  well  as 
under  the  provision  for  equal  protection  of  the  laws.  In  the 
language  of  the  Supreme  Court  in  the  Illinois  inheritance  tax 
case,  supra,  Sec.  517,  the  rule  (of  the  Fourteenth  Amendment) 
is  not  a  substitute  for  municipal  law ;  it  onl}^  prescribes  that 
the  law  have  the  attribute  of  equality  of  operation,  and  the 
equality  of  operation  does  not  mean  indiscriminate  operation 
on  persons  as  such,  but  on  persons  according  to  their  relations. 
In  some  circumstances  it  cannot  tax  A  more  than  B,  but  if  A  be 
of  a  different  trade  or  profession  than  B,  it  may. 

In  North  Carolina  a  license  of  a  thousand  dollars  charged 
upon  the  occupation  of  an  emigrant  agent,  unaccompanied  by 
any  police  regulation,  wais  held  void  as  violative  of  the  princi- 
ple of  uniformity,  which,  under  the  constitution  of  that  State, 
prohibited  any  discriminating  tax  upon  persons  pursuing  the 
same  vocation.  The  decision  was  based  upon  the  ground  that 
there  was  no  regulation  prescribed  in  the  act,  and  that  it  was 
an  arbitrary  and  unreasonable  exercise  of  the  taxing  power.^ 

Reasonable  classifications  for  taxation,  however,  such  as  be- 
tween w^holesale  and  retail  merchants,^  between  manufacturing 
and  qtoasi  public  corporations  and  other  corporations,^  between 
gas  companies  and  other  manufacturing  companies,*  have  been 
sustained,  as  also,  in  numerous  cases,  have  license  charges  upon 
all  those  engaged  in  a  certain  business.  But,  on  the  other  hand, 
discriminations  between  members  of  the  same  natural  clasg 
have  been  uniformly  condemned.  Thus  discriminations  between 
commission  merchants  and  produce  dealers,^  in  license  taxation 


1  North  Carolina  v.  Moore,  113  N.  C.  697,  and  22  L.  R.  A.  472  (1893). 
The  act  also  lacked  uniformity  in  that  it  expressly  excluded  from  its 
operation  all  counties  lying  west  of  a  certain  line. 

2  Commonwealth  v.  Clark,  195  Pa.  St.  634  (1900). 

3  Carroll  v.  Alsup  (Tenn.),  64  S.  W.  Rep.  193  (1901).  See  also  Com- 
monwealth V.  Edgerton  Coal  Co.,  164  Pa.  St.  284  (1894). 

4  Williams  v.  Ree.se,  2  Fed.  882  (1880). 

5  Kansas  City  v.  Grush,  151  Mo.  128  (1899). 


588      EQUAL  PROTECTION  OF  THE  LAWS  IN  TAXATION.    §  528 

according  to  the  residence  of  a  party, i  and  between  merchants 
doing  business  in  different  parts  of  a  city,  have  been  held  void 
as  violative  of  the  principle  of  uniformity  and  equality,  as  be- 
tween members  of  the  same  natural  class.  A  poll  tax,  exempt- 
ing persons  who  had  voted  at  the  last  election,  was  held  an  un- 
reasonable classification  and  void.s  A  peddler's  license  tax,  ex- 
empting persons  who  had  served  in  the  army  or  navy,  was  also 
held  void.4 

But  the  Fourteenth  Amendment,  while  securing  to  all  per- 
sons in  the  pursuit  of  a  lawful  business  the  equal  protection  of 
the  laws,  is  not  to  be  construed  as  restricting  the  State  in  the 
exercise  of  its  power  to  charge  its  citizens  with  the  burdens  of. 
taxation,  differing  in  their  imposition  according  to  the  manner 
in  which  the  vocation  of  the  citizen  touches  and  concerns  the 
public  interests.  Thus,  in  New  York,  a  license  fee  upon  the 
entire  class  of  persons  acting  within  the  State  as  agents  for 
associations  of  individual  fire  underwriters  not  incorporated 
under  the  laws  of  the  State,  while  the  agents  of  domestic  fire 
insurance  corporations  were  not  subject  thereto,  was  held  not 
to  involve  the  unequal  application  of  a  tax.s 

The  regulation  of  the  liquor  traffic,  or  of  any  other  calling 
or  business  which  is  of  such  a  nature  that  it  may  fairly  be 
deemed  to  be  subject  to  police  prohibition  or  regulation,  ob- 
viously rests  on  different  grounds,  and  the  same  State  law  may 
authorize  both  regulation  and  taxation.^ 

Thus  the  statute  of  Texas,  requiring  a  license  and  bond  and 
the  payment  of  an  occupation  tax  as  conditions  of  the  right  to 
sell  liquors,   was  sustained  by  the   Supreme    Court,    although 


iSt.  Louis  V.  Consolidated  Coal  Co.,  113  Mo.  83   (1892). 

2  St.  Louis  v.  Spiegel,  75  Mo.  145  (1881) ;  St.  Louis  v.  Spiegel,  90  Mo. 
587  (1886). 

3  Kansas  City  v.  Whipple,  136  Mo.  475  (1896). 

4  State  V.  Garbrouski,  111  Iowa  496  (1900). 

5  Fire  Department  of  New  York  City  v.  Stanton,  159  N.  Y.  225  (1899) ; 
see  also  State  v.  French,  17  Mont.  54  (1895) ;  Hayes  v.  Commonwealth, 
55  S.  W.  Rep.  425  (1900);  Kinsley  v.  Cottrell,  196  Pa.  St.  614  (1900); 
Singer  Manufacturing  Co.  v.  Wright,  33  Fed.  121  (1887). 

6  Gundling  v.  Chicago,  supra,  Sec.  473. 


§    530         EQUAL   PROTECTION   OF    THE   LAWS   IN   TAXATION,  589 

there  was  no  such  requirement  as  to  any  other  occupation.i  The 
court  said  the  statute  affected  all  persons  in  Texas  engaged  in 
the  sale  of  liquors,  exacted  compliance  in  the  same  manner  and 
to  the  same  degree,  and  did  not  therefore  violate  the  Four- 
teenth Amendment.2 

§  529.    Street  Railroads  and  Equal  Protection  of  the  Laws. 

— The  exemption  of  the  sub-surface  street  railway  in  New  York 
city  from  the  operation  of  the  special  franchise  tax  law  of  New 
York  of  1899  did  not  make  that  statute  invalid  as  to  the  owners 
of  the  surface  street  railway  ;3  nor  was  a  street  railroad  denied 
the  equal  protection  of  the  laws  by  a  municipal  tax  on  its  busi- 
ness at  the  rate  of  $100  per  mile  or  fraction  of  a  mile  in  said 
streets,  because  a  steam  railway  making  an  extra  charge  for 
local  deliveries  of  freight  brought  over  its  road  from  outside 
of  the  State  is  not  subject  to  this  tax.4 

§  530.  The  Supreme  Court  on  Classifications  in  License  or 
Occupation  Taxation.— Although  the  equal  protection  of  the 
laws  is  invoked  in  substantially  all  eases  where  due  process  of 
law  is  denied  in  State  taxation,  particularly  in  the  case  of 
license  or  occupation  taxes,  the  Supreme  Court  has  all  but  uni- 
formly sustained  the  State  authority.  Thus,  it  was  held  that 
wholesale  dealers  in  oil  are  not  denied  the  equal  protection  of 
the  laws  by  the  Texas  occupation  tax,  although  no  similar  tax 
is  exacted  from  wholesale  dealers  on  other  articles  of  merchan- 
dise, such  as  sugar,  bacon,  coal,  and  iron  ;5  nor  was  the  require- 
ment of  a  stamp  tax  for  places  where  corporate  stocks  and 
bonds,  and  grain,  and  provisions,   and  other  commodities  are 

iGiozza  V.  Tiernan,  148  U.  S.  657,  37  L.  Ed.  599   (1893). 

2  See  also  Humes  v.  Ft.  Smith,  93  Fed.  857  (Ark.)  (1899);  Daniels 
V.  State,  150  Ind.  348  (1898);  Strouse  v.  Galesburg,  89  111.  App.  504 
a900);  In  re  Eberly,  98  Fed.  295  (1899). 

»  New  York  ex  rel.  v.  State  Board  Tax  Commission,  199  U.  S.  1, 
50  L.  Ed.  65   (1905),  affirming  174  N.  Y.  417. 

*  Savannah  Ry.  Co.  v.  Savannah,  198  U.  S.  392,  49  L.  Ed.  1097 
(1905),  affirming  115  Ga.  137. 

s  Southwestern  Coal  Co.  T.  Texas,  217  U.  S.  114,  54  L.  Ed.  688  (1910), 
affirming  100  Tex.  647. 


590      EQUAL  PROTECTION  OF  THE  LAWS  IN  TAXATION.    §  530 

"bought  and  sold,  but  not  paid  for  at  the  time,  make  the  statute 
invalid  as  denying  the  equal  protection  of  the  laws  under  the 
Missouri  Act  of  March,  1907  ;i  nor  was  an  occupation  tax  im- 
posed upon  the  business  of  compounding,  rectifying,  adulter- 
ating, and  blending  distilled  spirits  by  the  Kentucky  Act  of 
March  28,  1906,  invalid  as  denying  the  equal  protection  of  the 
laws,  because  no  such  tax  was  exacted  from  either  resident  or 
non-resident  distillers  who  neither  rectify,  compound,  adulter- 
ate, or  blend  their  products,  nor  from  rectifiers  and  blenders 
of  other  States  or  countries  who  vend  in  the  States,  untaxed, 
rectified  or  blended  spirits,  in  direct  competition  with  the  spir- 
its of  local  rectifiers  or  blenders  ;2  nor  did  the  exemption  of 
steam  laundries  and  women  engaged  in  a  laundry  business 
where  more  than  two  women  were  employed,  from  the  license 
tax  of  Montana,  Code  2776,  upon  the  laundry  business,  deny_ 
the  equal  protection  of  the  laws  to  men  operating  a  hand  laun- 
dry. 3 

In  this  case  it  was  suggested  that  this  exemption  involved  a 
discrimination  against  Chinamen ;  and  the  court  said  that  that 
question  was  not  properly  before  it,  as  the  action  was  one 
brought  to  recover  $10  paid  under  duress  and  protest  for  a 
license  to  do  hand  laundry  work,  and  it  was  without  prejudice 
to  that  question  when  it  should  be  raised ;  and  the  court  affirmed 
the  judgment. 

Nor  was  the  equal  protection  of  the  laws  denied  in  any  of 
the  f ollovsdng  cases : 

To  a  retail  dealer  by  the  Iowa  tax  imposed  on  cigarette  sell- 
ing, because  sales  by  jobbers  and  wholesalers,  in  doing  inter- 
state business  with  customers  outside  of  the  State,  were  ex- 
cept ed.* 


iBroadnak  v,  Missouri,  219  U.  S.  284  (1910),  55  L.  Ed.  219,  affirming 
228  Mo.  25. 

2  Brown-Forman  Company  v.  Kentucky,  217  U.  S.  563,  54  L.  Ed,  883 
(1910),  affirming  125  Ky.  402. 

3  Quong  Wing  v.   Kirkendall,  223   U.   S.   59,  56   L.   Ed.   350    (1912), 
affirming  39  Mont.  64. 

4  Cook   V.   Marsliall   County,   196   U.   S.   261,   49   L.   Ed.   471    (1905), 
affirming  119  la.  384. 


§  531    EQUAL  PROTECTION  OF  THE  LAWS  IN  TAXATION.      591 

Nor  liquor  sellers,  because  producers  and  manufacturers  of 
domestic  wines  are  excepted  by  the  Texas  law,  while  such  wines 
were  in  their  hands.i 

Nor  to  a  domes)tie  agent  of  a  non-resident  packing  house  un- 
der the  Georgia  License  Law.s 

Nor  members  of  an  incorporated  chamber  of  commerce,  be- 
cause of  the  exemption  by  the  laws  of  Minnesota  of  other  or- 
ganizations, such  as  the  Associated  Press,  fraternal  orders, 
etc.  3 

§  531.    Discrimination  in  Expenditure  of  Public  Funds. — 

The  equal  protection  of  the  laws  under  the  Fourteenth  Amend- 
ment prohibits  unjust  discrimination  not  only  in  taxation,  but 
also  in  the  expenditure  of  the  proceeds  of  taxation.  It  is  ob- 
vious, however,  that  a  very  clear  case  must  be  presented,  to 
justify  the  judiciaiy  in  interfering  with  the  very  large  discre- 
tion which  is  reposed  in  the  legislative  department  in  expend- 
ing, under  the  limitations  of  the  State  constitution,  the  public 
funds  for  the  public  needs. 

This  principle  was  applied  by  the  United  States  Circuit 
Court  in  Kentucky,  in  granting  an  injunction  against  a  Board 
of  Trustees  of  Public  Schools,  in  behalf  of  certain  colored  citi- 
zens, on  the  ground  of  discrimination  in  the  distribution  of 
school  funds.4  The  act  of  the  legislature  authorized  the  munici- 
pality to  levy  a  tax  for  the  benefit  of  the  public  schools  within 
its  limits,  but  directed  that  the  taxes  collected  from  the  white 
people  should  be  used  to  sustain  the  schools  for  white  children 
only,  and  that  those  collected  from  the  colored  people  should 
go  to  support  the  schools  for  the  colored  children.  The  effect 
of  this  discrimination  was  to  give  to  the  whites  excellent  school 
facilities  and  a  school  session  annually  of  nine  months,  and  to 
the  colored  children  inferior  school  facilities  and  an  annual  ses- 


1  Cox  V.   Texas,  202   U.   S.   440,  50   L.   Ed.   1019    (1906),  affirming   95 
S.  W.   (Tex.)   734. 

2  Cairo  V.  Stewart,  197  U.  S.  60,  49  L.  Ed.  663,  affirming  117  Ga.  919. 
8  Rogers  v.  County  of  Hennepin,  supra. 

*  Claybrook  v.  City  of  Owensboro,  16  Fed.  297. 


592  EQUAL   PROTECTION   OF   THE   LAWS   IN   TAXATION.  §    531 

sion  of  only  three  months.  The  court  said  that  this  was  a  dis- 
crimination under  State  authority  constituting  a  denial  of  the 
equal  protection  of  the  laws.  In  answer  to  the  argument  that 
the  equal  protection  does  not  mean  the  equal  benefit  of  the  laws, 
the  court  said  that  on  that  basis  the  State  could  apply  taxes  not 
only  according  to  color,  but  also  according  to  the  nativity  of 
citizens,  and  that  a  division  might  be  made  limiting  the  benefit 
and  distributing  the  protection  of  the  laws  according  to  the 
taxes  paid  and  the  wealth  of  the  taxpayer.  This  would  entirely 
ignore  the  spirit  of  our  republican  institutions.  The  court  added 
at  page  302: 

"The  equal  protection  of  the  laws  guarantied  by  this  amend- 
ment must  and  can  only  mean  that  the  laws  of  the  States 
must  be  equal  in  their  benefit  as  well  as  equal  in  their  bur- 
dens, and  that  less  would  not  be  the  equal  protection  of  the 
laws.  This  does  not  mean  absolute  equality  in  distributing 
,the  benefits  of  taxation.  This  is  impracticable;  but  it  does 
mean  the  distribution  of  the  benefits  upon  some  fair  and  equal 
classification  or  basis." 

The  court  quoted  the  language  of  the  Supreme  Court  of  Cali- 
fornia :^ 

"  'To  declare,  then,  that  each  person  within  the  jurisdic- 
tion of  the  State  shall  enjoy  the  equal  protection  of  its  laws, 
is  necessarily  to  declare  that  the  measure  of  legal  right  within 
the  State  shall  be  equal  and  uniform,  and  the  same  for  all  per- 
sons found  therein,  according  to  the  respective  conditions  of 
each — each  child  as  to  all  other  children,  each  adult  person  as 
to  all  other  adult  persons.'  '* 

On  final  hearing  of  this  case,^  it  was  held  that  the  court  had 
no  power  to  issue  a  mandatory  injunction,  requiring  the  dis- 
tribution of  the  money  raised  by  taxation  for  public  schools  re- 
gardless of  the  discriminations  prescribed  by  the  act,  and  could 
only  enjoin  persons  from  acting  under  authority  of  the 
act. 


1  In  Ward  v.  Flood,  48  Cal.  51  (1874). 

2  23  Fed.  634   (1884). 


§    533         EQUAL    PROTECTION    OF   THE   LAWS   IN    TAXATION.  593 

§  532.    Equal  Protection  of  the  Laws  in  Tax  Procedure. — 

The  right  of  classification  recognized  in  the  guaranty  of  the 
equal  protection  of  the  laws  is  also  applied  to  tax  procedure 
when  it  is  claimed  that  statutes  of  procedure  do  not  apply 
equally  to  all  the  lands  in  the  State.  The  fact  that  in  its  appli- 
cation a  statute  can  only  meet  conditions  such  as  are  embraced 
in  the  law  as  to  a  part  of  the  counties  in  the  State  does  not  ren- 
der it  obnoxious  to  the  Fourteenth  Amendment.  It  is  sufficient 
that  the  law  applies  with  equal  force  to  all  that  are  brought 
within  its  terms.^ 

§  533.  Discrimination  Between  Races  in  Expenditure  of 
School  Funds. — The  same  question  came  before  the  Supreme 
Court  of  the  United  States  in  another  case  presenting  a  mate- 
rially different  question.  The  Board  of  Education  in  Richmond 
County,  Georgia,  suspended  the  high  school  for  negroes,  but 
continued  to  maintain  one  for  white  children.  Suit  was  brought 
to  compel  the  closing  of  the  high  school  for  the  whites,  on  the 
ground  that  its  maintenance  when  the  other  was  closed  was  a 
discrimination  against  the  colored  race  in  violation  of  the  rights 
secured  to  them  under  the  Fourteenth  Amendment.  The  con- 
stitution of  Georgia  provided  for  free  and  separate  schools. 
The  State  court  did  not  deem  the  action  of  the  board  in  sus- 
pending temporarily  and  for  economic  reasons  the  high  school 
for  the  colored  children  a  sufficient  reason  for  closing  that  for 
the  whites,  and  said  there  was  no  evidence  that  the  board  had 
acted  in  bad  faith,  or  that  it  had  abused  its  discretion.2  The 
Supreme  Court  said  that  under  the  circumstances  it  could  not 


1  See  Kentucky  Union  Company  v.  Kentucky,  Sec.  365,  supra. 

2  Gumming  v.  Board  of  Education,  175  U.  S.  538,  44  L.  Ed.  262 
(1899),  affirming  103  Ga.  641.  Held,  by  the  New  York  Ct.  of  App., 
93  N.  Y.  438,  People  ex  rel.  v.  Gallagher,  that  separate  public  schools 
being  provided  for  colored  children,  such  children  may  be  excluded 
from  those  provided  for  vv^hite  children,  and  that  this  involved  no 
denial  of  rights  under  the  Fourteenth  Amendment.  Attention  was 
called  to  the  fact  that  Congress  had  established  exclusive  schools  for 
the  education  of  the  colored  race  in  the  District  of  Columbia.  The 
amendment  was  not  intended  to  have  any  other  effect  than  to  give  to 


594  EQUAL    PROTECTION    OF    THE   LAWS   IN    TAXATION.  §   533 

see  that  this  action  of  the  State  court  was,  within  the  meaning 
of  the  Fourteenth  Amendment,  a  denial  of  the  equal  protection 
of  the  laws  to  plaintiffs;  adding  that  "while  all  admit  that  the 
benefits  and  burdens  of  public  taxation  must  be  shared  by  citi- 
zens without  discrimination  against  any  class  on  account  of 
their  race,  the  education  of  the  people  in  the  schools  maintained 
by*  State  taxation  is  a  matter  belonging  to  the  respective  States, 
and  any  interference  on  the  part  of  the  Federal  authority  with 
the  management  of  such  schools  cannot  be  justified  except  in 
the  case  of  a  clear  and  unmistakable  disregard  of  rights  secured 
by  the  supreme  law  of  the  land." 

It  seems  that  in  this  case  the  board  had  not  established  a  high 
school  for  white  boys,  but  only  for  white  girls.  The  court  said 
that  the  colored  school  children  of  the  county  would  not  be  ad- 
vanced in  the  matter  of  their  education  by  a  decree  compelling 
the  board  to  cease  giving  support  to  the  white  high  school,  that 
its  decision  was  in  the  interest  of  the  greater  number  of  the 
colored  children  who  attended  the  primary  schools,  and  that  the 
small  number  wanting  a  high  school  education  could  obtain  it 
in  the  existing  private  institutions  at  an  expense  not  beyond 
that  incurred  in  the  high  school  discontinued  by  the 
board. 

In  a  Kansas  ease,^  an  act  providing  for  the  levy  of  a  fire  tax 
which  excluded  the  property  of  railroad  companies,  whereon 
the  tax  was  levied,  from  the  benefit  and  protection  of  the  pro- 
ceeds thereof,  was  held  invalid,  the  court  saying: 

"As  some  of  the  taxpayers  appear  to  have  been  purposely 
excluded  from  the  benefit  and  protection  of  the  law,  the  tax, 
therefore,  lacks  that  equality  and  uniformity  essential  to  its 

all,  without  respect  to  color,  age  or  sex,  the  same  legal  rights  and  the 
uniform  protection  of  the  same  laws. 

Held,  in  North  Carolina,  Markham  v.  Manning,  96  N.  C.  132  (1887) ,  that 
a  law  which  directed  that  the  funds  raised  by  taxation  from  the  prop- 
erty of  whites  should  be  devoted  to  the  schools  of  white  children,  and 
those  raised  from  the  property  of  negroes  should  be  devoted  to  schools 
for  negroes,  was  unconstitutional  and  void.  See  United  States  v.  Bun- 
tin,  10  Fed.  730,  and  cases  cited  in  note. 

lA.  T.  &  S.  F.  R.  Co.  V.  Clark,  60  Kan.  826  (1899). 


§    534         EQUAL   PROTECTION    OF   THE   LAWS   IN   TAXATION.  595 

validity.  It  is  a  discrimination  against  one  taxpayer  in  favor 
of  another,  and  is  a  denial  of  the  equal  protection  of  the  law 
required  by  both  State  and  Federal  constitutions.  Absolute 
equality  in  taxation  is,  of  course,  unattainable,  but  a  law,  the 
manifest  purpose  and  legitimate  result  of  which  is  discrimina- 
tion and  inequality,  cannot  be  sustained." 

§  534.    Federal  and  State  Guaranties  of  Equal  Taxation. — 

The  Fourteenth  Amendment  in  this  guaranty  of  the  equal  pro- 
tection of  the  laws  confers  no  right,  except  that  of  invoking  the 
Federal  power  against  illegal  discriminations  under  State  au- 
thority. Equal  protection  of  the  laws  as  construed  by  the  Su- 
preme Court  does  not  require  an  iron  rule  of  equality  in  tax- 
ation, but  does  require  that  uniformity  and  equality  as  to  the 
same  class  of  subjects  by  due  apportionment  which  are  inherent 
in  taxation,  as  distinguished  from  arbitrary  exaction.  A  State 
has  the  right  to  determine  according  to  its  own  considerations 
of  public  policy  what  subjects  shall  be  taxed  and  what  reason- 
able classification  shall  be  made  in  distributing  the  burdens  of 
taxation,  provided  that  the  classification  is  natural  and  reason- 
able and  not  arbitrary  and  oppressive.  What  is  natural  and 
reasonable  on  the  one  hand,  or  arbitrary  and  oppressive  on  the 
other,  must  be  determined  from  the  circumstances  of  each  case, 
as  from  the  nature  of  things  no  definite  rule  can  be 
formulated. 

It  will  be  seen,  however,  from  the  opinions  of  the  Supreme 
Court  and  the  several  State  courts  in  which  the  question  has 
been  discussed,  that  the  latter  tribunals  have  been  disposed  to 
give  a  stricter  construction  to  State  constitutional  provisions 
requiring  equality  and  uniformity  in  taxation  than  the  Supreme 
Court  has  given  to  this  clause  of  the  Fourteenth  Amendment 
as  a  restraint  upon  the  State  power  of  taxation.  Thus,  in  the 
matter  of  inheritance  taxation,  the  Supreme  Court  held  valid, 
under  the  Fourteenth  Amendment,  a  progressive  tax  which  had 
been  held  invalid  in  certain  State  courts  as  violative  of  equality 
and  uniformity  in  their  respective  constitutions. 

It  is  doubtless  true,  however,  that  the  very  existence  of  this 
Federal  guaranty,  conservative  as  the  Supreme  Court  has  been 


596  EQUAL   PROTECTION    OF    THE   LAWS   IN   TAXATION.  §    534 

in  its  enforcement,  is  a  protection  against  the  discriminating 
exercise  of  the  taxing  power. ^ 


1  The  subject  of  classification  was  thoroughly  considered  in  In- 
diana, State  ex  rel.  v.  Smith,  158  Ind.  543  (1902),  where  the  court, 
two  judges  dissenting,  sustained,  as  a  valid  classification  under 
the  State  constitution  requiring  a  uniform  rate  of  taxation,  and 
also  under  the  Fourteenth  Amendment,  an  act  allowing  deduction 
from  the  assessed  value  of  real  estate  of  mortgage  indebtedness 
to  the  amount  of  $700,  no  deduction  being  allowed  greater  than  one- 
half  of  the  assessed  value  of  the  real  estate. 

The  writ  of  error  from  the  Supreme  Court  in  this  case  was  dis- 
missed, 191  U.  S.  138,  48  L.  Ed.  125  (1903),  the  court  holding  that  a 
county  auditor  did  not  have  such  a  personal  interest  entitling  him 
to  a  writ  of  error,  as  a  personal,  and  not  an  official,  interest  was 
necessary. 


CHAPTER  XVI. 

EQUAL  PROTECTION  OF  THE  LAWS  IN  THE  VALUATION  OF 

PROPERTY. 

§  535.  Inequality  in  taxation  through   inequality   of  valuation. 

536.  Inequality  of  valuation  from  error  of  judgment. 

537.  Inequality  through   unequal   local   assessments. 

538.  Fraudulent  valuation  in  assessments. 

539.  Discrimination   by   undervaluation    of    other    property. 

540.  Dilemma  of  courts  in  remedying  unequal  valuations. 

541.  Habitual  and  intentional  violation  of  assessor's  duty  must  be 

proved. 

542.  Relief  against  discriminating  assessments  in   State  courts. 

543.  Equality   of   valuation   enforced    in    Federal    courts. 
o44.     Judge  Taft  on  dilemma  of  courts. 

545.  Formal    resolution    not    necessary    for    intentional    discrimina- 

tion. 

546.  Supreme  Court  condemns   inequality  of  valuation. 

547.  Illegality    of    unequal    valuation    reaffirmed — Jurisdiction     of 

equity. 

548.  Inequality  of  valuation  as  Federal  question. 

549.  Proof  of  discrimination   by  cross-examination   of   State   Board 

of  Equalization  members. 

550.  Systematic  discrimination  by  undervaluation  of  other  property 

illegal. 

551.  The  proof  of  unlawful  discrimination. 

552.  Full  valuation  enforced  by  creditors  of  counties  and   munici- 

palities. 

§  535.  Inequality  in  Taxation  Through  Inequality  of  Val- 
uation.— The  Federal  guaranty  of  equal  protection  of  the  laws 
has  been  invoked  to  remedy  another  form  of  discrimination, 
growing  out  of  habitual  and  intentional  inequality  in  the  valu- 
ation of  property  for  taxation.  It  is  obvious  that,  where  tax- 
ation is  upon  property  that  requires  valuation,  inequality  of 
taxation  is  produced  as  surely  by  inequality  of  valuation  as  by 
inequality  of  the  rate  of  tax.  This  was  declared  by  the  Su- 
preme Court  in  construing  the  Act  of  Congress  providing  that 
State  taxation  upon  the  shares  of  the  national  banks  should  not 

(597) 


598  EQUALITY   OP   VALUATION   IN    TAXATION.  §    535 

be  at  a  greater  rate  than  is  assessed  on  other  moneyed  capital.^ 
The  court  said  that  Congress  had  in  mind  an  assessment,  a  rate 
of  assessment,  and  valuation,  and  taking  all  these  together  the 
taxation  on  these  shares  was  not  to  be  greater  than  on  other 
moneyed  capital.  Congress,  therefore,  in  prohibiting  discrim- 
ination in  taxation  against  national  banks,  prohibited  discrim- 
inations in  the  valuation  of  bank  shares.  The  principle  thus 
applied  in  enforcing  equality  in  the  taxation  of  national  bank 
shares  has  been  applied  to  discriminations  in  the  taxation  of 
other  property,  effected  through  inequality  of  valuation  pro- 
ducing inequality  in  taxation  under  the  same  rate  of  taxation. 
This  discriminating  inequality,  when  habitual  and  intentional, 
has  been  declared  violative  of  both  the  equality  and  uniformity 
guaranteed  by  State  constitutions,  and  also  of  the  equal  pro- 
tection of  the  laws  guaranteed  by  the  Federal  Constitution. 

It  is  obviously  immaterial  what  the  basis  of  valuation  is,  if  it 
is  uniform  as  to  all  property  within  the  territory  or  as  to  the 
class  of  subjects  upon  which  the  tax  is  laid.  This  is  recognized 
in  the  requirement  of  some  State  constitutions,  that  taxation  shall 
be  uniform  upon  the  same  class  of  subjects  within  the  territorial 
limits  of  the  authority  imposing  it.  Thus,  if  all  the  property 
in  the  State  were  valued  on  the  same  basis,  it  would  be  imma- 
terial to  the  individual  taxpayer  whether  he  paid  one  per  cent 
on  a  valuation  of  one  hundred  cents,  or  two  per  cent  on  a  valu- 
ation of  fifty  cents,  or  four  per  cent  on  a  valuation  of  twenty- 
five  cents.  If  there  were  no  general  property  tax  levied  by  the 
State,  based  upon  valuation,  it  would  make  no  difference 
whether  property  in  one  town  or  county  was  valued  on  a  higher 
basis  than  property  in  another.  But  within  the  territory 
wherein  the  tax  is  levied,  as  in  the  State  at  large  wherein  the 
State  tax  upon  property  is  levied  throughout  its  jurisdiction, 
inequalit}^  of  taxation  results  as  certainly  from  inequality  of 
valuation  as  from  inequality  in  the  tax  rate.  The  failure  to 
recognize  this  fundamental  principle  in  taxation  often  makes 
it  misleading  to  compare  for  illustration  the  taxing  rates 
of  different  States  or  communities,  as  it  is  impossible  to  com- 


1  Supra,  Sec.  312. 


5  537        EQUALITY  OF  VALUATION  IN  TAXATION.  599 

pare  the  burden  of  taxation  in  different  communities,  unless  we 
have  both  the  essential  factors  of  the  problem,  the  rate  of  the 
valuation  and  the  rate  of  the  tax.^ 

§  536.    Inequality  of  Valuation  from  Error  of  Judgment. — 

This  inequality  of  valuation  may  exist  when  the  design  on  the 
part  of  the  assessors  is  honest,  and  there  is  no  intentional  dis- 
crimination. There  are  inevitable  inequalities  in  valuation 
growing  out  of  the  errors  and  infirmities  of  human  judgment. 
The  Supreme  Court  has  said  that  "perfect  uniformity  and  per- 
fect equality  of  taxation,  in  all  the  aspects  in  which  the  human 
mind  can  view  it,  is  a  baseless  dream.  "^ 

The  influences  which  affect  the  salable  values  of  property 
are  variable  and  often  complicated.  Thus  it  has  been  said*  that 
the  differences  between  assessors  on  questions  of  valuation  of 
the  same  class  of  property  are  no  greater  than  frequently  arise 
between  witnesses  in  a  trial  on  questions  of  value.  There  is  no 
certain,  definite  standard  of  values,  excepting  of  money  and 
standard  marketable  articles.  Many  influences,  tangible  and  in- 
tangible, affect  the  salable  value  of  property,  real  and  personal, 
both  in  city  and  country,  so  as  to  make  its  real  valuation  a  work 
of  great  difficulty  and  resulting  in  inevitable  inequalities.  It 
is  for  the  purpose,  thei-efore,  of  remedying  as  far  as  practicable 
these  inevitable  inequalities  growing  out  of  the  honest  but  mis- 
taken judgment  of  assessors,  that  special  tribunals  are  provided 
for  the  equalization  of  values,  and  as  a  rule  inequalities  not 
involving  intentional  discrimination  oan  only  be  remedied  in 
such  tribunals. 4 

§  537.    Inequality  Through  Unequal  Local  Assessments. 

These  inevitable  and,  as  a  rule,  irremediable  inequalities  in  tax- 

1  For  illustrations  in  State  taxing  systems  of  taking  a  fixed  per 
cent  of  the  value  returned  as  a  basis  of  assessment,  see  State  systems 
of  Alabama,  Illinois,  Iowa,  Nebraska  and  Minnesota,  infi-a,  appendix. 

2  Justice  Miller  in  the  Head  Money  Cases,  112  U.  S.  580,  1.  c.  595,  28 
L.  Ed.  798    (1884). 

'■ifiupra,  Sec.  312. 

■♦  In  some  Statns,  as  in  Now  York,  inequalities  in  values  may  be  re- 
viewed by  the  courts  on  writ  of  crrtiorari. 


600  EQUALITY   OF   VALUATION    IN    TAXATION.  §    537 

ation  are  in  many  cases  grossly  aggravated  by  intentional  low- 
ering or  raising  of  the  rate  of  valuation  by  local  assessments 
in  response  to  local  needs  or  local  public  opinion.  In  many 
States  the  maximum  tax  rate  of  municipalities  or  counties  is 
limited  by  the  constitutdon  or  statutes,  so  that  a  higher  rate  of 
valuation  is  enforced  in  order  to  raise  the  revenues  for  munici- 
pal or  local  expenses,  while,  in  counties  where  there  is  no  such 
need  for  revenue,  valuations  are  made  at  a  lower  rate ;  so  that 
the  State  tax  is  levied  upon  property  in  cities  at  a  higher  rate 
of  valuation  than  it  is  upon  other  property  in  the  State,  thus 
making  an  inequality  of  taxation  as  between  different  parts  of 
the  State.  1 

Many  of  the  States  have  sought  to  remedy  these  inequalities, 
growing  out  of  the  action  of  local  assessors  influenced  by  local 
considerations,  through  boards  of  equalization  vested  with  power 
to  equalize  these  local  valuations  as  to  the  different  classes  of 
property.  Another  remedy  has  been  urged  and  adopted  in 
some  States,  in  the  separation  of  the  sources  of  municipal  and 
State  revenue,  "Where  such  separation  is  made  and  no  State 
tax  is  levied  upon  the  property,  the  inequality  in  valuation  be- 
tween the  local  subdivisions  becomes  immaterial,  as  the  other 
subdivisions  are  not  affected  thereby.2 


1  In  some  States  county  assessors  are  reported  to  have  been  elected 
on  the  platform  of  lowering  the  county  assessments. 

2  The  experience  of  Missouri  in  this  regard  is  interesting,  as  it  is 
fairly  typical  of  other  States  in  this  matter.  From  a  careful  investi- 
gation made  a  few  years  since,  it  was  found  that  the  rate  of  assess- 
ments varied  in  the  State  from  20%  to  80%  of  the  full  value,  the  aver- 
age assessment  of  farm  lands  being  about  35%.  In  St.  Louis,  real  es- 
tate was  assessed  at  70%,  while  money  and  securities,  when  discov- 
ered by  the  assessor  (mainly  in  the  Probate  Court),  were  assessed  at 
100%.  The  only  effectual  equalizing  by  the  State  Board  of  Equaliza- 
tion was  in  the  case  of  banks  and  trust  companies,  which  had  been 
locally  assessed  in  the  different  cities  and  counties  all  the  way  from 
38%  to  100%,  and  the  State  Board  fixed  an  equalized  value  at 
50%.  The  equalizing  of  general  property  valuations  was  not  at- 
tempted. See  writer's  "Taxation  in  Missouri,"  Ch.  XVI.  A  State  tax 
commission  was  created  in  1917  to  igrapple  with  the  problem. 


§  538        EQUALITY  OP  VALUATION  IN  TAXATION.  601 

§  538,  Fraudulent  Valuation  in  Assessments.  —  Assessors 
act  in  a  semi-judicial  capacity,  and,  as  a  rule,  their  judgments 
are  only  reviewable  in  special  tribunals  established  by  the  State 
for  that  purpose,  so  far  as  errors  of  judgment  in  valuation  are 
concerned.  These,  like  all  judgments,  may  be  vacated  for  fraud 
in  direct  proceedings,  but  the  fraud  must  be  clearly  estab- 
lished.! Accordingly,  an  invidious  assessment,  made  unequal 
and  oppressive  through  intentional  unfairness  of  valuation,  will 
be  set  aside.  Thus,  the  Supreme  Court  of  Michigan,  in  an  opin- 
ion by  Judge  Cooley,  held  that  a  bill  was  not  demurrable,  which 
alleged  that  an  assessment  was  fraudulently  made  above  the  real 
value  of  the  property  and  relatively  much  above  other  property. 
Later,  2  the  same  court  applied  this  principle  to  a  case  where 
a  fraudulent  undervaluation  of  certain  property  was  alleged 
which  resulted  in  the  increase  of  plaintiff's  assessment,  and  the 
court  held  that  the  plaintiff  was  entitled  to  a  reduction  to  the 
extent  that  his  assessment  was  increased  by  reason  of  such 
fraudulent  valuation.     It  said: 

"We  cannot  agree  with  the  authorities  cited  by  defendant 
to  sustain  the  position  that  a  wilful  or  intentional  violation 
of  the  law,  by  the  omission  of  property  from  assessment  or  its 
deliberate  undervaluation,  must  be  treated  the  same  in  equity, 
as  regards  the  assessment  and  valuation  of  property  for  tax- 
ation, as  an  accidental  omission  or  an  honest  mistake  in  judg- 
ment because  the  result  is  the  same  in  both  cases.  Fraud  is 
ever  open  to  remedy  in  a  court  of  equity,  and  there  can  exist 
no  good  reason  why  relief  against  fraud  in  taxation,  "vvhich  in 
the  end  deprives  a  man  of  his  property  without  due  process  of 
law,  cannot  be  granted  as  well  as  against  any  other  fraud. "« 


1  Merrill  v.  Humphrey,  24  Mich.  170  (1871). 

»  Walsh  V.  King.  74  Mich.  350  (1889). 

s  See  also  Pacific  Postal  Telegraph  Cable  Co.  v.  Dalton,  119  Cal. 
604  (1898),  holding  that  a  taxpayer  may  enjoin  the  collection  of  a  tax 
founded  upon  assessments  fraudulently  and  corruptly  made  with  in- 
tention of  discriminating  against  him,  and  for  the  purpose  of  causing 
him  to  pay  more  than  his  just  share  of  taxes,  but  not  for  mere  error 
In  judgment.  See  also  Hersey  v.  Supervisors,  16  Wis.  185  (1862),  where 
an  intentional  omission  was  held  to  avoid  an  assessment. 


602  EQUALITY    OP   VALUATION   IN    TAXATION.  §    540 

§  539.  Discrimination  by  Undervaluation  of  Other  Prop- 
erty.— The  proof  of  such  fraudulent  undervaluation,  which 
would  warrant  a  court  in  setting  aside  an  assessment,  is  rarely 
obtainable.  The  real  difficulty,  which  is  widely  prevalent,  arises 
not  from  discrimination  by  intentional  overvaluation,  that  is, 
by  valuing  property  at  more  than  the  true  value,  but  by  the 
undervaluation  of  other  property.  This  may  not  be  fraudulent 
in  the  sense  that  it  proceeds  from  a  corrupt  motive  on  the  part 
of  the  assessor,  but  it  is  intentional,  and,  when  it  is  habitual, 
as  it  often  is,  it  operates  as  an  effective  discrimination.  This 
discrimination  may  be  effected,  although  the  property  of  the 
party  discriminated  against  may  also  be  valued  at  less  than  its 
true  value,  through  the  greater  undeiwaluation  of  other  prop- 
erty. It  is  the  relative  valuation  of  property  which  constitutes 
discrimination.  Thus,  if  the  property  of  one  taxpayer  or  class 
of  taxpayers  is  valued  at  eighty  per  cent  of  the  full  value,  while 
all  other  property  subject  to  the  same  tax  is  valued  at  forty  per 
cent,  there  is  as  clear  and  effective  a  discrimination  as  if  the 
^assessment  of  the  former  had  been  above  the  true  value  and  all 
other  assessments  at  the  true  value. 

§  540.  Dilemma  of  Courts  in  Remedying"  Unequal  Valua- 
tion.— The  courts  of  some  of  the  States  have  found  a  difficulty 
in  remedying  this  form  of  discrimination  in  taxation,  as  such 
remedy  would  involve  the  judicial  recognition  of  the  practice 
of  undervaluing  property  in  violation  of  the  constitutional  or 
statutory  requirement,  that  all  property  should  be  assessed  at 
its  full  or  cash  value.  This  requirement  is  differently  phrased 
in  the  constitutions  or  statutes  as  "full  value,"  "cash  value," 
or  "fair  cash  value."  Not  only  is  it  presumed  that  assessors 
perform  their  official  duty  and  do  not  violate  their  official  oaths, 
but  these  courts  have  found  it  difficult  to  relieve  disproportion- 
ate taxation  by  directing  a  reassessment  or  a  reduction  of  an 
assessment  below  the  "full  value"  directed  by  the  constitution 
or  statute  of  the  State. 

Thus  it  was  said  by  the  Supreme  Court  of  Massachusetts:^ 


1  Lowell  V.  Co.  Commissioners,  152  Mass.  375  (1890). 


§541  EQUALITY    OP   VALUATION    IN    TAXATION.  603 

"Whatever  may  be  the  remedy,  if  there  be  any,  Avhen  it  is 
shown  that  the  assessors  have  intentionally  assessed  the  prop- 
erty of  a  part  or  all  o  f  the  inhabitants  at  less  than  its  fair  cash 
value,  we  are  of  opinion  that,  in  a  petition  for  the  abatement 
of  taxes  on  the  groiuad  of  the  overvaluation  of  the  property  of 
the  petitioner,  and  1  ]ie  disproportionate  taxation  arising  from 
such  overvaluation,  the  question  is,  whether  the  property  has 
been  valued  at  more  than  its  fair  cash  value,  and  not  whether 
it  has  been  valued  L-^slatively  more  or  less  than  similar  property 
of  other  persons.'"' 

Also  in  New  Jorsey,^  where  it  was  claimed  that  the  State 
Board  had  assessf/1  corporate  property  at  its  "true  value"  and 
local  assessors  had  assessed  other  property  "at  much  below  its 
true  value,"  thft  court  said  that  the  argument  that  the  State 
Board  should  be.  compelled  to  pursue  the  same  forbidden  course 
had  no  force  v/^hatever. 

In  an  Ohio  ease,^  the  court  said  that  a  gross,  if  not  scandal- 
ous, inequality  existed  between  the  burdens  of  taxation  cast 
upon  bank  staires  and  those  imposed  upon  other  property  in 
the  county.  Tiut  it  said  that  the  blame  attached  to  the  officers 
of  the  law  a;ad  not  to  the  law  itself,  and  that,  to  reduce  plain- 
tiff's assessraent  from  eighty  per  cent,  its  value  fixed  by  the 
assessor,  to  the  forty  per  cent  at  which  other  property  was 
valued,  wot  dd  put  an  additional  wrong  upon  the  other  counties 
of  the  Sta'ce  where  property  was  presumably  valued  for  State 
purposes  3  t  the  full  value  prescribed  by  the  statute.* 

§  541.  Habitual  and  Intentional  Violation  of  Assessor's 
Duty  Mu  ":X  be  Proved. — The  presumption,  on  which  these  de- 
cisions o-'£  the  State  courts  are  based,  that  assessors  sworn  to 


iThis  was  the  case  of  a  manufacturing  company,  and  it  was  held 
that  the  evidence  of  what  other  manufacturing  property  was  valued 
at  was  admissible  only  as  a  possible  assistance  in  determining  the 
cash  va  iue  of  the  property  in  question,  as  that  and  not  the  propor- 
tionate  Taluo  was  in  issuo. 

2Cen  tral  Railroad  Company  v.  Assessors,  48  N.  J.  L.  1  (1886). 

•'Wagoner  v.  Loomis.  37  Ohio  St.  571   (1881). 

*Tbif,  case  is  an  interesting  illustration  of  the  injustice  and  ef- 
fectu?  1  inequality  enforced  through  the  presumption  that  officers  of 
the  lav/  do  their  duty,  when  it  is  notorious  that  they  do  not. 


604  EQUALITY  OF  VALUATION  IN  TAXATION.        §  541 

assess  property  at  its  true  value  or  trtie  cash  value  perform 
their  official  duty,  has  been  recognized  and  applied  by  the  Su- 
preme Court,  where  discriminations  through  undervaluations 
of  other  property  were  claimed  as  a  deniaA  of  the  equal  protec- 
tion of  the  laws  under  the  Fourteenth  Amendment.  That  court 
has  therefore  held  that  such  undervaluation  cannot  be  pre- 
sumed, but  must  be  distinctly  alleged  and  proved.  In  this  case 
the  New  York  Court  of  Appeals  said^  that,,  while  it  was  gener- 
ally understood  that  in  many  localities  throughout  the  States 
assessors,  in  violation  of  their  duties,  valued  real  estate  at  less 
than  its  actual  value,  the  court  could  not  asimme  without  proof 
that  there  had  been  such  -undervaluation  irA  the  city  of  New 
York,  which  was  the  place  where  the  assessment  was  complained 
of.  In  the  Supreme  Court,^  reliance  was  placed  upon  the  ex- 
pressions in  the  opinion  in  Cummings  v.  National  Bank^  as  to 
the  notoriety  of  the  practice  of  undervaluation  by  assessors. 
But  the  court  said  that  in  that  ease  the  bill  alleged  the  fact  of 
undervaluation  and  the  testimony  supported  the  allegation,  and 
added : 

"Although  the  Justice  who  wrote  the  opinion  did  speak  of 
the  fact  as  matter  of  common  observation,  neither  he  nor  the 
court  took  judicial  notice  thereof,  but  only  those  facts  which 
had  been  pleaded  and  testimony  to  sustain  whicih  had  been 
duly  given  formed  the  basis  of  judicial  action.  "V/e  will  not 
and  ought  not  to  presume  a  violation  in  the  absence  of  allega- 
tions and  proofs  to  that  effect." 

The  court  said  that  there  was  no  allegation  in  the  petition 
for  certiorari  that  the  laws  of  the  State  provided  for  ,an  under- 
valuation  of  property,  either  with  regard  to  individuaj^s  or  cor- 
porations, but  on  the  contrary  it  was  therein  asserted  that  the 
assessed  valuation  of  the  real  estate  was  its  actual  va'i'ue,  and 
the  w^hole  force  of  the  plaintiff's  contention  was  based  upon  the 
fact  of  undervaluation,  although  it  was  in  the  teeth  of  ti'ie  stat- 


1  People  ex  rel.  v.  Barker,  146  N.  Y.  304  (1895). 

2  New  York  State  v.   Barker,   179  U.   S.   279,  45   L.   Ed.   190    ^'1900), 
affirming  158  N.  Y.  709. 

3  101  U.  S.  153,  supra. 


§  542        EQUALITY  OF  VALUATION  IN  TAXATION.  605 

lite  and  in  plain  violation  of  its  provisions.  In  order  to  raise 
the  question  of  the  denial  of  equal  protection  of  the  laws,  it 
veas  obviously  necessary,  the  court  said,  to  allege  and  prove  that 
there  was  habitual  violation  of  the  law  by  undervaluation ;  that 
the  assessors  habitually  and  intentionally,  or  by  some  rule  pre- 
scribed by  themselves  or  by  someone  whom  they  were  bound  to 
obey,  undervalued  real  estate  by  assessment  in  New  York  city, 
and  that  such  rule  had  been  applied,  not  solely  to  one  individ- 
ual, but  to  a  large  class  of  individuals  or  corporations.  The 
court  said,  further,  that  this  was  tlue  effect  of  the  ruling  in  the 
National  Bank  cases,  where  the  court  had  enforced  the  Act  of 
Congress  prohibiting  discrimination  against  national  bank 
shares.  Whether  the  facts  assumed  by  counsel,  as  to  the  under- 
valuation of  real  estate  held  by  individuals  as  compared  with 
corporate  property,  would  amount  to  such  a  discrimination 
against  corporations  as  to  work  a  denial  of  the  equal  protec- 
tion of  the  laws,  was  a  question  not  r-aised  by  the  record  and 
not  necessary  to  be  decided.^ 

§  542.  Relief  Against  Discriminating  Assessments  in  State 
Courts. — Equality  in  taxation,  that  is,  equality  as  to  the  same 
class  of  subjects  upon  which  the  tax  is  levied,  both  in  the  tax 
rate  and  in  the  valuation  of  property,  is  not  only  guaranteed 
by  the  provisions  of  many  State  constitutions,  but  is  inherent 
in  taxation  as  distinguished  from  arbitrary  exaction.  Equality 
in  this  sense,  therefore,  as  already  shown,  is  equivalent  to  the 
equal  protection  of  the  laws  under  the  Fourteenth  Amendment. 
When  cases  of  discrimination  in  assessments  through  underval- 
uations are  presented  to  the  State  courts,  they  are  confronted 


1  This  presumption  tliat  assessors  perform  their  duty  was  applied 
in  Missouri,  where  it  was  held,  State  ex  re ?.  v.  Western  Union  Tel.  Co., 
165  Mo.  502  (1901),  that  the  testimony  of  one  member  of  the  State  Board 
of  Equalization,  that,  in  his  judgment,  the  valuation  put  upon  prop- 
erty generally  was  only  35  to  40  per  cent  of  its  true  value,  was  in- 
sufficient to  overcome  the  presumption  that  the  officers  did  their  duty 
in  assessing  property  at  its  true  value  in  money  as  required  by  the 
statute.  This  testimony  was  held  insufficient  to  convict  the  local 
assessors  of  systematic  and  intentional  violation  of  duty.  See  also, 
as  to  proof  of  undervaluation.  Sec.  547  ct  seq.,  infra. 


606  EQUALITY    OF   VALUAT^ION    IN    TAXATION.  §    542 

with  the  dilemma  whether  they  should  give  effect  to  the  para- 
mount intent  inherent  in  taxation,  whether  specifically  declared 
in  the  State  constitution  or  not,  that  taxes  shall  be  equally 
levied,  or  whether  they  should  disregard  that  intent  and  deny 
relief,  because  of  the  statutory  requirement  that  all  property 
shall  be  assessed  at  its  cash  value. 

The  Federal  and  many  St^ite  courts  have  taken  the  former 
course  and  granted  relief  where  the  complainant's  property 
was  assessed  at  less  than  the  true  value,  but  at  a  higher  rate 
than  other  property  in  the  same  jurisdiction.  Thus,  in  Con- 
necticut,! where  there  was  no  direct  constitutional  requirement 
of  equal  taxation,  the  statute  required  that  property  should  be 
assessed  at  its  full  market  value.  Plaintiff's  property  was  so 
assessed,  contrary,  however,  as  was  shown,  to  the  practice  of 
the  assessing  board,  whicht  regularly  assessed  property  at  one- 
half  of  its  market  value.  The  complainant  was  declared  en- 
titled to  an  assessment  according  to  the  uniform  rule,  in  the 
face  of  the  mandatory  jjrovision  of  the  statute  that  all  prop- 
erty should  be  assessed  at  its  true  market  value,  the  court  say- 
ing: 

''There  are  two  ways  in  which  a  taxpayer  may  be  wronged 
in  lev;yang  taxes:  An  assessment  may  conform  to  the  statute 
generally,  and  the  individual  may  be  assessed  in  excess  of  the 
statutory  requirement.  A  wrong  of  that  description  is  easily 
redressed.  But  when  the  town  disregards  the  statute,  and  es- 
tablishes a  rule  of  its  OAvn,  assessing  the  property  at  one-half 
of  its  actual  value,  and  then  assesses  an  individual  at  the  full 
value  of  the  property,  while  the  injury  is  the  same,  the  appli- 
cation of  the  remedy  becomes  more  complicated.  Practically, 
the  only  way  to  redress  the  wrong  is  to  reduce  the  assessment, 
and  that  makes  the  court  seem  to  disregard  the  statute,  while, 
if  the  wrong  is  not  redressed,  there  is  a  denial  of  justice,  and 
the  court  practically  ignores  the  statute  giving  an  aggrieved 
party  an  appeal,  and  practically  ignores  the  statute  which  pro- 
vides that  'said  court  shall  have  power  to  grant  such  relief  as 
shall  to  justice  and  equity  appertain.'  Thus  we  are  in  a  di- 
lemma. If  we  ehoose  one  horn  of  it,  a  public  statute  is  vio- 
lated, not  so  much  by  the  court  as  by  the  town,  but  by  an  ap- 


iRandell  v.  City  of  Bridgeport,  63  Conn.  321  (1893). 


§   642  EQUALITY   OF   VALUATION   IN    TAXATION.  607 

parent  approval  of  the  court  as  to  one  individual,  and  that  by 
an  express  command  of  another  statute,  and  by  the  dictates 
of  justice.  If  we  take  the  other  horn,  the  court  itself  violates 
a  remedial  statute,  and  becomes  in  a  measure  a  party  to  the 
wrong-doing.  Under  the  circumstances,  we  do  not  hesitate  to 
choose  the  former,  and  to  redress  the  wrong.  "^ 

In  Arkansas,-  the  assessment  of  a  bridge  was  reduced  to  fifty 
per  cent  of  its  actual  value  because  this  appeared  to  be  the  reg- 
ular rate  of  valuation  assessed  upon  all  realty  in  the  county, 
although  the  statute  on  the  subject  provided  that  property 
should  be  assessed  at  its  "true  market  value  in  money."  The 
court  said: 

"It  may  be  said  that,  inasmuch  as  its  property  was  not  as- 
sessed above  its  true  value,  it  had  no  right  to  complain.  But 
this  is  not  true.  It  had  the  right  to  demand  that  no  unequal 
burden  be  imposed  upon  it  by  taxation.  The  duty  to  con- 
tribute to  the  support  of  the  State  government  by  the  pay- 
ment of  taxes  is  imposed  upon  all  persons  owning  property 
subject  to  taxation.  The  constitution  provides  that  this  bur- 
den shall  be  apportioned  among  them  according  to  the  value 
of  their  property,  to  be  ascertained  as  directed  by  law.  When, 
therefore,  the  property  of  a  few  is  taxed  according  to  its 
value,  and  of  all  others  at  one-half  its  value,  then  the  few  are 
required  to  contribute  double  their  portion  of  the  burden. 
This  is  manifestly  a  wrong,  and  justice  demands  that  it  be  re- 
dressed whenever  it  can  be  done  conformably  to  the  laws. 

In  Illinois  the  statute  directed  that  each  parcel  of  property 
should  be  valued  at  its  true  value  in  money.  In  a  case  where  it 
appeared^  that  the  valuation  of  the  property  of  individuals 
ranged  from  one-fifth  to  one-third,  while  that  of  the  railroad 
companies  ranged  from  one-third  to  one-half,  the  court  held 
that  the  assessment  of  the  railroad  property  must  be  at  the 
same  percentage  of  the  real  value  as  that  of  individuals,  and 
said : 


1  See  also,  to  the  same  effect.  Cocheco  Co.  v.  Stratford,  51  N.  II.  455. 
(1871.) 
-Ex  parte  Bridge  Co.,  62  Ark.  4G1  (1896). 
3  Board  of  Supervisors  v.  Railroad  Co.,  44  111.  229  (1867). 


608  EQUALITY  OF  VALUATION  IN  TAXATION.        §  543 

"The  rule  adopted  by  the  assessors  in  this  State  has  grown 
into  a  custom,  and  has  been  tacitly  sanctioned  by  every  de- 
partment of  the  government  for  a  long  course  of  years,  and  it 
is  now  too  late  to  challenge  it.  .  .  .  Would  not  the  sense  of 
justice  of  every  man  in  this  community  be  outraged  by  allow- 
ing this  or  any  other  depreciation  to  one  class  of  people,  and 
demanding  of  another  a  higher  tax  on  a  similar  article  of  the 
same  actual  value?  The  proposition  cannot  commend  itself 
to  the  favor  of  any  just  man,  and  can  receive  no  countenance 
in  a  court  of  justice." 

In  Kansas  the  constitution  of  the  State  required  that  the 
legislature  should  provide  for  a  uniform  and  equal  rate  of  as- 
sessment for  taxation,  while  by  the  terms  of  the  statute  all 
property  must  be  assessed  at  its  true  value.  The  court  held^ 
that  the  assessment  of  railroad  property  at  its  true  value,  while 
the  property  of  individuals  and  other  corporations  was  assessed 
at  twenty-five  per  cent  of  its  true  value,  was  not  uniform  and 
equal  taxation,  and  that  plaintiff,  having  tendered  its  just  share 
of  taxes,  was  entitled  to  enjoin  the  oollection  of  the  illegal 
excess. 

§  543.    Equality  of  Valuation  Enforced  in  Federal  Courts. 

— These  rulings  of  the  State  courts  last  cited,  that  effect  must 
be  given  to  the  paramount  purpose  of  equality  in  taxation,  in 
disregard  of  the  statutory  directions  that  property  must  be  as- 
sessed at  its  full  value,  have  been  followed  in  several  notable 
cases  in  the  Federal  courts. 

The  United  States  Circuit  Court  of  Appeals  for  the  Eighth 
Circuit  followed  the  decision  of  the  Supreme  Court  of  Kansas, 
and,  -reversing  the  United  States  Circuit  Court,  directed  a  de- 
cree of  injunction  against  the  enforcement  of  a  tax  on  the  full 
value  of  the  plaintiff's  property,  assessed  by  the  State  Board 
of  Assessors  of  a  county,  pursuant  to  agreement  among  them- 
selves, while  other  property  in  the  county  was  assessed  at  only 
one- third  of  its  value. 2 


1  C,  B.  &  Q.  R.  R.  Co.  V.  Board  of  Commissioners,  54  Kan.  781  (1895). 

2  C,  B.  &  Q.  R.  R.  Co.  V.  Commissioners  of  Republic  County,  67  Fed. 
411,  14  C.  C.  A.  456,  and  32  U.  S.  App.  224  (1895). 


i   543  EQUALITY   OF   VxiLUATION"   IN    TAXATION.  609 

Reference  has  already  been  made  to  the  opinion  of  Mr.  Jus- 
tice Field  in  the  California  Railroad  case,i  wherein  was  fii-st 
announced  the  application  of  the  Fourteenth  Amendment  to 
discriminating  taxation.  In  holding  that  the  deduction  of  a 
mortgage  from  the  valuation  of  real  estate  in  other  cases  and 
denying  such  deduction  in  the  case  of  a  railroad  was  neces- 
sarily a  discrimination,  the  court  said: 

"The  basis  of  all  ad  valorem  taxation  is  necessarily  the  as- 
sessment of  the  property;  that  is,  the  estimate  of  its  value. 
"Whatever  affects  the  value  necessarily  increases  or  diminishes 
the  tax  proportionately.  If,  therefore,  any  element  which  is 
taken  into  consideration  in  the  valuation  of  the  property  of 
one  party  be  omitted  in  the  valuation  of  the  property  of  an- 
other, a  discrimination  is  made  against  the  one  and  in  favor 
of  the  other,  which  destroys  the  uniformity  so  essential  to  all 
just  and  equal  taxation.  "^ 

An  opinion  by  Judge  Taft  in  the  United  States  Circuit  Court 
of  Appeals  for  the  Seventh  Circuit,3  contains  a  thorough  re- 
view of  the  authorities  and  is  a  valuable  contribution  on  this 
question  to  our  jurisprudence.  It  was  established  by  the  evi- 
dence that  other  property  in  the  State  of  Tennessee  than  that 
of  railroad  companies  was  habitually  and  intentionally  assessed 
at  not  exceeding  seventy-five  per  cent  of  its  real  value.  The 
actual  value  of  the  railroad  and  telegraph  lines  as  compared 
with  that  of  other  property  would  make  the  share  of  the  former 
in  the  payment  of  taxes  a  little  less  than  one-eighth  of  the 
whole.  The  actual  assessment  of  railroad  and  telegraph  prop- 
erty placed  upon  them  an  additional  burden,  so  as  to  make  their 
share  of  the  total  taxation  one-sixth  instead  of  one-eighth.  The 
constitution  of  the  State  not  only  directed  that  taxes  should  be 
"equal  and  uniform"  throughout  its  jurisdiction,  but  specif- 
ically required  that  "no  one  species  of  property  from  which  a 
tax  might  be  collected  should  be  taxed  higher  than  any  other 

1  Supra,  Sec.  333. 

2  18  Fed.  385  (1883). 

3 Taylor  v.  L.  &  N.  R.  R.  Co.,  31  C.  C.  A.  537,  and  88  Fed.  350  (1898), 
affirming  85  Fed.  302,  and  86  Fed.  168. 


610  EQUALITY  OP  VALUATION  IN  TAXATION.        §  544 

of  the  same  value;"  and  the  statute  of  the  State  required  that 
all  property  should  be  assessed  at  its  full  value,^ 

§  544.  Judge  Taft  on  Dilemma  of  Courts. — Upon  the  ques- 
tion presented  whether  the  court  should  enforce  equality  in  dis- 
regard of  the  statute  or  refuse  to  remedy  inequality  by  follow- 
ing the  statute,  the  court  said  that  the  intentional  and  system- 
atic disregard  of  the  law  by  those  charged  with  the  duty  of 
assessing  all  other  species  of  property  than  that  owned  by  com- 
plainant and  others  in  the  same  class  was  a  flagrant  viola- 
tion of  the  constitution  of  the  State  forbidding  discrimination 
in  taxation  between  different  species  of  property.  In  answer 
to  the  suggestion  that  the  only  remedy  consistent  with  the  con- 
stitution was  by  raising  the  assessments  of  other  property,  the 
court  said  that  this  was  no  remedy  at  all,  as  it  would  involve 
raising  the  total  tax  assessment  of  the  State  in  each  of  the  coun- 
ties, and  the  absolute  futility  of  such  a  course  and  the  enormous 
expense  and  length  of  time  necessary  needed  no  comment.  The 
court  added: 

*  *  To  enjoin  the .  enforcement  of  the  prescribed  method  of 
assessment  as  to  one  species  of  property,  when  there  is  a  de- 
parture from  it  as  to  all  others,  if  the  injunction  secures  uni- 
formity as  to  all,  is  not  so  great  a  violation  of  the  method 
really  prescribed  as  that  involved  in  a  continuance  of  the  ex- 
isting conditions,  and  the  denial  of  relief  to  the  injured  tax- 
payer. The  court  is  placed  in  a  dilemma,  from  which  it  can 
only  escape  by  taking  that  path  "which,  while  it  involves  a  nom- 
inal departure  from  the  letter  of  the  law,  does  injury  to  no 
one,  and  secures  that  uniformity  of  tax  burden  which  was  the 
sole  end  of  the  constitution.  To  hold  otherwise  is  to  make  the 
restrictions  of  the  constitution  instruments  for  defeating  the 
very  purpose  they  were  intended  to  subserve.  It  is  to  stick  in 
the  bark,  and  to  be  blind  to  the  substance  of  things.    The  same 


1  Judge  Taft  said  in  his  opinion  tliat  Judge  Lurton  and  he  were 
inclined  to  think  that  any  legislative  system  of  tax  assessment  of 
property  based  on  a  uniform  percentage  of  its  value  would  be  "accord- 
ing to  its  value,"  and  would  be  a  compliance  with  the  constitutional 
mandate.  The  third  judge,  Severance,  doubted  on  this  subject,  but  it 
was  said  the  difference  was  not  material,  as  they  were  of  the  unani- 
mous opinion  that  the  question  was  not  controlling. 


§    544  EQUALITY   OF   VALUATION   IN   TAXATION.  611 

dilemma  has  been  presented  to  other  courts.     They  have  not 
always  taken  the  same  horn." 

The  Supreme  Court  has  adopted  the  same  ''horn"  of  the  dilem- 
ma as  Judge  Taft.^  It  was  said  in  the  latter  opinion  that 
the  principle  declared  in  the  Cummings  case,  in  regard  to 
discrimination  in  the  valuation  of  national  banks,^  applies  as 
well  in  the  assessment  of  other  classes  of  property,  and  that 
there  was  nothing  in  subsequent  decisions  of  the  Supreme  Court 
distinguishing  between  habitual  and  sporadic  decisions  that 
changed  the  effect  of  this  case.  Occasional  and  accidental  dis- 
criminations were  inevitable  in  every  assessment,  but  are  not 
likely  to  continue  because  they  are  not  the  result  of  any  illegal 
purpose  on  the  part  of  anyone.  The  interposition  of  a  court  of 
equity  is  only  justified  when  there  is  an  obvious  violation  of 
law,  or  something  equivalent  to  fraud.  As  to  the  remedy,  the 
court  said  that  the  entire  assessment  on  all  classes  of  property 
was  to  be  regarded  as  one  judgment.  The  effect  of  an  inten- 
tional and,  therefore,  fraudulent  violation  of  the  law  by  uni- 
formly undervaluing  certain  classes  of  property  while  assessing 
other  classes  at  their  full  value,  though  a  literal  compliance 
with  the  law,  made  the  whole  assessment,  considered  as  one 
judgment,  a  fraud  upon  the  fully  assessed  property.  Tn  view, 
however,  of  the  inconvenience  to  the  public  in  the  delay  inci- 
dent to  a  new  assessment,  the  injunction  would  extend  only  to 
so  much  of  the  tax  as  was  based  upon  the  excessive  assessment ; 
and  the  injunction  therefore  required  that  the  complainant,  as 
a  condition  to  the  issue,  should  pay  to  the  proper  officers  a  tax 
on  seventy-five  per  cent  of  the  assessment  made  by  the  de- 
fendants. 

The  opinion,  in  this  case,  does  not  discuss  or  invoke  the  guar- 
anty of  the  equal  protection  of  the  laws  under  the  Fourteenth 
Amendment,  but  is  based  upon  general  constitutional  principles 
of  taxation  expounded  by  the  State  courts  in  the  cases  cited. 
Jurisdiction  in  the  case  was  based  upon  adverse  citizenship.3 

1  See  Sees.  546,  547,  infra. 

2  See  supra,  312. 

»  The  decision  in  the  United  States  Circuit  Court,  by  Judge  Clark, 
Is  baaed  directly  upon  the  violation  of  the  equal   protection  of  the 


612  EQUALITY  OF  VALUATION  IN  TAXATION.        §  545 

§  545.  Formal  Resolution  Not  Necessary  for  Intentional 
Discrimination. — "While  the  courts  presume  that  assessors  per- 
form their  duty,  and  habitual  and  intentional  discrimination 
must  not  only  be  alleged  but  proved,  it  does  not  follow  that  this 
intention  of  assessors  to  discriminate  should  be  proved  by  for- 
mal resolution  to  that  effect.  This  was  ruled  in  the  case  of  dis- 
crimination against  the  shareholders  in  national  banks. i  Thus, 
in  the  United  States  Circuit  Court  of  Oregon,  where  it  was 
claimed  that  the  lands  in  certain  counties  were  assessed  at  one- 
third  of  their  value,  while  the  mortgages  of  plaintiff  were  as- 
sessed at  the  nominal  value  of  the  debts,  that  is,  at  the  full 
value,2  the  court  said  that  it  was  not  necessary  to  make  the 
assessment  illegal  that  there  should  be  an  actual  conspiracy  or 
express  design  on  the  part  of  the  assessors  to  disregard  the  law, 
adding : 

"Whenever  the  assessor  of  a  district  of  a  country  as  large 
as  one  of  these  counties  uniformly  estimates  real  property  at 
only  one-third  of  the  value  he  places  on  mortgages,  it  is  impos- 
sible to  attribute  the  result  to  the  infirmity  of  human  judg- 
ment, and  the  only  conclusion  possible  in  the  premises  is  that 
it  M-as  deliberately  and  wilfully  done  in  pursuance  of  a  set- 
tled purpose  or  rule  on  his  part ;  and  Avhere  the  same  thing 
occurs  in  a  number  of  counties  in  various  parts  of  the  State  it 
is  manifest  that  the  action  of  the  assessor  is  not  only  wilful 
and  deliberate,  but  that  it  is  the  result  of  general  and  well- 
understood  custom  to  substitute  this  conventional  value  of  real 
property  for  'the  true  cash'  one  which  the  statute  requires. "3 


laws  under  the  Fourteenth  Amendment,  86  Fed.  168  (1898).  See  also 
Trustees  of  the  Cincinnati  Southern  R.  R.  Co.  v.  Guenther,  Trustee,  19 
Fed.  395  (1884). 

1  See  Sec.  316,  supra. 

2  Dundee  Mortgage  &  Inv.  Co.  v.  Parrish,  24  Fed.  197  (1885) ;  see  also 
California  &  Oregon  Land  Co.  v.  Gowan,  48  Fed.  771  (1892). 

3  The  court  said  in  its  opinion  that  the  practice  was  so  universal 
and  well  known  in  Oregon  that  the  court  could  take  judicial  notice 
of  it  and  safely  assume  that  there  was  not  an  acre  of  land  in  Oregon 
valued  for  taxation  at  more  than  one-half  of  its  true  value.  Generally 
it  was  not  valued  at  more  than  one-third  of  its  value.  As  personal 
property,  especially  money,  is  more  liable  to  escape  taxation  than 
land,  therefore,   in   a  country  governed   largely  by   landowners,   like 


§    546  EQUALITY    OF   VALUATION   IN   TxVXATION.  613 

§  546.  The  Supreme  Court  Condemns  Inequalities  of  Valu- 
ation.— In  two  notable  cases  the  Supreme  Court  has  definitely 
determined  that  intentional  discrimination  growing  out  of  sys- 
tematic undervaluation  of  other  taxable  property  of  the  same 
class  constitutes  a  denial  of  the  equal  protection  of  the  laws, 
entitling  the  party  thus  discriminated  against  to  relief  in  a 
court  of  equity,  when  there  is  no  adequate  remedy  at  law.  These 
cases  involved  the  assessment  of  corporate  franchise  values  of 
public  utility  companies  by  the  State  Boards  of  Equalization, 
one  in  Illinois^  and  the  other  in  Kentucky.^ 

The  first  of  these  cases  was  a  sequence  of  the  franchise  liti- 
gation instituted  against  the  public  utility  companies  of  Chi- 
cago. The  constitution  of  Illinois  provided  that  the  capital 
stock  of  corporations  was  to  be  valued  by  the  State  Board  of 
Equalization,  who  should  determine  its  "fair  cash  value." 
Mandamus  was  issued  against  the  State  board,  requiring  them 
to  determine  the  valuation  of  the  stock  and  franchises  of  the 
defendant  company.^  Valuation  having  been  made  by  the  State 
Board  of  Equalization  under  this  mandamus,  bills  were  filed 
claiming  that  the  action  of  the  board  was  a  denial  of  the  equal 
protection  of  the  laws  in  violation  of  the  Fourteenth  Amend- 
ment, as  their  property  was  valued  at  a  higher  rate,  that  is, 
at  a  higher  proportion  of  its  valuation  than  other  taxables  of 
the  same  class  in  the  State.  It  appeared  upon  the  hearing  in 
the  Circuit  Court  that  the  assessment  of  the  capital  stock  had 
been  raised  over  that  of  the  preceding  year,  and  to  an  amount 
equal  to  the  current  quotations  of  the  stock  on  the  Stock  Ex- 
change, and  some  thirty  per  cent  above  that  of  the  uniform 
assessment  of  other  property  throughout  the  State,  there  being 


Oregon,  there  was  more  or  less  undervaluation  of  land,  upon  the  plea, 
more  understood  than  expressed,  that  this  was  the  only  way  to  keep 
even  with  money  capital  of  the  country  and  secure  something  like 
equality  of  burden. 

1  Raymond  v.  Chicago  Union  Traction  Co.,  207  U.  S.  20,  52  L.  Ed. 
78  (1907),  affirming  114  Fed.  657. 

2  The  Kentucky  Franchise  Tax  Cases,  decided  June  11,  1917,  

U.  S. ,  61  L.  Ed. . 

3  See  State  Board  of  Equalization  v.  People,  191  111.  528  (1901). 


614  EQUALITY  OP  VALUATION  IN  TAXATION.        §  546 

no  authorized  classification  system.     The  Circuit  Court  deter- 
mined the  valuation  by  capitalizing  the  earnings  on  a  six  per 
cent  basis  and  then  reducing  the  cash  value  by  thirty  per  cent, 
so  as  to  equalize  the  assessment  with  that  of  other  property  in 
the  State  according  to  the  ratio  fixed  by  the  State  Board  of 
Equalization,  and  this  amount  was  then  divided  by  five  in  ac- 
cordance with  the  State  law  at  that  time,  directing  that  all  valu- 
ations should  be  thus  divided;  and  to  this  valuation  of  the  in- 
tangible property  the  value  of  the  tangible  property  was  added, 
as  provided  by  law.     The  assessment  thus  having  been  reduced 
some  eighteen  million  dollars,  the  Circuit  Court  granted  an  in- 
junction on  payment  of  the  taxes  on  the  reduced  amount.^   This 
judgment  of  the  Circuit  Court,  enjoining  the  enforcement  of  the 
original  order  of  the  Board  of  Equalization,  was  affirmed  by 
the  Supreme  Court.     It  said  that  the  action  of  the  State  Board 
was  the  action  of  the  State,  and,  if  carried  out,  would  take  the 
property  of  the  companies  without  due  process  of  law,  and,  by 
failing  to  give  them  the  equal  protection  of  the  laws,  consti- 
tuted a  Federal  question  beyond  all  controversy.     The  court 
said  the  action  of  the  State  board  was  one  of  the  instrumen- 
talities provided  by  the  State  for  raising  the  public  revenue 
by  way  of  taxation,  and,  therefore,   it  represented  the   State, 
and  its  action  was  the  action  of  the  State,  saying: 

"There  can  be  no  contention  of  legality  simply  because  of 
assessing  the  franchises  of  these  corporations  at  a  different 
rate  from  intangible  property  in  the  State,  which  the  State 
might  do,  but  it  is  asserted  that  the  Board  assessed  the  fran- 
chises and  other  property  of  these  companies  at  a  different 
rate  and  by  a  different  method  from  that  which  had  been  em- 
ployed by  the  Board  for  other  corporations  of  the  same  class 
for  that  year.  The  result  is  an  enormous  disparity  and  dis- 
crimination between  the  various  assessments  upon  the  corpo- 
rations. ' ' 

The  court  also  said  that  the  function  of  equalizing  assess- 
ments by  a  State  board  was  in  this  case  omitted  and  ignored, 


iFor   opinions   of   the   Circuit   Court   on   application   for   temporary 
injunction,  see  112  Fed.  607,  and  on  final  decree,  114  Fed.  557. 


§  547        EQUALITY  OF  VALUATION  IN  TAXATION,  615 

as  there  was  a  failure  to  enforce  uniformity  throughout  the 
State.  The  court  said  that  under  the  facts  a  case  was  pre* 
sented  for  the  interposition  of  a  court  of  equity,  say- 
ing: 

"A  system  of  valuation  was  adopted  and  applied  to  a  large 
class  of  corporations  differing  wholly  from  that  applied  to 
other  corporations  of  the  same  class,  and  resulting  in  a  dis- 
crimination against  the  appellee  of  a  most  serious  and  mate- 
rial nature.  It  is  not  a  question  of  a  mere  difference  of  opin- 
ion in  the  valuation  of  property,  but  it  is  a  question  of  a  dif- 
ference of  method  in  the  manner  of  assessing  property  of  the 
same  kind.  Although  the  law  itself  may  be  valid,  and  pro- 
vides for  a  proper  valuation,  yet  if  through  mistakes  on  the 
part  of  the  State,  through  its  Board  of  Equalization  and  while 
acting  as  a  qvasi  judicial  body,  the  Board  erred  in  the  method 
to  be  pursued  in  relation  to  the  corporations,  the  mistake  is 
one  which  can  be  corrected  in  equity." 

In  this  ease  there  was  no  adverse  citizenship ;  the  jurisdiction 
was  based  solely  on  the  Federal  question  involved.  There  was 
no  evidence  of  fraud  in  the  sense  of  corruption.  The  court  was 
not  concluded  by  the  decision  of  the  Circuit  Court  of  the  State 
in  the  mandamus  case,  as  the  companies  assessed  were  not 
parties  to  that  proceeding,  and  the  question  of  discrimination 
was  not  involved  therein. 

The  court,  in  its  opinion,  recognized  the  right  of  the  State  to 
cla.ssify  such  properties  for  taxation,  and  on  this  point '  reaf- 
firmed the  ruling  to  that  effect  in  a  prior  Kentucky  case,^  but 
condemned  the  discriminating  inequality  of  valuation  in  prop- 
erties of  the  same  taxable  class,  as  violative  of  the  equal  protec- 
tion of  the  laws. 

§  547.  Illegality  of  Unequal  Valuation  Reaffirmed — Juris- 
diction of  Equity. — This  same  subject  received  full  considera- 
tion in  a  series  of  cases  involving  the  action  of  the  State  Board 
of  Equalization  of  Kentucky  in  assessing  the  intangible  prop- 
erty of  corporations  subject  to  the  franchise  tax  on  such  cor- 


1  See  infra.  Sec.  547. 


616  EQUALITY  OF  VALUATION  IN  TAXATION.        §  547 

porations.^    It  had  been  ruled  in  a  former  case  from  Kentucky' 
that  so  much  of  the  bill  as  sought  an  injunction  against  the  col- 
lector of  the  State  tax  could  not  be  maintained,  but  that  a  bill 
in  the  proper  place  could  be  brought  to  restrain  the  apportion- 
ment to  the  counties.     The  court  said  that  this  ruling  might  be 
deemed  to  have  been  overruled  in  the  Chicago  Union  Traction 
cases,^  where  the  assessment  enjoined  included  State  taxesi  as 
well  as  local  taxes.    It  was,  therefore,  decided  that  State  as  well 
as  so-called  franchise  taxes  based  upon  an  assessment  of  the  in- 
tangible property  of  public  service  corporations  made  by  the 
State  Board,  could  be  enjoined  by  discrimination  arising  out  of 
the  systematic  undervaluation  of  other  taxable  property  of  the 
same  class,  where  the  proper  State  officers  charged  with  the  en- 
forcement of  the  tax  laws  of  the  State  were  made  parties.  There 
was  at  this  time  no  authorized  classification  in  valuation  of  this 
class  of  properties  for  taxation.     It  seems  in  these  Kentucky 
cases  that  it  was  shown  that  property  in  general  was  assessed 
at  no  more  than  fifty-two  per  cent  of  its  actual  value,  while  the 
railway  property  of  the  complainant  was  assessed  at  seventy- 
five  per  cent.     The  constitution  of  the  State  provided  that  all 
property  should  be  uniformly  assessed  at  its  ''fair  cash  value." 
The  court  said  the  rule  had  been  correctly  declared  by  Judge 
Taft  in  the  case  cited,^  that  taxation  by  a  uniform  iTile  requires 
uniformity  not  only  in  the  rate  of  taxation,  but  also  uniformity 
in  the  basis  of  ascertaining  the  taxable  valuation.     Attention 
was  also  called  to  the  fact  that  several  of  the  States  had  enacted 
laws  adopting  percentages  of  full  valuation  for  taxation  as  a 
basis. 5     The  court  in  commenting  upon  the  systematic  under- 
valuation of  taxable  property,  said  that  the  general  terms  aris- 
ing from  the  statutory  duty  of  assessors  to  assess  the  ''fair  cash 
value,"  together  with  "stereotyped  affidavits  denying  discrim- 

1  L.  &  N.  R.  R.  Co.  V.  Green,  U.  S.  ,  61  L.  Ed.  ,  decided 

June  11,  1917. 

2  See  Coulter  v.  L.  &  N.  R.  R.  Co.,  196  U.  S.  599,  49  L.  Ed.  615  (1905), 
reversing  131  Fed.  282. 

3  Supra,  Sec  546. 

4  Supra,  Sec.  544. 

5  Iowa,  25'7f;   Illinois,  20%,  now  SZVsVc ;   Nebraska,  207.;   Alabama, 
60%.   See  the  State  Systems,  Appendix,  infra.   See  also  Sec.  536,  supra. 


§  548        EQUALITY  OF  VALUATION  IN  TAXATION.  617 

• 

ination  and  undervaluation,  would  not  necessarily  impair  the 
probative  effect  of  official  assessments,  and  direct  and  substan- 
tial evidence  from  unimpeached  and  private  sources,  that  the 
great  mass  of  property  in  the  State  was  intentionally,  system- 
atically and  notoriously  assessed  far  below  its  cash  value." 

The  controlled  mileage  within  and  without  the  State  is  what 
a  State  Board  must  take  into  consideration  in  valuing  inter- 
state properties;  and  the  action  of  both  the  Illinois  and  Ken- 
tucky Boards  was  sustained  in  adopting  a  6  per  cent  interest 
rate  as  the  basis  of  capitalization;  and  the  findings  of  such 
Board,  being  quasi  judicial,  are  not  to  be  disregarded,  unless  it 
is  shown  that  the  Board  was  proceeding  upon  a  wrong  prin- 
ciple, or  fraud  appears.  Controlled  mileage  within  and  with- 
out the  State,  and  not  merely  operated  mileage,  must  be  taken 
into  consideration  in  making  such  valuation.! 

In  determining  and  remedying  such  inequality  of  valuation  of 
interstate  properties,  in  order  to  avoid  a  double  assessment, 
there  must  be  deducted  from  the  local  apportionment  of  the 
total  capital  stock  the  value  of  the  local  portion  of  the  mileage 
controlled  in  addition  to  the  authorized  deduction  of  the  as- 
sessed value  of  the  local  property  there  situated.  It  is  the  local 
apportioned  value  of  the  total  interstate  property  thus  deter- 
mined under  the  State  law  which  is  entitled  to  equality  of  valu- 
ation with  other  property  of  the  same  class  in  the  State. 

§  548.    Inequality  of  Valuation  as  a  Federal  Question. — 

In  the  case  from  Illinois,  Sec.  546,  supra,  there  was  no  adverse 
citizenship  and  the  jurisdiction  was  based  solely  on  the  Federal 
question  involved.  In  none  of  these  cases  was  there  any  evidence 
of  fraud  in  the  sense  of  corruption.  The  rule  was  thus  definitely 
laid  down  that  where  there  is  habitual  and  intentional  discrimina- 
tion in  the  valuation  of  property,  resulting  in  substantial  in-* 
equality  of  taxation,  there  is  a  denial  of  the  equal  protection  of 
the  laws  and  a  Federal  question  is  thus  directly  presented. 

It  follows  therefore  that,  where  there  is  habitual  and  inten- 
tional discrimination  in  the  valuation  of  property  of  the  same 
class,  resulting  in  substantial  inequality'  of  taxation,  there  is  a 


1  L.  A  N.  R.  R.  V.  Green,  supra. 


618  EQUALITY  OF  VALUATION  IN  TAXATION.        §  548 

denial  of  the  equal  protection  of  the  laws.  The  discrimination 
must  not  be  sporadic  or  occasional,  but  substantial;  that  is,  the 
relative  undervaluation  must  extend  to  a  large  class  of  indi- 
viduals or  corporations,  and  not  solely  to  one  individual  or  cor- 
poration. It  is  immaterial,  however,  that  the  discrimination  is 
aimed  only  against  one  individual  or  class,  as  the  equal  protec- 
tion of  the  laws  requires  that  no  person  or  class  of  persons  shall 
be  denied  the  same  protection  of  the  laws  which  is  enjoyed  by 
other  persons  and  other  classes  in  the  same  place  and  under  like 
circumstances. 

The  State  may  classify  and  specialize  in  taxation  (see  Chap- 
ter XV)  and  thus,  if  the  classification  is  natural  and  reasonable, 
subject  different  classes  to  different  rates  of  taxation.  It  is 
true  that  the  same  result  would  be  effected  by  a  difference  in  the 
rate  of  valuation  as  by  a  difference  in  the  rate  of  the  tax.  On 
account  of  the  difficulty  of  reaching  personal  property,  and  par- 
ticularly intangible  personal  property,  for  taxation,  there  is  a 
very  general  disposition  on  the  part  of  the  assessors,  frequently 
commented  on  by  the  courts,  to  value  such  property  higher  than 
real  estate,  which  cannot  be  concealed.  It  is  also  true  that  some 
forms  of  personal  property,  such  as  money  and  securities  and 
standard  marketable  articles,  have  a  definite  standard  of  value 
which  real  estate  has  not.  In  some  States  deductions  for  debts 
are  allowed  from  assessments  of  personal  property,  and  in  some 
from  credits  only.  These  considerations  may  all  influence  as- 
sessors, and  doubtless  do  so  influence  them,  in  discriminating 
valuations.  But  whether  or  not  such  considerations  may  afford 
a  valid  basis  for  classification,  it  is  clear  that  such  classification 
when  authorized  by  the  State  constitution  can  only  be  made  by 
the  legislative  power,  and  cannot  be  made  by  the  arbitrary  ac- 
tion of  assessors.  Such  arbitrary  discriminations  by  assessors 
between  different  classes  of  property  in  valuations  for  taxation 
are  violative  of  due  process  of  law  as  well  as  of  the  equal  protec- 
tion of  the  laws.^ 


lAs  to  such  discriminations  see  Dundee  Mortgage  and  Investment 
Co.  V.  Parrish,  supra.  Sec.  545;  see  also  National  Bank  v.  New  York, 
64  N.  E.  Rep.  756  (1902),  where  the  N.  Y.  Court  of  Appeals  held  that  the 


§  549        EQUALITY  OF  VALUATION  IN  TAXATION.  619 

§  549.  Proof  of  Discrimination  by  Cross-Examination  of 
State  Board  of  Equalization  Members. — In  C,  B.  &  Q.  R.  R.  v. 

Babcock,^  where  the  court  affirmed  the  judgment  of  the  Circuit 
Court,  dismissing  bills  to  enjoin  the  assessments  made  by  the 
State  Board  of  Equalization,  the  court  condemned  the  calling 
of  the  members  of  the  board,  including  the  governor  of  the 
State,  and  submitting  them  to  an  elaborate  cross-examination  in 
regard  to  the  operation  of  their  minds  in  valuing  and  taxing 
the  roads.  The  court  said  that  although  the  members  of  the 
board  might  not  be  entitled  to  the  status  of  judges,  the  case  cer- 
tainly did  not  differ  from  that  of  members  of  a  jury  or  umpires ; 
and  even  jurymen  could  not  be  called  to  testify  to  the  niotives 
and  influences  that  led  to  their  verdict,  the  court  saying: 

"All  the  often  repeated  reasons  for  the  rule  as  to  jurymen 
apply  with  redoubled  force  to  the  attempt,  by  exhibiting  on 
cross-examination  the  confusion  of  the  members'  minds,  to  at- 
tack in  another  proceeding  the  judgment  of  a  lay  tribunal, 
which  is  intended  as  far  as  may  be  to  be  final,  notwithstanding 
mistakes  of  fact  or  law." 

The  court  said  the  record  kept  by  the  board  was  the  best  evi- 
dence, at  least  of  its  decisions  and  acts ;  and  if  an  express  rul- 
ing was  desired,  it  should  have  been  asked  for;  and  that 
members  of  the  board  had  a  right  to  use  their  own  experience, 
and  they  were  created  for  that  purpose,  and,  within  its  juris- 
diction, except  in  the  case  of  fraud  or  a  clearly  shown  adoption 
of  wrong  principles,  it  was  the  ultimate  guardian  of  certain 
rights. 


assessment  of  bank  stock  and  other  personal  property  at  full  value, 
while  real  estate  was  assessed  at  GO'/r,  did  not  warrant  injunctive  re- 
lief. The  case  involved  a  question  of  procedure,  and  the  decision  also 
seems  to  have  recognized  the  existence  of  legislative  authority  for  the 
discriminating  valuations. 

■1204  U.  S.  585.  51  L.  Ed.  636  (1907).  As  to  the  status  of  State 
Board  of  Equalization  in  cases  of  alleged  discrimination,  see  Missouri 
rx  rrl.  Hill  v.  Tucker,  et  ah,  191  U.  S.  165,  48  L.  Ed.  133  (1903).  As 
to  the  construction  of  the  powers  of  a  territorial  Board  of  Equaliza- 
tion, see  Copper  Queen  Mining  Co.  v.  Arizona,  206  U.  S.  474,  51  L.  Ed. 
1143,  affirming  84  Pac.  511   (1907). 


620  EQUALITY   OF   VALUATION   IN    TAXATION,  §    550 

It  would  seem  that  this  was  a  criticism  rather  of  the  abuse 
than  of  the  legitimate  use  of  the  right  of  cross-examination. 
Where  the  issue  of  good  or  bad  faith  is  raised,  as  it  often  is  in 
such  a  litigation,  it  would  seem  that  the  testimony  of  the  mem- 
bers of  an  administrative  board  charged  with  bad  faith,  would 
be  admissible  as  to  their  motives  subject  to  a  legitimate  use  of 
cross-examination.  1 

§  550.  Systematic  Discrimination  by  Undervaluation  of 
Other  Property,  Illegal. — The  rule,  therefore,  is  definitely  estab- 
lished in  the  Federal  courts  that  a  systematic  intentional  con- 
tinuing omission  or  undervaluation  of  other  taxable  property 
of  the  same  class  by  the  taxing  officers  of  a  State  or  county,  pur- 
suant to  a  rule  of  practice  adopted  by  them,  the  inevitable  ef- 
fect of  which  is  an  unjust  discrimination  in  taxation  against  the 
property  of  the  complainant  and  against  other  property  simi- 
larly situated,  is  a  violation  of  the  equal  protection  of  the  laws 
guaranteed  by  the  United  States  Constitution ;  and  if  there  is  no 
adequate  remedy  at  law,  such  omission  or  undervaluation  will 
sustain  a  bill  in  equity  in  the  Federal  court  to  enjoin  the  collec- 
tion of  the  tax  based  on  illegal  discrimination.  If  such  dis- 
crimination is  violative  of  the  State  constitution  or  statute,  re- 
lief may  be  had  on  that  ground.* 

It  was  said  by  the  C.  C.  A.,  8th  Circuit,  in  a  case  involving 
taxation  in  a  county  of  Colorado,  that  the  law  presumed  that 
every  man  intended  the  natural  and  inevitable  effect  of  his 
deeds,  and  that  taxing  officers  who  intentionally  omit  or  under- 
value other  taxable  property  in  violation  of  the  constitution  or 
statute,  so  that  an  undue  share  of  the  burden  of  taxation  is 
necessarily  thrown  upon  the  property  of  the  complainant,  in- 
tended to  discriminate  against  his  property;  and  it  was  not 
necessary  to  the  cause  of  action  that  the  officers  should  have 


1  See  Coulter  v.  L.  &  N.  R.  Co.,  supra,  where  the  court  spoke  of  such 
testimony  as  anomalous,  but  seems  to  have  considered   its  weight. 

2  Johnson  v.  Wells  Fargo  Co.,  239  U.  S.  234,  60  L.  Ed.  243  (1915), 
affirming  C.  C.  A.,  8th  Circuit,  in  214  Fed.  180,  which  had  reversed 
205  Fed.  60. 


§    551  EQUALITY   OF   VALUATION    IN    TAXATION.  621 

had  such  actual  intention,  for  their  acts  were  as  injurious  or 
remedial  without  as  with  that  intention,  i 

"Where,  on  the  other  hand,  there  is  no  proof  of  such  a  scheme 
and  of  such  intentional  discrimination,  but  it  appears  that  the 
assessment  is  intended  in  good  faith  to  be  on  the  same  basis  as 
that  of  other  property,  or  if  the  errors  made  are  incidental  to, 
and  consistent  with  an  attempt  to  administer  the  law  in  good 
faith,  there  can,  of  course,  be  no  relief.  The  charges  of  discrim- 
ination must  not  only  be  made,  but  proved.2 

§  551.  The  Proof  of  Unlawful  Discrimination.  —  The  party 
complaining  of  an  unlawful  discrimination,  alleging  a  sys- 
tematic and  intentional  omission  or  undervaluation  of  other 
property  by  the  taxing  officers  of  the  State,  often  relies 
on  facts  which,  although  they  may  be  in  a  popular  sense 
of  common  knowledge,  are  not  as  easily  proved  as  alleged.  The 
proper  proof  in  such  cases  was  exliaustively  discussed  by  the 
Circuit  Court  of  Appeals  of  the  Eighth  Circuit,^  where  the 
court  held  that  parties  to  a  suit  who  admit  in  their  pleadings 
that  the  actual  value  of  property  was  far  in  excess  of  its  as- 
sessed value  are  estopped  from  invoking,  to  sustain  the  assess- 
ment, the  rule  that  where  the  discrimination  of  an  issue  of  fact 
like  the  valuation  of  property  for  taxation  is  entrusted  by 
statute  to  the  judgment  of  an  officer  or  board,  his  or  its  decision 
raises  more  than  a  presumption  of  fact  and  may  not  be  over- 
thrown by  the  testimony  of  two  or  three  witnesses. 

It  was  said  by  the  same  court  in  another  case*  that  on  the 


1  See  A.  T.  &  S.  F.  Ry.  Co.  v.  Sullivan,  C.  C.  A.,  8tli  Cir.,  173  Fed. 
456  (1909);  see  also  Western  Union  T6l.  Co.  r.  Trapp,  186  Fed.  114. 
C.  C.  A.,  8th  Cir.  (1911),  where  the  same  ruling  was  followed  with 
reference  to  taxation  on  an  express  company  in  Oklahoma.  See  also 
Mudge  v.  McDougal,  222  Fed.  562,  Di'st.  of  Ark.  (1915),  where  this  case 
was  followed  with  reference  to  taxation  in  an  Arkansas  county.  See  also 
L.  &  N.  R.  Co.  v.  Bosworth,  Eastern  Dist.  of  Ky.,  230  Fed.  191   (1915). 

2  Illinois  Central  R.  R.  Co.  v.  Mississippi  R.  R.  Commission,  229 
Fed.  248,  Dist.  of  Miss.    (1914). 

3  A.  T.  &  S.  F.  Ry.  Co.  v.  Sullivan,  supra. 

*  Western  Union  Tel.  Co.  v.  Trapp,  supra,  following  Supreme  Court 
in  Railway  Co.  v.  Backus,  supra;  Adams  Express  Co.  v.  Ohio  State 
Auditor,  supra. 


622  EQUALITY   OF   VALUATION   IN    TAXATION.  §    552 

issue  whether  there  was  an  intentional  reduction  of  property 
other  than  that  of  the  public  corporation  by  the  State  Board 
of  Equalization  it  would  be  presumed  that  there  was  no  such 
reduction,  the  burden  of  proving  the  contrary  being  on  the  com- 
plainant, and  that  the  judgment  of  a  State  Board  empowered  to 
fix  the  valuation  of  property  for  taxation  could  not  be  set  aside 
by  proof  that  the  value  was  other  than  that  fixed  by  the  board 
when  there  was  no  evidence  of  fraud  and  no  gross  error  in  the 
system  on  which  the  valuations  were  made. 

A  report  made  by  a  railway  company  to  taxing  officers  under 
the  statute  for  the  purpose  of  aiding  the  officers  in  properly 
assessing  its  property  was  competent  evidence  against  it  of  the 
fact  stated  therein  in  a  suit  to  enjoin  the  collection  of  such  taxes, 
but  a  report  of  the  company  to  the  Interstate  Commerce  Com- 
mission covering  a  period  of  time  other  than  that  on  which  the 
statute  required  the  assessment  to  be  based,  and  not  made  for 
taxation  is  not  competent  evidence.  So  as  to  the  admission  of 
agents  and  attorneys  where  they  are  authorized  to  act  in  the 
suit,  they  estop  their  principal,  but  are  not  competent  evidence 
in  another  suit  or  proceeding.  In  this  case  there  was  an  ex- 
haustive examination  of  the  practice  of  the  assessor  in  the  claim 
of  the  alleged  under  assessment  and  omission  of  other  prop- 
erty, i 

§  552.  Full  Valuation  Enforced  by  Creditors.— In  another 
class  of  cases  the  question  of  valuation  is  raised,  not  by  a  tax- 
payer who  complains  of  discrimination  against  him  by  the  un- 
dervaluation of  other  property,  but  where  a  full  valuation  of 
all  property  in  the  taxing  district  is  sought  to  be  enforced  by  a 
creditor  in  a  mandamus  proceeding  to  enforce  taxation  in  pay- 
ment of  a  judgment  against  a  county  or  municipality.  In  such 
cases  the  judgment  creditor  is  enforcing  through  mandamus 
proceedings  what  has  been  adjudged  to  be  a  contract  right 
growing  out  of  the  contractual  engagement  made  by  the  muni- 


1  A.  T.  &  S.  F.  Ry.  Co.  v.  Sullivan,  supra.  For  detailed  discussion 
of  the  evidence  of  the  omission  and  undervaluation  of  different  classes 
of  property,  see  opinion  in  Sullivan  and  Bosworth  cases,  supra. 


§    552  EQUALITY    OP   VALUATION   IN    TAXATION.  623 

cipal  corporation,  and  it  is  an  impairment  of  the  obligation  of 
the  contract  to  destroy  or  lessen  the  means  by  which  it  can  be 
enforced.^  Thus,  mandamus  was  held  to  lie  to  compel  the 
assessor  and  equalization  officers  in  an  Arkansas  county  to  re- 
quire all  property  subject  to  taxation  therein  to  be  taxed  at  full 
value,  and  that  it  was  no  defense  to  the  county  board,  that  they 
had  equalized  the  property  of  the  county  at  a  valuation  of  fifty 
per  cent  of  the  full  value. 

It  seems  that  in  this  ease  the  judgment  had  been  recovered 
by  the  contractor  who  had  built  the  court  house,  and  it  was 
stipulated  in  the  contract  that  the  county  would,  if  necessary, 
increase  the  court  house  building  tax  or  the  assessed  valuation 
of  the  county  to  the  full  market  value  of  the  taxable  property 
of  the  county  as  provided  by  law.  The  court  said  that  it  was 
not  a  question  of  whether  the  assessor  had  a  right  to  assess 
property  at  fifty  per  cent  of  its  value,  but  that  they  could  not 
do  it  to  the  prejudice  of  the  contractual  rights  of  the  relator, 
saying : 

"If  Monroe  County  can  contract  with  the  relator  for  the  use 
of  its  people,  accept  the  same,  and  then  refuse  to  pay  for  it  on 
the  ground  that,  in  violation  of  the  constitution  and  law^s  of 
Arkansas,  it  is  assessing  property  for  taxation  at  only  fifty  per 
cent  of  its  true  value,  then  our  courts  of  justice  are  established 
for  no  purpose.  "2 

Thus,  in  a  State  where,  at  the  time  a  contract  was  made,  all 
property  taxable  was  required  to  be  assessed  by  the  City  Re- 
corder at  its  full  value,  and  subsequently  a  State  statute  was 
passed  ref|uiring  all  assessments  to  be  made  by  a  county  as- 

^  Supra,  Sec.  81;   Huidekoper  v.  Hadley,  et  al.,  supra.  Sec.  360. 

2U.  S.  ex  rel.  v.  Jimmerson,  C.  C.  A.,  8th  Cir.,  222  Fed.  489  (1915). 
The  Supreme  Court  of  Arkansas,  in  State  v.  Meek,  192  S.  W.  203 
(1907),  declined  to  follow  this  case  under  a  similar  state  of  fact,  and 
held  that  the  State  Supreme  Court  was  the  final  arbitrator  in  con- 
struing State  Constitutions  and  laws,  and  said  that  the  fact  that 
county  officers  contracted  to  assess  property  at  full  value  could  create 
no  greater  obligation  than  the  law  imposes,  and  that  mandamus 
could  not  be  used  to  compel  an  officer  to  make  tax  assessments  dis- 
turbing this  State  equalization. 


624  EQUALITY  OF  VALUATION  IN  TAXATION.        §  552 

sessor,  and  next  by  the  State  Board,  and  that  under  this 
equalization  the  property  was  assessed  at  only  some  seventy 
per  cent  of  its  actual  value,  the  court  held  that  such  statute 
was  void  and  that  mandamus  would  be  granted  against  the 
recorder,  compelling  an  assessment  for  property  at  its  true 
value.^  It  follows,  therefore,  that  while  a  State  may  adopt  such 
a  percentage  of  true  value  for  taxable  valuation  as  it  deems 
proper,  or  may  equalize  values  at  percentages  below  the  true 
value,  such  right  must  be  exercised  subject  to  the  right  of  cred- 
itors who  have  a  contract  right  to  enforce  full  value  for  taxa- 
tion in  contracts  with  counties  and  other  subdivisions  of  the 
State. 


1  City  of  Cleveland,  Tennessee  v.  U.  S.  et  ah,  C.  C.  A.,  6th  Cir.,  166 
Fed.  677   (1909). 


CHAPTER    XVII. 

THE  TAXING  POWER  OF  CONGRESS. 

§  553.  Taxing  power  of  Congress  granted  by  Constitution. 

554.  Purpose  for  which  taxing  power  may  be  exercised. 

555.  Appropriation  of  public  money. 

556.  Supreme  Court  on   bounty   legislation. 

557.  Moral  and  equitable  claims  as  "debts." 

558.  Conclusiveness   of   legislative   determination   as   to    what   are 

"debts." 

559.  Taxes,  duties,  imposts  and  excises. 

560.  What  are  direct  taxes. 

561.  The  Income  Tax  Amendment  of  1913. 

562.  The  corporation  Excise  Tax  of  1909  constitutional. 

563.  Constitutionality  of  the  Income  Tax  Act  of  1913  sustained. 

564.  Inheritance  tax  not  direct  tax. 

565.  Direct   taxation    in   economic   sense   and   constitutional    sense 

distinguished. 

566.  The  War  Revenue  Act  of  June  13,  1898. 

567.  Direct  tax  as  defined  by  the  Supreme  Court. 

568.  Taxing    powers    of    Congress    co-extensive    with    territory    of 

United  States. 

569.  Uniformity  in  Federal  taxation. 

570.  Uniformity   in   levy   of  duties. 

571.  Levying  duties  under  the  war  power. 

572.  Uniformity  clause  as  applied  to  territorial  acquisitions. 

573.  Insular   decisions. 

574.  Tax  upon  exports. 

575.  Tax  on  foreign  bills  of  lading  is  tax  on  exports. 

576.  Porto  Rican  Tariff  of  1900  not  tax  on  exports. 

577.  Act  conferring  reciprocity  powers  on   President  sustained. 

578.  Taxing  power  of  Congress  with  reference  to  treaty  power. 

579.  •  State    instrumentalities    and    agencies    exempt    from    Federal 

taxation. 

580.  This   exemption    does   not   extend    to   the    State's   Assumption 

of  business  of  liquor  selling. 

581.  Federal  succession  tax  on  bequests  to  municipalities. 

582.  State    securities    are    not    exempt    from    Federal    inheritance 

taxes. 

583.  Federal  securities  subject  to  Federal  inheritance  taxes. 

(625) 


626  THE   TAXING   POWER    OF    CONGRESS.  §    553 

584.  Taxing  power  of  Congress  and  State  authority. 

585.  Taxing  power  of  Congress  and  State  franchises. 

586.  Taxing  power  of  Congress  and  police  power  of  State. 

587.  Municipal   corporations  subject  to   internal  revenue  taxation. 

588.  Diminution  of  salaries  by  taxation. 

589.  Progressive   taxation. 

590.  Scope  of  Federal  taxing  power. 

591.  Taxing  power  of  Congress  in  relation  to  interstate  commerce. 

592.  Congress  may  increase  excise  as  well  as  property  tax. 

593.  Taxation  of  property  of  non-resident  aliens. 

594.  Taxation  of  property  of  residents  invested  abroad. 

595.  The  taxing  power  of  Congress  over  territories. 

596.  Classification    in    territorial    taxation   of   Indian    reservations. 

597.  The  taxing  power  in  case  of  unincorporated  territories. 

598.  Taxation  in  District  of  Columbia. 

599.  Power  of  Congress  in  enforcing  collection  of  taxes. 

Art.  I,  Section  8  of  the  Constitution  of  the  United  States: 

"Section  8.  The  Congress  shall  have  power:  To  lay  and  collect 
taxes,  duties,  imposts  and  excises,  to  pay  the  debts,  and  provide  for 
the  common  defense  and  general  welfare  of  the  United  States;  but  all 
duties,  imposts  and  excises,  shall  be  uniform  throughout  the  United 
States." 

Art.  I,  Sec.  9,  paraigraph  4: 

"No  capitation,  or  other  direct  tax  shall  be  laid,  unless  in  propor- 
tion to  the  census  on  enumeration  hereinbefore  directed  to  be  taken." 

Art.  I,  Sec.  9,  paragraph  5: 
.    "No  tax  or  duty  shall  be  laid  on  articles  exported  from  any  State." 

Amendment  XVI.     Adoption  proclaimed  February  25,  1913: 

"The  Congress  shall  have  power  to  lay  and  collect  taxes  on  incomes, 
from  whatever  source  derived,  without  apportionment  among  the  sev- 
eral States,  and  without  regard  to  any  census  or  enumeration. 

§  553.    Taxing  Power  of  Congress  Granted  by  Constitution. 

— The  Constitution  of  the  United  States,  while  restraining,  ex- 
pressly and  by  necessary  implication,  the  taxing  power  of  the 
States,  grants  certain  taxing  powers  to  Congress.  As  the  Fed- 
eral government  under  the  Constitution  is  one  of  delegated 
powers,  we  must  find  the  taxing  power  of  Congress  in  the  ex- 
press or  implied  grants  of  the  Constitution.  Thus  it  is  said  by 
Justice  Story  :^ 


1  Martin  v.  Hunter,  1  Wheaton  304,  1.  c.  326,  4  L.  Ed.  97   (1816). 


§   554  THE  TAXING  POWER   OF   CONGRESS.  627 

"The  government  of  the  United  States  can  claim  no  powers 
which  are  not  granted  to  it  by  the  Constitution,  and  the  powers 
actually  granted  must  be  such  as  are  expressly  given,  or  given 
by  necessary  implication. ' ' 

There  is  no  power  of  taxation  inherent  in  the  United  States, 
as  there  is  in  the  States.  The  most  serious  vice  of  the  Con- 
federation was  the  absence  of  power  in  Congress  to  raise  its 
own  revenue  for  the  execution  of  its  powers.  The  Constitution 
therefore  granted  to  Congress  specific  powers  of  taxation  deal- 
ing directly  with  the  subject  of  taxation,  exclusive  as  to  duties 
on  foreign  imports,  and  concurrent  with  the  States  in  internal 
taxation,  subject  to  the  qualifications  of  uniformity  and  appor- 
tionment in  the  exercise  of  these  powers  thus  granted,  as  stated 
in  the  clauses  quoted.  In  his  opinion  in  Gibbons  v.  Ogden,^ 
Chief  Justice  ]\rarshall  distinguished  between  this  concurrent 
power  of  taxation  and  the  power  to  regulate  commerce,  saying 
that  the  exercise  of  the  taxing  power  by  Congress  does  not  in- 
terfere with  the  power  of  the  State  to  tax  for  the  support  of  its 
own  government,  and  that,  when  each  exercises  the  power  of 
taxation,  neither  is  exercising  the  power  of  the  other.^ 

§  554.    Purpose  for  Which  Taxing-  Power  May  be  Exercised. 

— It  seems  to  be  settled  that  the  words  in  Article  I,  Section  8, 
above  quoted,  "To  pay  the  debts  and  provide  for  the  common 
defense  and  general  welfare  of  the  United  States,"  do  not 
grant  a  distinct  power  to  Congress,  but  simply  declare  the  ob- 
ject of  the  taxing  power  preceding,  so  that  the  clause  is  equiva- 
lent to  the  following:  "Congress  shall  have  power  to  lay  and 
collect  taxes,  duties,  imposts  and  excises,  in  order  to  pay  the 
debts  and  provide  for  the  common  defense  and  general  welfare 
of  the  United  States."  Congress  therefore  has  not  an  unlim- 
ited power  as  to  the  purpose  of  taxation,  and  can  levy  taxes 
only  for  these  specific  objects.^ 


1  See  supra.  Sec.  3. 

2  Concurrent  Powers  of  Taxation,  supra,  Sec.  3. 

3  Story's  Commentaries  on  the  Constitution,  Vol.  1,  Sec.  907.  He 
says  that  the  view  that  paying  the  debts  and  providing  for  the  com- 
mon defense  and  general  welfare  constitutes  another  substantial  power 


628  THE   TAXING   POWER   OP    CONGRESS.  §    554 

This  limitation  of  the  purposes  for  which  taxes  may  be  levied 
by  Congress,  while  historically  interesting,  is  really  addressed 
to  the  legislative  discretion  rather  than  to  the  judicial  power, 
for  the  reason  that  the  specific  purposes  for  which  the  proceeds 
of  taxes  are  to  be  expended  are  not  declared  in  the  Acts  of  Con- 
gress levying  them,  and  the  courts  cannot  look  beyond  the  acts 
themselves  to  discover  those  purposes.  The  same  principle  ap- 
plies in  the  judicial  review  of  the  purposes  for  which  State 


distinct  from  the  power  to  tax,  would  make  the  government  one  of 
general  and  unlimited  powers,  and  that,  while  this  view  has  been 
maintained  by  minds  of  great  ingenuity  and  liberality,  the  contrary 
opinion  has  been  the  generally  received  sense  of  the  nation,  and 
seems  supported  by  reasoning  at  once  solid  and  impregnable.  He  says 
also,  Sec.  926,  that  the  argument  in  favor  of  the  restricted  construc- 
tion has,  perhaps,  never  been  presented  in  a  more  precise  and  forcible 
shape  than  in  the  official  opinion  of  Mr.  Jefferson  on  the  proposed 
Bank  of  the  United  States,  February  16,  1791,  as  follows:  "For  the 
laying  of  taxes  is  the  power,  and  the  general  welfare  fhe  purpose  for 
which  the  power  is  to  be  exercised.  Congress  is  not  to  lay  taxes 
ad  libitum  for  any  purpose  they  please;  but  only  to  pay  the  debts  or 
provide  for  the  welfare  of  the  Union.  In  like  manner  they  are  not 
to  do  anything  they  please,  to  provide  for  the  general  welfare,  but 
only  to  lay  taxes  for  that  purpose."     7th  Jefferson's  Works  757. 

In  this  construction  Mr.  Hamilton  agreed,  see  Report  on  Manu- 
factures, where  he  contends  that,  while  the  power  to  lay  taxes  is  con- 
fined to  purposes  for  the  common  defense  and  general  welfare,  the 
power  of  appropriation  of  public  moneys  is  co-extensive,  that  is,  that 
it  may  be  applied  to  any  purposes  for  the  common  defense  and  gen- 
eral welfare.  The  late  Justice  Miller  in  his  Lectures  on  the  Constitu- 
tion, says,  page  230:  "At  one  time  I  did  not  concur  in  this  peculiar 
manner  of  punctuating  this  instrument  by  commas  and  semicolons, 
without  a  period  coming  in  between  the  opening  words  of  this  8th 
section,  'Congress  shall  have  power,'  and  the  18th  clause  with  which 
it  concludes.  This  clause,  however,  in  regard  to  paying  the  debts  and 
providing  for  the  common  defense  and  general  welfare  constitutes  a 
proper  qualification  of  the  power  to  collect  taxes,  and  in  what  may  be 
called  the  same  sentence  is  followed  by  the  limitation  requiring  all 
duties,  excises  and  imposts  to  be  uniform,  so  that  it  seems  probable 
that  the  meaning  is  that  Congress  shall  have  power  to  lay  these  taxes 
and  collect  them  in  order  'to  pay  the  debts  and  provide  for  the  com- 
mon defense  and  general  welfare.' " 

See  also  John  Randolph  Tucker's  Commentaries  on  the  Constitution 
of  the  United  States,  Sec.  222. 


§   554  THE   TAXING   POWER   OF    CONGRESS.  629 

taxes  are  levied,  and  such  questions  in  the  courts  have  usually 
related  to  the  validity  of  municipal  bonds,  for  the  payment  of 
which  taxation  is  required.^ 

Under  the  permanent  revenue  system  of  the  government,^ 
taxes  are  levied,  not  for  specific  purposes,  but  by  continuing 
laws  establishing  the  rate  of  customs  duties  and  internal  revenue 
taxes,  and  questions  relating  to  the  lawful  purposes  of  taxation 
do  not  arise  in  the  levying  of  taxes,  but  in  the  appropriation 
of  public  funds  for  public  needs. 

The  power  of  taxation  is  sometimes  invoked  with  no  purpose 
of  revenue  in  view,  but  solely  to  destroy  the  interest  or  business 
upon  which  the  tax  is  levied,  by  taxing  it  out  of  existence.  Thus 
the  tax  upon  the  State  bank  notes  was  imposed  to  destroy  their 
use,  so  as  to  open  the  means  for  circulating  the  notes  of  the  na- 
tional banks.^  While  the  only  lawful  purpose  of  taxation  is 
revenue,  the  amount  of  the  tax  on  any  subject  within  the  scope 
of  the  taxing  power  is  for  the  legislative  discretion  to  deter- 
mine. 

"It  is  a  perplexing  inquiry  unfit  for  the  judicial  department, 
what  degree  of  taxation  is  the  legitimate  use  and  what  degree 
may  amount  to  an  abuse  of  the  power. '  '* 

A  legislator  may  therefore  vote  against  an  act,  which  he  as  a 
legislator  deems  unauthorized  by  the  Constitution,  and  yet  as  a 
judge  he  might  be  compelled  to  sustain  the  same  act  as  an  exer- 
cise of  legislative  discretion  not  subject  to  judicial  review.^ 

1  See  Ch.  XII,  on  Public  Purpose  of  Taxation. 

2  As  to  permanent  tax  laws,  see  Tucker  on  Constitutional  Law, 
Sees.  239  and  240.  He  says  that  our  system  of  permanent  tax  laws  de- 
stroys the  relation  between  taxation  and  representation.  For  differ- 
ence between  English  and  American  practice  as  to  revenue  bills,  see 
Miller's  Lectures  on  the  Constitution,  pages  203  to  208. 

3  See  infra,  Sec.  585. 

4  Chief  Justice  Marshall  in  McCulloch  v.  Maryland,  4  Wheaton,  438, 
supra. 

5  In  the  54th  Congress  the  extent  of  the  taxing  power  of  Congress  in 
suppressing  industries  was  discussed  in  connection  with  the  attempted 
passage  of  the  so-called  "anti-option"  bill,  proposing  to  tax  out  of 
existence  the  dealings  in  "options"  and  "futures."  Some  held  that 
the  taxing  power  was  inadequate  and  relied  on  the  commerce  clause. 


630  THE   TAXING   POWER   OP    CONGRESS.  §    555 

§  555.  Appropriation  of  Public  Money. — The  Constitution 
provides^  that  no  money  shall  be  drawn  from  the  treasury  but 
in  consequence  of  appropriations  made  by  law.  In  the  exercise 
of  this  power  of  appropriation,  or  the  expenditure  of  the  pro- 
ceeds of  taxation,  there  could  be  no  question  as  to  two  of  the 
three  authorized  objects  of  expenditure,  the  payment  of  the 
debts,  and  the  providing  for  the  common  defense.  There  was, 
however,  a  great  difference  in  the  opinions  of  the  great  master- 
minds in  the  formation  and  defense  of  the  Constitution,  Ham- 
ilton and  Madison,  as  to  the  power  of  Congress  to  appropriate 
''for  the  general  welfare  of  the  United  States."  Thus  Mr. 
Madison  held  that  the  words  "general  welfare,"  as  a  general 
description  of  the  objects  of  the  taxing  power,  were  limited  by 
and  commensurate  with  the  objects  of  the  Constitution  as  de- 
fined in  the  enumerated  powers  specified,  and  that  there  can  be 
no  general  welfare  intended  by  the  Constitution  beyond  what 
Congress  has  power  to  create,  regulate  and  control  by  virtue  of 
the  enumerated  powers.  On  the  other  hand,  it  was  held  by  Mr. 
Hamilton  that  the  words,  "general  welfare"  include,  not  only 
the  enumerated  powers  of  the  Constitution,  but  whatever  Con- 
gress may  deem  to  be  for  the  general  welfare.^ 


1  Art.  I,  Sec.  9,  Par.  6. 

2  Justice  Story  said,  1  Story  on  Const.,  Sec.  958,  of  this  and  the  other 
questions  arising  out  of  this  same  grant  to  Congress  of  its  taxing 
power,  viz.:  "Whether  the  government  has  a  right  to  lay  taxes  for 
any  other  purpose  than  to  raise  revenue,  however  much  that  purpose 
may  be  for  the  common  defense,  or  general  welfare,"  that  each  of 
these  questions  had  given  rise  to  much  animated  controversy.  The 
former  involves  the  question  whether  Congress  can  lay  taxes  to  pro- 
tect and  encourage  domestic  manufactures;  the  latter,  whether  Con- 
gress can  appropriate  money  to  internal  improvements.  "Each  has 
been  affirmed  and  denied,  with  great  pertinacity,  zeal  and  eloquent 
reasoning;  each  has  become  prominent  in  the  struggles  of  party;  and 
defeat  in  each  has  not  hitherto  silenced  opposition,  or  given  absolute 
security  to  victory.  The  contest  is  often  renewed;  and  the  attack 
and  defense  maintained  with  equal  ardor.  In  discussing  this  subject, 
we  are  treading  upon  the  ashes  of  yet  unextinguished  fires,  incedimus 
per  ignes  suppositos  cineri  doloso." 

The  question  was  practically  determined  by  Congress  in  the  matter 
of   internal    improvements,   that   while   it   could   not   constitutionally 


5    555  THE   TAXING   POWER   OF    CONGRESS.  631 

But  this  question  of  the  limitation  of  the  legislative  power  in 
appropriation,  for  the  reasons  already  stated,  is  political  rather 
than  judicial,  and  the  subject  has  become,  from  a  legal  point  of 
view,  academic  rather  than  practical  since  the  decision  of  the 
Supreme  Court  in  McCulloch  v.  Maryland,  wherein  the  court 
held  that  Congress  could  establish  a  bank,  although  there  was 
no  authority  given  it  in  the  enumerated  powers  of  the  Consti- 
tution to  create  a  corporation  of  any  kind.  The  court  said  that 
the  great  powers  to  lay  and  collect  taxes,  to  borrow  money,  to 
regulate  commerce,  to  declare  and  conduct  war  and  support 
armies  and  navies  carry  with  them  the  selection  of  the  means 
for  those  great  ends,  saying  at  page  415:  "To  have  prescribed 
the  means  by  which  government  should,  in  all  future  time,  exe- 
cute its  powers,  would  have  been  to  change,  entirely,  the  char- 
acter of  the  instrument,  and  give  it  the  properties  of  a  legal 
code." 

The  court  called  attention  to  the  concluding  clause  of  the 
eighth  section  of  Article  I,  giving  the  power  to  make  all  laws 
necessary  and  proper  for  the  carrying  into  execution  the  pre- 
ceding powers,  and  said  at  p.  420: 

"The  result  of  the  most  careful  and  attentive  consideration 
bestowed  upon  this  clause  is,  that  if  it  does  not  enlarge,  it  can- 
not be  construed  to  restrain  the  powers  of  Congress,  or  to  im- 
pair the  right  of  the  legislature  to  exercise  its  best  judgment 
in  the  selection  of  measures  to  carr}'  into  execution  the  consti- 
tutional powers  of  the  govermnent.  If  no  other  motive  for  its 
insertion  can  be  suggested,  a  sufficient  one  is  found  in  the  desire 
to  remove  all  doubts  respecting  the  right  to  legislate  on  that 
A^ast  mass  of  incidental  powers  which  must  be  involved  in  the 
Constitution,  if  tliat  instrument  be  not  a  splendid  bauble. 

"We  admit,  as  all  must  admit,  that  the  powers  of  the  gov- 
ernment are  limited,  and  that  its  limits  are  not  to  be  tran- 
scended.    But  we  think  the  sound  construction  of  the  Constitu- 


build  canals  and  other  works  of  internal  improvement,  it  could,  ap- 
propriate money  therefor.  For  the  Hamiltonian  view,  see  Report  on 
Manufactures.  For  Mr.  Madison's  view,  see  veto  message,  March  3, 
1817.  For  a  thorough  review  of  the  subject  from  an  anti-Hamilton ian 
view,  see  John  Randolph  Tucker's  Commentaries  on  the  Constitution, 
Vol.  1,  Sec.  234,  et  aeq. 


632  THE   TAXING   POWER   OF    CONGRESS,  §    556 

tion  must  allow  to  the  national  legislature  that  discretion,  with 
respect  to  the  means  by  which  the  powers  it  confers  are  to  be 
carried  into  execution,  which  will  enable  that  body  to  perform 
the  highest  duties  assigned  to  it,  in  the  manner  most  beneficial 
to  the  people.  Let  the  end  be  legitimate,  let  it  be  within  the 
scope  of  the  Constitution,  and  all  means  which  are  appropriate, 
which  are  plainly  adapted  to  that  end,  which  are  not  prohib- 
ited, but  consist  with  the  letter  and  spirit  of  the  Constitution, 
are  constitutional." 

§  556.  Supreme  Court  on  Bounty  Legislation. — The  practical 
difficulty  in  the  review  by  the  judiciary  of  the  congressional 
discretion  in  the  appropriation  of  public  funds,  is  illustrated 
in  the  history  of  the  bounty  clause  in  the  Tariff  Act  of  1890. 
This  provided  for  payment  from  the  treasury  of  the  United 
States  to  the  producers  of  beet  sugar  of  a  hounty  of  two  cents 
or  one  and  three-quarter  cents  per  pound,  according  to  the 
grade  of  the  sugar.  The  constitutionality  of  this  bounty  was 
gravely  doubted,  and  it  was  contended  that  the  provision  was 
void  under  the  rule  declared  in  Loan  Association  v.  Topeka.^ 
But  the  Supreme  Court,  in  a  case  involving  the  validity  of  the 
Tariff  Act  of  1890,^  declined  to  pass  upon  the  constitutionality 
of  this  provision,  though  they  conceded  its  grave  importance, 
saying,  1.  e.  p.  695,  "it  would  be  difficult  to  suggest  a  question 
of  larger  importance  or  one  the  decision  of  which  would  be 
more  far-reaching."  The  court  said  that  even  if  it  was  un- 
constitutional, it  would  not  invalidate  the  other  sections  of  the 
tariff  act,  as  the  different  objects  had  no  legal  connection  with 
each  other. 

Subsequently,  in  the  Tariff  Act  of  1894,  Congress  repealed 
this  bounty  provision,  enacting  that  thereafter  it  should  be  un- 
lawful to  issue  any  licenses  or  pay  any  bounty  for  the  produc- 
tion of  sugar  at  any  time.  It  seems,  however,  that  when  this 
repealing  act  was  passed,  certain  manufacturers  had  taken  out 
licenses  under  the  act  and  had  produced  and  manufactured  the 
sugar  on  the  faith  thereof,  but,  by  reason  of  the  repeal  of  the 
act,  were  unable  to  obtain  the  money  from  the  treasury  on  the 


1  See  supra,  Ch.  XII,  The  Public  Purpose  of  Taxation. 

2  Field  V.  Clark,  143  U.  S.  649,  36  L.  Ed.  294  (1892). 


§   557  '  THE  TAXING   POWER   OF   CONGRESS.  633 

warrants  which  had  been  issued  to  them.     Congress  therefore 
passed  an  act  in  1895  appropriating  money  for  the  payment  of 
those  manufacturers  and  producers  of  sugar,  who  had  complied 
with  the  act,  but  were  debarred  from  payment  by  reason  of  its 
repeal  in  1894.     It  seems  that  the  parties  who  were  entitled  to 
pajnnent  under  this  act  were  few  in  number,  and  the  appropria- 
tion called  for  about  $250,000.     The  proper  disbursing  officer 
of  the  treasury  refused  to  pay  the  warrants  drawn  pursuant  to 
the  act,  upon  the  ground  that  the  act  was  unconstitutional.     A 
Louisiana  corporation,  entitled  to  payment  under  this  act  of 
1895,  applied  to  the  Supreme  Court  of  the  District  of  Columbia 
for  a  mandnimis  against  the  Secretary  of  the  Treasury  and  the 
Commissioner  of  Internal  Revenue,  to  compel  action  on  their 
part  under  the  act.     The  act  was  declared  unconstitutional  by 
the  Court  of  Appeals  of  the  District  of  Columbia,  on  the  ground 
that  the  bounty  provision  itself  was  unconstitutional  and  any 
appropriation  on  account  of  it  invalid.^     The  Supreme  Court^ 
avoided  any  decision  as  to  the  validity  of  the  bounty  legislation 
in  the  act  of  1890,  but  sustained  the  act  of  1895,  as  within  the 
constitutional  power  of  Congress  to  determine  whether  claims 
upon  the  public  treasury  are  founded  upon  moral  and  honor- 
able obligations  and  upon  principles  of  right  and  justice.   When 
it  has  decided  such  questions  in  the  affirmative,  and  has  appro- 
priated public  money  for  the  payment  of  such  claims,  said  the 
court,  ''its  decision  can  rarel.v,  if  ever,  be  the  subject  of  review 
by  the  judicial  branch  of  the  government." 

§  557.    Moral  and  Equitable  Claims  as  "Debts."  — It  was 

argued  in  this  case  that  there  could  be  no  valid  claim  growing 
out  of  an  unconstitutional  act.  But  the  court  said  that  the 
question  involved  was,  not  the  validity  of  the  claim  under  the 
unconstitutional  act,  but  whether  honorable  considerations  could 
arise  warranting  the  appropriation.  The  parties  whom  Con- 
gress reimbursed  could  not  be  held  to  know,  what  no  one  else 
could  know  prior  to  the  determination  of  that  fact  by  some 
judicial  tribunal,  tliat  the  bounty  law  was  unconstitutional.    The 

1  United  States  ex  rcl.  v.  Carlisle,  5  D.  C.  App.  1,38  (1895). 

2  United  States  v.  Realty  Co.,  163  U.  S.  427,  41  L.  Ed.  215  (1896). 


634  THE   TAXING   POWER   OP    CONGRESS,  §    559 

power  to  raise  money  to  pay  the  debts  of  the  United  Sj;ates  in- 
cludes the  power  to  appropriate  the  money  when  raised  for  that 
object,  and  the  debts  of  the  United  States  are  not  limited  to 
those  evidenced  by  some  written  obligation  or  otherwise  of  a 
strictly  legal  character.  The  court  cited  instances  of  appropria- 
tions of  like  character  since  the  foundation  of  the  government, 
and  said: 

"Of  course,  the  difference  between  the  powers  of  the  State 
legislatures  and  that  of  the  Congress  of  the  United  States  is  not 
lost  sight  of,  but  it  is  believed  that  in  relation  to  the  power  to 
recognize  and  to  pay  obligations  resting  only  upon  moral  con- ' 
siderations  or  upon  the  general  principles  of  right  and  justice, 
the  Federal  Congress  stands  upon  a  level  with  the  State  legis- 
lature. '  * 

§  558.  Conclusiveness  of  Legislative  Determination  as  to 
What  are  "Debts." — The  decision  in  the  case  cited  establishes 
not  only  the  principle  that  the  term  "debts"  includes  those 
debts  or  claims  which  arise  upon  a  merely  honorary  obligation 
and  would  not  be  recoverable  in  a  court  of  law  if  existing 
against  an  individual,  but  also  that  the  determination  of  Con- 
gress in  any  given  case  that  an  appropriation  is  warranted 
upon  such  honorable  and  moral  considerations  cannot  be  re- 
viewed by  the  courts.  The  opinion  in  this  case  is  interesting 
and  important,  as  it  illustrates  the  practical  difficulty  of  en- 
forcing in  any  case  the  constitutional  restrictions  as  to  the  pur- 
pose for  which  taxes  can  be  levied.  Thus  the  court  said  in  this 
case,  p.  444: 

"In  regard  to  the  question  whether  the  facts  existing  in  any 
given  case  bring  it  within  the  description  of  that  class  of 
claims  which  Congress  can  and  ought  to  recognize  as  founded 
upon  equitable  and  moral  considerations  and  grounded  upon 
principles  of  right  and  justice,  we  think  that  generally  such 
question  must  in  its  nature  be  one  for  Congress  to  decide  for 
itself.  Its  decision  recognizing  such  a  claim  and  appropriating 
money  for  its  payment  can  rarely,  if  ever,  be  the  subject  of  re- 
view by  the  judicial  branch  of  the  government." 

§  559.  Taxes,  Duties,  Imports  and  Excises. — The  poAver  to 
tax  contained  in  Article  I,  Section  8,  of  the  Constitution  is  to 


§    559  THE   TAXING   POWER   OF    CONGRESS.  635 

lay  and  collect  taxes,  duties,  imposts  and  excises.  The  terms 
"tax"  and  "duty"  are  used  in  paragraph  1  of  Section  9  and 
in  paragraph  5,  in  respect  to  articles  exported.  The  term 
"duty"  in  a  narrower  sense  as  used  in  the  Constitution  relates 
to  customs  duties,  and  has  been  held  equivalent  to  imposts.  Thus, 
in  Section  10  of  Article  I  of  the  Constitution,  the  States  are 
prohibited  from  laying  sniy  imposts  or  duties  on  imports  or  ex- 
ports; but  "duties,  imposts  and  excises"  in  Section  8  are  dis- 
tinguislied  from  other  taxes  which  Congress  has  power  to  levy, 
in  the  requirement  that  they  shall  be  uniform  throughout  the 
United  States.^ 

An  excise  tax  has  been  defined  as  one  which  is  assessed  upon 
some  article  of  personal  property,  or  money,  or  something  which 
is  exhausted  in  the  use.^  It  is  one  which  from  its  essence  and 
nature  must  be  paid  in  fact  by  the  last  man  who  buys  and  uses 
the  property,  because  whoever  has  it,  at  the  time  when  the  tax 
is  levied  upon  it,  adds  that  amount  to  the  selling  price,  when  he 
comes  to  dispose  of  it  or  the  property  is  consumed.  From  its 
derivation  (cxcidere — ^to  cut  off)  it  means  a  tax  upon  specific 
commodities,  paid  at  some  time  between  the  manufacture  and 
the  consumption.     As  used  in  the  constitutional  grant  of  the 


1  See  Story's  Commentaries,  Sec.  952;  Knowlton  v.  Moore,  178  U.  S. 
41,  87,  41  L.  Ed.  969  (1900).  Mr.  Madison  in  his  letter  on  the  tariff 
of  September  18,  1828,  4  Elliot's  Debates  600,  says  as  to  these  different 
terms  used  in  the  grant  of  the  taxing  power: 

"Pleonasms,  tautologies  and  the  promiscuous  use  of  terms  and 
phrases  differing  in  their  shades  of  meaning  (and  always  to  be  ex- 
pounded with  reference  to  the  text  and  under  the  control  of  the  gen- 
eral character  and  manifest  scope  of  the  instrument  in  which  they  are 
found)  are  to  be  ascribed  sometimes  to  the  purpose  of  general  cau- 
tion, sometimes  to  the  imperfection  of  language,  and  sometimes  to  the 
imperfection  of  man  himself.  In  this  view  of  the  subject  it  w^as  quite 
natural,  however  certainly  the  general  power  to  regulate  trade  might 
include  a  power  to  impose  duties  on  it,  not  to  omit  it  in  a  clause 
enumerating  the  several  modes  of  revenue  authorized  by  the  Consti- 
tution. In  few  cases  could  the  'ex  majori  cautela'  occur  with  more 
claim  to  respect." 

The  term  "duty"  is  used  sometimes  In  the  general  sense  of  tax — as 
a  "stamp  duty." 

2  Miller's  Lectures  on  the  Constitution,  p.  238. 


636      .  THE  TAXING  POWER  OP    CONGRESS.  §    559 

taxing  power  to  Congress,  the  term  has  been  given  a  broader 
meaning,  so  that  it  includes  practically  all  taxes,  other  than 
customs  duties,  which  are  not  direct  taxes  and  which  therefore 
do  not  require  to  be  levied  by  the  rule  of  apportionment.^  Thus 
taxes  on  inheritances,  on  commercial  exchange  sales  and  stamp 
taxes  of  all  kinds  have  been  held  to  be  excise  taxes  within  the 
meaning  of  the  constitution. ^  In  the  Head  Money  cases,^  the 
tax  levied  by  Congress  on  the  business  of  bringing  passengers 
from  foreign  countries  was  held  to  be  an  excise  duty  within 
the  meaning  of  the  constitution. 

The  tax  levied  by  Congress  on  manufactured  tobaeeo  is  a 
tax  on  an  article  manufactured  for  consumption  and  imposed 
at  a  period  intermediate  the  commencement  of  the  manufacture 
and  the  final  consumption,  and  is  also  an  excise  tax  under  the 
constitution.*  In  the  case  last  cited  the  court  reviewed  the  dif- 
ferent definitions  of  the  term  excise,  including  that  of  Dr.  John- 
son, "A  hateful  tax  levied  upon  commodities,"  an  opinion 
which,  the  court  says,  was  evidently  shared  by  Blackstone,  who 
said,  after  mentioning  the  number  of  articles  that  had  been 
added  to  those  excised,  that  it  was  "a  list  which  no  friend  of 
his  country  would  wish  to  see  further  increased."  But  the 
Supreme  Court  said  that  these  are  considerations  of  policy  to 
be  determined  by  the  legislative  branch,  and  not  of  power  to 
be  determined  by  the  judiciary.  All  of  the  taxes  enumerated 
in  the  various  statutes  for  the  collection  of  internal  duties  are 
not  excises,  but  the  great  body  of  them,  including  the  tax  on 
tobacco,  are  plainly  excises  within  the  accepted  definition  of 
the  term. 


1  In  Maine  v.  Grand  Trunk  R.  R.  Co.,  supra.  Sec.  231,  the  term  "ex- 
cise" in  a  State  statute  was  held  properly  applicable  to  the  license  for 
the  exercise  of  corporate  privileges  in  the  State,  based  on  the  State's 
mileage  proportion  of  the  gross  earnings.  In  State  v.  Hamlin,  86 
Maine  495,  an  inheritance  tax  was  classed  as  an  excise  tax. 

2  Pacific  Ins.  Co.  v.  Soule,  7  Wall.  433,  19  L.  Ed.  95  (1869);  Sholey 
V.  Rew,  23  Wall.  331,  23  L.  Ed.  99  (1875);  Nicol  v.  Ames,  173  U.  S. 
509,  43  L.   Ed.   986    (1899);   Knowlton  v.  Moore,  178  U.   S.   41,  supra. 

3  112  U.  S.  580,  supra. 

*  Fatten  V.  Brady,  184  U.  S.  608,  46  L.  Ed.  713    (1902). 


§   560  THE  TAXING  POWER  OF   CONGRESS.  637 

The  taxing  power  therefore  conferred  by  the  constitution 
upon  Congress,  it  has  been  repeatedly  held,  includes  all  the 
subjects  of  taxation,  under  thi*ee  express  restrictions:  First, 
direct  taxes  must  be  levied  according  to  the  rule  of  apportion- 
ment ;  second,  all  taxes  must  be  uniform  throughout  the  United 
States;  and,  third,  no  tax  can  be  levied  upon  exports.  These 
are  the  express  limitations  upon  the  exercise  of  the  general 
taxing  power  granted  to  Congress.  There  is  also  an  implied 
limitation  to  this  general  grant,  growing  out  of  the  relation  of 
the  Federal  government  to  the  States,  and  another,  it  has  been 
claimed,  growing  out  of  the  prohibition  in  the  constitution 
against  the  diminution  of  salaries  during  continuance  in  office. 

§  560.  What  are  Direct  Taxes.— The  Constitution  provides,^ 
that  ''no  capitation  or  other  direct  tax  shall  be  laid  unless  in 
proportion  to  the  census  or  enumeration  hereinbefore  directed 
to  be  taken."  Another  clause^  provides  that  "representatives 
and  direct  taxes  shall  be  apportioned  among  the  several  States, 
wliieh  may  be  included  within  this  Union,  according  to  their 
respective  numbers,  which  shall  be  determined  by  adding  to 
the  whole  number  of  free  persons,  including  those  bound  to 
service  for  a  term  of  years,  and  excluding  Indians  not  taxed, 
three-fifths  of  all  other  persons."  The  abolition  of  slavery 
made  the  "other  persons"  freemen,  and  it  was  provided  by  the 
second  section  of  the  Fourteenth  Amendment  that  "represen- 
tatives shall  be  apportioned  among  the  several  States  according 
to  their  respective  numbers,  counting  the  whole  number  of  per- 
sons in  each  State,  excluding  Indians  not  taxed."  No  change 
was  made  by  the  Fourteenth  Amendment  in  the  provision  for 
the  apportionment  of  direct  taxes. 

Capitation  or  poll  taxes  and  other  direct  taxes  must  there- 
fore be  apportioned  among  the  States,  each  of  which  must  pay 
according  to  its  population  and  not  according  to  its  wealth.a 

1  Art.  I,  Sec.  9,  Par.  4. 

2  Art.  I,  Sec.  2,  Par.  3. 

3  A  direct  tax  amounting  to  $20,000,000  was  levied  by  Congress 
August  5,  1861,  and  apportioned  to  tiie  States  in  proportion  to  tlie 
population  as  shown  by  the  census.     The  tax  was  levied  upon  lands 


638  THE   TAXING   POWER   OP    CONGRESS.  §    560 

The  view  was  first  entertained  that  the  only  other  direct  tax, 
besides  the  capitation  or  poll  tax,  was  a  tax  upon  land,  and  in 
Hylton  V.  United  States.i  which  appears  to  have  been  the  first 
decision  of  the  Supreme  Court  as  to  the  taxing  power  of  Con- 
gress, a  tax  upon  carnages  kept  for  the  party's  own  use  was 
held  not  to  be  a  direct  tax,  and  therefore  not  required  to  be 
levied  by  the  rule  of  apportionment.  The  same  ruling  was 
made  with  reference  to  the  Income  Tax  of  1864,  levied  during 
the  Civil  War,  which  was  declared  to  be,  not  a  direct  tax,  but 
an  excise  tax,  in  a  case  involving  a  tax  on  income  from  pro- 
fessional earnings  and  from  United  States  bonds.2 

But  the  whole  subject  was  re-examined  in  connection  with 
the  Income  Tax  of  1894,  and  the  court  there,  upon  full  consid- 
eration, decided  that  the  tax  upon  incomes  from  land  is  a  direct 
tax,  the  same  as  if  levied  upon  the  land  itself.  The  court,  how- 
ever, eight  justices  sitting,  was  equally  divided  on  the  questions 
of  whether  the  same  rule  applied  to  incomes  from  personal 
property  and  whether  the  invalidity  of  the  provision  as  to  the 
income  from  rentals  would  invalidate  the  act.3 


and  improvements,  the  public  property  of  States  and  the  United 
States  excepted.  It  was  held  in  United  States  v.  Louisiana,  123  U.  S. 
32,  31  L.  Ed.  69  (1888),  that  the  act  imposed  no  obligation  upon  the 
States  as  such,  though  the  States  could  assume,  and  some  did  assume, 
the  amounts  apportioned.  After  the  Civil  War  the  collection  of  the 
tax  was  suspended  by  Congress,  and  the  amounts  collected  were  sub- 
sequently refunded  to  the  States.  For  the  enforcement  of  the  direct 
tax  by  sales  of  delinquent  lands,  see  Turner  v.  Smith,  14  Wallace  553, 
20  L.  Ed.  724  (1872);  Keely  v.  Sanders,  99  U.  S.  441,  25  L.  Ed.  327 
(1879);  Van  Brocklin  v.  Tennessee,  117  U.  S.  151,  29  L.  Ed.  845 
(1886). 

1  3  Dallas  171,  1  L.  Ed.  556   (1796). 

2  Springer  v.  United  States,  102  U.  S.  586,  26  L.  Ed.  253   (1881). 

3  Pollock  V.  Farmers'  Loan  &  Trust  Co.,  157  U.  S.  429,  39  L.  Ed.  759 
(1895).  Justices  White  and  Harlan  dissenting  and  Justice  Jackson 
absent.  The  justices  all  agreed  in  holding  that  the  tax  on  income 
from  bonds  of  municipal  corporations  was  invalid  as  a  tax  upon  the 
agencies  of  the  State.  The  justices  were  also  equally  divided  upon 
the  question  whether  any  part  of  the  income  tax,  if  not  considered  as 
a  direct  tax,  was  invalid  for  want  of  uniformity  on  either  of  the 
grounds   suggested.     Upon   the  rehearing,   however,   this   question   of 


§    561  THE   TAXING   POWER   OF    CONGRESS.  639 

Upon  the  rehearing,  the  tax  on  income,  not  only  from  real 
estate,  but  also  from  personal  property,  was  adjudged  a  direct 
tax,  and  the  whole  act,  since  it  was  one  entire  scheme  of  taxa- 
tion, was  therefore  declared  void.i 

§  561.  The  Income  Tax  Amendment  of  1913. — Congress, 
on  July  31, 1909,  submitted  to  the  States  for  ratification  Amend- 
ment XVI  to  the  Constitution  of  the  United  States,  as  follows : 

"The  Congress  shall  have  power  to  lay  and  collect  taxes  on 
incomes,  from  whatever  source  derived,  without  apportionment 
among  the  several  states,  and  without  regard  to  any  census  or 
enumeration." 

And  on  February  25,  1913,  this  amendment  was  declared,  by 
proclamation  of  the  Secretary  of  State,  duly  adopted. 

On  October  3,  1913,  Congress  enacted  an  Income  Tax  Law 
which,  re-enacted  in  1916,  is  still  (1917)  in  force.  Prior  to  the 
adoption  of  this  amendment.  Congress,  on  August  5,  1909,  had 
enacted  what  was  termed  an  excise-  tax  on  corporations  in  the 
Payne- Aldrich  Tariff  Act  of  that  date.  These  provisions  were 
repealed  by  the  act  of  October  3,  1913,  though  continued  in 
force  for  the  collection  of  taxes  for  the  year  1913.  This  act  of 
October  3,  1913,  enacted  under  the  authority  of  the  Amend- 
ment XVI,  and  re-enacted  in  1916,  provides  for  the  taxation  of 
incomes  of  both  individuals  and  eorporations.2 


uniformity  was  not  decided  or  considered,  the  other  questions  de- 
cided being  decisive  of  the  case.  As  to  uniformity  in  Federal  taxa- 
tion, see  infra,  Sec.  569. 

1 158  U.  S.  601,  39  L.  Ed.  1108  (1895),  Justices  Harlan,  Brown,  Jack- 
son and  White  dissenting. 

2  See  U.  S.  Compiled  Statutes,  1913,  Sees.  6319  to  6336.  These  sec- 
tions were  enacted  as  the  income  tax  provisions  of  the  Underwood 
Tariff  Act  of  October  3,  1913. 

These  sections  were  again  revised  in  the  Federal  Revenue  Law 
approved    September   8,    1916,   containing   the   following: 

1.  Income  Tax.  5.  Dye  Stuffs. 

2.  Estate  (Inheritance)  Tax.  6  Printing  Paper. 

3.  Munitions   Manufacturer's  7.  Tariff  Commission. 

Tax.  8.  Unfair   Competition. 

4.  Miscellaneous   Taxes.  9.  Miscellaneous    Provisions. 
Title  one    (1)    of  the  above  is  a  complete  Income  Tax  superseding 


640  THE   TAXING   POWER   OP    CONGRESS.  §    562 

§  562.  The  Corporation  Excise  Tax  of  1909  Constitutional. 
— Prior  to  the  adoption  of  the  Sixteenth  Amendment  the  Su- 
preme Court  affirmed  the  constitutionality  of  the  act  of  Au^st 
15,  1909,  known  as  the  Corporation  Tax  Law,  holding  that  it 
was  not  a  direct  tax,  but  an  excise  tax,  upon  the  carrying  on 
or  the  doing  of  business  in  a  coi*porate  or  quasi  corporate  ca- 
pacity.^ There  was  such  a  substantial  difference  between  the  car- 
rying on  of  business  by  corporations,  and  the  same  business  when 
conducted  by  a  private  firm  or  individual,  as  justified  this  excise 
tax.  It  was  immaterial  that  part  of  the  income  was  derived  from 
property  that  was  in  itself  not  taxable.  There  was  no  interfer- 
ence with  the  rights  of  the  States  in  this  excise  tax  upon  corpora- 
tions, and  public  service  corporations  were  properly  subject  to 
the  tax.  The  court  also  sustained  the  exemption  in  the  act  of 
corporations,  whose  income  was  under  $5,000  per  annum,  and 
also  the  exemption  of  labor,  agricultural  and  other  non-business 
corporations,  nor  was  there  any  violation  of  the  geographial  uni- 
formity required  by  the  constitution. 

It  was  held  also  that  real  estate  trusts  not  organized  under 
any  statute^  and  corporations  which  were  not  engaged  in  active 
business,  but  only  holding  the  title  to  property  under  lease, 
were  not  included  in  the  terms  of  the  act.^ 

So  also  a  railroad  company,  which  had  leased  its  railroad  and 
was  not  engaged  in  operating  the  same,  was  not  included  in  the 
act.* 

On  the  other  hand,  mining  corporations  engaged  solely  in 
mining  upon  their  own  premises  were  subject  to  the  act  and 


the  Act  of  October  3,  1913,  recast,  rearranged   and   modified.      (See 
Appendix.) 

(For  War  Tax  of  1917,  see  Appendix.) 

1  Flint  V.  Stone  Tracy  Co.,  220  U.  S.  107,  55  L.  Ed.  389  (1911). 

2  Elliott  V.  Freeman,  220  U.  S.  178,  55  L.  Ed.  424   (1911). 

3  Zonne  v.  Minneapolis  Syndicate,  220  U.  S.  187,  55  L.  Ed.  428 
(1911). 

4McCoach  V.  Minehil  &  S.  H.  R.  Co.,  228  U.  S.  295,  57  L.  Ed.  842 
(1913).  Neither  was  the  income  derived  from  the  management  of 
street  railway  lines  by  receivers  under  the  supervision  of  the  court 
subject  to  the  act.  U.  S.  v.  Whitridge,  231  U.  S.  144,  58  L.  Ed.  159 
(1913). 


§    563  THE   TAXING   POWER   OP    CONGRESS.  641 

the  proceeds  of  the  ore  so  mined  constituted  income  under  the 
act.  1 

This  act  was  therefore  sustained  as  constitutional,  not  in  any 
proper  sense  an  income  tax  law,  but  an  excise  upon  the  conduct 
of  business  in  a  corporate  capacity,  the  tax  being  measured  by 
the  reference  to  the  income  in  a  manner  prescribed  by  the  act 
itself .2  The  term  ' '  entire  net  income ' '  did  not  allow  the  deduction 
of  interest  upon  the  bonded  or  other  indebtedness  of  the  cor- 
poration whether  secured  by  mortgage  or  not.  The  court  said 
there  was  no  merit  in  the  claim,  that  this  construction  of  the  act 
resulted  in  an  arbitrary  classification. 

§  563.  Constitutionality  of  the  Income  Tax  Act  of  1913  Sus- 
tained.— The  Supreme  Court^  affirmed  the  judgment  of  the 
District  Court  of  New  York  dismissing  a  bill  in  a  suit  by  a 
stockholder  to  restrain  a  corporation  from  voluntarily  comply- 
ing with  the  Federal  Income  Tax  provisions  of  the  Tariff  Act 
of  October  3, 1913,  holding  that  these  provisions,  that  is,  of  the 
Income  Tax  Law  of  1913,  were  valid  in  all  respects  and  enforce- 
able. 

The  bringing  of  the  suit  did  not  violate  the  provisions  of  Sec. 
3224,  R.  S.  In  this  respect  the  ruling  made-  in  the  Pollock  case* 
was  followed.  The  court  caid  the  whole  purpose  of  the  Sixteenth 
Amendment  was  to  exclude  the  source,  from  which  a  tax  income 
was  derived  as  the  criterion,  by  which  to  determine  the  applica- 
bility of  the  constitutional  requirement  as  to  the  apportionment 
of  direct  taxes.  The  provision  of  the  act  fixing  the  preceding 
March  1st  as  the  time  for  which  the  taxed  income  for  the  first 
ten  months  was  to  be  computed  was  sustained,  since  the  date  of 


1  Stratton's  Independence  v.  Howbert,  231  U.  S.  399,  58  L.  Ed.  285 
(1913).  The  court  in  this  case  did  not  discuss  the  question  of  de- 
preciation as  it  was  not  properly  included  in  the  question  certified 
for   determination. 

2  Anderson  v.  42  Broadway,  239  U.  S.  69,  60  L.  Ed.  152  (1916),  re- 
versing the  Cir.  Ct.  of  App.  2nd  Cir.,  213  Fed.  777. 

3  Drushaber  v.  Union  Pacific  R.  Co.,  240  U.  S.  1,  60  L  Ed  493 
(1916). 

*  Supra,    Sec.    560, 


642  THE   TAXING    POWER   OP    CONGRESS.  §    563 

the  retroactivity  did  not  extend  beyond  the  time  when  the  consti- 
tutional amendment  became  ^operative. 

It  was  also  held  that  Congress  had  power  to  exclude  from 
taxation  some  income  of  designated  persons  and  classes,  and  to 
exempt  entirely  certain  enumerated  organizations,  such  as  labor, 
agricultural,  horticultural  organizations,  etc. 

The  court  reaffirmed  its  former  rulings  that  geographical  uni- 
formity only  is  exacted  by  Art.  1,  Sec.  8. 

The  Fifth  Amendment  of  the  constitution,  concerning  due 
process  of  law,  is  not  a  limitation  upon  the  taxing  power  con- 
ferred upon  Congress  by  the  Federal  Constitution  unless  under 
a  seeming  exercise  of  the  taxing  power,  the  taxing  statute  is  so 
arbitrary  so  as  to  compel  the  conclusion  that  it  was  aimed  at 
the  confiscation  of  the  property  and  is  so  wanting  in  basis  for 
classification  as  to  produce  such  a  gross  and  patented  inequality 
as  inevitably  to  lead  to  the  same  conclusion.  The  progressive 
rate  feature  in  this  act  was  not  an  arbitrary  abuse  of  power  and 
was  sustained. 

The  methods  of  collection  at  the  source  were  also  sustained 
against  all  the  objections  urged,  nor  was  there  any  unlawful 
discrimination  between  individuals  and  corporations. 

The  deductions  allowed  in  the  act,  and  the  discrimination 
between  married  and  single  people,  and  husbands  and  wives 
who  are  living  together  and  those  who  are  not,  and  the  failure 
to  require  the  estimation  of  rental  value,  or  the  computation 
of  family  expenses,  or  the  conferring  of  certain  administrative 
powers  upon  the  Secretary  of  the  Treasury  in  the  enforcement 
of  the  act,  were  all  sustained  as  valid  legislation. 

These  ralings  were  reaffirmed  in  another  case  decided  at  the 
same  term,^  and  it  was  held  that  corporations  are  not  uncon- 
stitutionally discriminated  against,  because  of  the  exemption, 
which  the  income  tax  provisions  of  the  Tariff  Act  of  October  3, 
1913  (38  Stat,  at  L,  166,  Ch.  16)  make  of  individual  incomes 
below  $4,000;  that  labor,  agricultural  and  horticultural  organ- 
izations, mutual  savings  banks,   etc.,   could  be   excepted  from 


1  Stanton  v.  Baltic  Mining  Co.,  240  U.  S.  103,  60  L.  Ed.  546   (1916). 


§    564  THE   TAXING   POWER   OF    CONGRESS.  643 

the  operations  of  the  income  tax  without  rendering  the  tax  re- 
pugnant to  the  Federal  Constitution,  and  the  tax  imposed  by 
the  income  tax  law  upon  the  product  of  the  working  of  a  cor- 
porate mine  is  not  a  direct  tax  on  property  by  reason  of  its 
ownership,  because  adequate  allowances  may  not  be  made  for 
the  exhaustion  of  the  ore  body  resulting  from  working  the  mine. 
Mining  companies  and  their  stockholders  are  not  denied  the 
equal  protection  of  the  laws,  nor  deprived  of  their  property, 
without  due  process  of  law  contrary  to  the  United  States  Consti- 
tution, Fifteenth  Amendment,  by  the  income  tax  provisions  of 
the  Tariff  Act  of  October  3,  1913  (38  Stat,  at  L.  166,  Ch.  16), 
under  which  the  deduction  permitted  for  depreciation  arising 
from  the  depletion  of  ore  depositions  is  limited  to  five  per  cent 
of  the  gross  value  at  the  mine  of  the  output  during  the  year, 
while  other  individuals  or  corporations  have  the  right  to  deduct 
a  fair  and  reasonable  percentage  for  losses  for  depreciation. 

§  564.  Inheritance  Tax  Not  Direct  Tax. — The  meaning  of 
the  term  direct  taxes  was  thoroughly  argued  and  considered  by 
the  court  in  the  case  of  the  inheritance  tax  enacted  in  the  Span- 
ish War  Revenue  Act  of  1898.^  The  inheritance  or  succession 
tax  enacted  during  the  Civil  War  had  been  adjudged  an  excise 
tax^  and  therefore  not  a  direct  tax.  But,  as  it  had  also  been 
decided  under  the  sajue  revenue  act  that  an  income  tax  was  an 
excise  tax  and  not  a  direct  tax,  it  was  argued  that  this  decision 
had  been  overruled  by  the  decision  upon  the  Income  Tax  of 
1894.  The  court  held,  however,  that  the  ease  of  Scholey  v.  Rew 
had  not  been  overruled,  but  had  been  distinguished  on  the 
ground  that  the  income  tax  was  not  involved  in  the  ease.  "Un- 
doubtedly," the  court  said,  "in  the  course  of  the  opinion  in  the 
Pollock  ease,  it  was  said  that,  if  a  tax  was  direct  within  the 
constitutional  sense,  the  mere  erroneous  qualification  of  it  as  an 
excise  or  duty  would  not  take  it  out  of  the  constitutional  re- 
fjuirement  as  to  apportionment.  But  this  language  related  to 
the  subject-matter  under  consideration,  and  was  but  a  state- 
ment that  a  tax  which  was  in   itself  direct,  because  imposed 


iKnowlton  v.  Moore,  178  U.  S.  41,  44  L.  Ed.  969   (1900). 
2  Scholey  v.  Rew,  23  Wallace  331,  23  L.  Ed.  99    (1875). 


644  THE   TAXING   POWER    OP    CONGRESS.  §    565 

upon  property  solely  by  reason  of  its  ownership,  could  not  be 
changed  by  affixing  to  it  the  qualification  of  excise  or  duty." 
The  inheritance  tax  was  therefore  sustained  as  an  excise  tax 
and  the  decision  in  Scholey  v.  Rew  was  reaffirmed,  i 

§  565.  Direct  Taxation  in  Economic  Sense  and  Constitu- 
tional Sense  Distinguished. — It  was  strongly  urged  in  Knowl- 
ton  V.  Moore  that  the  ability  to  "shift  the  tax"  was  the  basis 
of  distinction  adopted  by  the  economists  between  an  indirect 
and  a  direct  tax ;  that  is,  if  the  party  upon  whom  by  law  the 
burden  of  paying  the  tax  was  first  cast  could  thereafter  shift 
it  to  another  pei^on,  the  tax  would  be  indirect,  w^hile  if  he  could 
not  shift  it,  the  tax  would  be  direct  in  the  economic  and  in  the 
constitutional  sense.  The  court  replied,  however,  that,  although 
this  theory  of  the  economists  had  been  referred  to  in  the  Income 
Tax  cases  of  1894,  it  was  not  the  basis  of  the  conclusion  of  the 
court.  The  constitutional  meaning  of  the  word  "direct"  was 
the  matter  decided.  As  to  this  economic  distinction,  the  court 
reiterated,  page  83,  what  had  been  said  in  Nicol  v.  Amesis 

*'In  deciding  upon  the  validity  of  a  tax  with  reference  to 
these  requirements,  no  microscopic  examination  as  to  the  purely 
economic  or  theoretical  nature  of  the  tax  should  be  indulged  in 
for  the  purpose  of  placing  it  in  a  category,  which  would  inval- 
idate the  tax.  As  a  mere  abstract,  scientific  or  economical  prob- 
lem, a  particular  tax  might  possibly  be  regarded  as  a  direct  tax, 
when  as  a  practical  matter  pertaining  to  the  actual  operation 
of  the  tax  it  might  quite  plainly  appear  to  be  indirect.  Under 
such  circumstances,  and  while  varying  and  disputable  theories 
might  be  indulged  as  to  the  real  nature  of  the  tax,  a  court  would 
not  be  justified,  for  the  purpose  of  invalidating  the  tax,  in  plac- 
ing it  in  a  class  different  from  that  to  which  its  practical  results 


1  For  construction  of  the  inheritance  tax  of  June  13,  1898,  with 
reference  to  the  effect  of  the  saving  clause  of  the  repealing  act  of 
April  12,  1902,  see  Hertz  v.  Woodmen,  218  U.  S.  204,  54  L.  Ed.  1001 
(1910),  and  as  to  the  taxation  of  residuary  legatees  before  the  hap- 
pening of  the  contingency  of  reaching  a  certain  age,  see  Vanderbilt 
V.  Eldman,  196  U.  S.  480,  49  L.  Ed.  563  (1905),  and  as  to  the  computa- 
tion of  the  value  of  9,  life  estate,  see  Herold  v.  Kahn,  C.  C.  A.  3rd  Cir. 
159  Fed.  680   (1908). 

2  173  U.  S.  509,  515,  supra,  Sec.  559. 


§   567  THE   TAXING   POWER   OP    CONGRESS.  645  . 

would  consign  it.  Taxation  is  eminently  practical,  and  is,  in 
fact,  brought  to  every  man's  door,  and  for  the  purpose  of  decid- 
ing upon  its  validity  a  tax  should  be  regarded  in  its  actual, 
practical  results,  rather  than  with  reference  to  those  theoretical 
or  abstract  ideas  whose  correctness  is  the  subject  of  dispute 
and  contradiction  among  those  who  are  experts  in  the  science 
of  political  fenonomy. ' ' 

§  566.  The  War  Revenue  Act  of  June  13,  1898.— In  the  so- 
called  Spanish  War  Revenue  Act  of  1898  different  forms  of 
taxation  were  imposed,  since  repealed,  which  involved  judicial 
determination  as  to  the  taxing  power  of  Congress  and  as  to  the 
meaning  of  direct  taxation  which  required  apportionment.  Thus 
not  only  the  inheritance  tax  was  declared  to  be  an  excise  tax, 
but  also  the  stamp  tax  which  required  the  stamps  on  contracts 
and  conveyances.  The  court^  held  that  this  fell  within  the  class 
of  duties,  imposts,  and  excises  which  did  not  require  apportion- 
ment, but  only  geographical  uniformity  throughout  the  United 
States.  The  same  ruling  was  made  as  to  the  special  taxes  im- 
posed upon  sugar  refineries  to  be  measured  by  gross  annual  re- 
ceipts in  excess  of  a  named  sum.  This  was  also  declared  to  be  an 
excise  and  not  a  direct  tax.^ 

§  567.    Direct  Tax  as  Defined  by  the  Supreme  Court. — The 

discussion  in  Knowlton  v.  Moore,  and  the  other  cases  arising 
under  the  "War  Revenue  Act  of  1898,  concerning  the  effect  of 
the  decision  in  the  Income  Tax  cases,  has,  since  the  adoption  of 
the  Sixteenth  Amendment,  had  only  an  academic  or  historic 
interest,  as  now  income  taxes  can  be  levied,  though  dependent 
on  the  general  ownership  of  property,  subject  only  to  the  re- 
quirement of  geographical  uniformity. 

It  was,  however,  definitely  determined  by  these  decisions  that 
taxe^s  upon  incomes  from  services,  professions,   etc.,   upon   in- 


1  Thomas  v.  United  States,  192  U.  S.  363,  48  L.  Ed.  481  (1904), 
affirming  115  Fed.  207.  See  also  United  States  v.  Chamberlain,  219 
U.  S.  250,  55  L.  Ed.  204  (1911),  reversing  156  Fed.  881,  construing 
the  provisions  of  the  statute  for  the  enforcement  of  the  collection  of 
the  stamp  tax. 

zSpreckles  Sugar  Refinery  Co.  v.  McClaln,  192  U.  S.  397,  48  L.  Ed. 
496    (1904),  reversiag  113  Fed.  244. 


646  THE   TAXING   POWER   OF    CONGRESS.  §    568 

heritances,  upon  occupations  and  commodities,  were  all  included 
in  the  words  "duties,  imposts  and  excises,"  and,  not  being 
"direct  taxes,"  could  be  levied  by  Congress  in  its  discretion 
without  regard  to  the  rule  of  apportionment.^ 

§  568.  Taxing  Power  of  Congress  Co-extensive  with  Terri- 
tory of  United  States. — The  power  of  Congress  in  levying  and 
collecting  taxes,  duties,  imposts  and  excises,  under  Sec.  8  of 
Art.  I  of  the  constitution,  is  co-extensive  with  the  territory  of 
the  United  States  and  includes  the  District  of  Columbia.  This 
was  adjudged  in  an  early  ease,^  wherein  it  was  contended  that 
Congress  could  not  impose  a  direct  tax  on  the  District  of  Colum- 
bia by  the  rule  of  apportionment  for  national  purposes.  The 
court,  in  an  opinion  by  Chief  Justice  Marshall,  declared  that 
the  right  of  Congress  to  tax  the  District  did  not  depend  solely 
upon  the  grant  to  Congress  in  the  constitution  of  exclusive  leg- 
islative power  over  the  District.  The  granting  of  the  taxing 
power  in  the  constitution  was  generally  without  limitation  as 
to  place.  It  consequently  extends  to  all  places  over  which  the 
government  extends.  If  this  could  be  doubted,  the  doubt  would 
be  removed  by  the  subsequent  words  in  the  constitution  which 
modify  the  grant,  that  all  duties,  imposts  and  excises  shall  be 
uniform  throughout  the  United  States.  The  court  continued, 
page  319 : 

"Does  this  term  designate  the  whole,  or  any  particular 
portion  of  the  American  empire?  Certainly  this  question 
can    admit   but    one    answer.      It   is   the    name    given    to    our 


1  The  tax  upon  sugar  refineries  measured  by  gross  receipts  was  held 
by  the  United  States  Circuit  Court  to  be,  not  a  direct  tax,  but  an  ex- 
cise laid  upon  business.  Spreckles  Sugar  Refining  Co.  v.  McCIain, 
109  Fed.   (Pa.)  76  (1901). 

2  Loughborough  v.  Blake,  5  Wheaton  317,  5  L.  Ed.  98  (1820).  Jus- 
tice Brown  in  his  opinion  in  Downes  v.  Bidwell,  infra,  Sec.  495,  says 
as  to  this  quotation  from  the  opinion,  "so  far  as  applicable  to  the 
District  of  Columbia,  these  observations  are  entirely  sound.  So  far 
as  they  apply  to  the  territories,  they  were  not  called  for  by  the 
exigencies  of  the  case."  182  U.  S.,  p.  262.  But  contra,  see  the  con- 
curring opinion  of  Justice  White  in  the  same  case,  p.  292,  and  the  dis- 
senting opinion  of  Chief  Justice  Fuller,  p.  352. 


§    569  THE   TAXING   POWER   OP    CONGRESS.  647 

great  republic,  which  is  composed  of  States  and  Territories. 
The  District  of  Columbia,  or  the  territory  west  of  the  Missouri, 
is  not  less  within  the  United  States  than  Maryland  or  Pennsyl- 
vania ;  and  it  is  not  less  necessary,  on  the  principles  of  our  Con- 
stitution, that  uniformity  in  the  imposition  of  imposts,  duties, 
and  excises,  should  be  observed  in  the  one  than  in  the  other. 
Since,  then,  the  power  to  lay  and  collect  taxes,  which  includes 
direct  taxes,  is  obviously  coextensive  with  the  power  to  lay  and 
collect  duties,  imposts,  and  excises,  and  since  the  latter  extends 
throughout  the  United  States,  it  follows  that  the  power  to  im- 
pose direct  taxes  also  extends  throughout  the  United  States." 

The  argument  was  presented  that  this  would  necessitate  ex- 
tending all  direct  taxes  to  the  District  and  territories,  which 
would  be,  not  only  inconvenient,  but  contrary  to  the  under- 
standing and  practice  of  the  government.  The  court  replied 
that,  while  Congress  clearly  has  no  power  to  exempt  any  State 
from  its  due  share  of  the  burden,  as  the  second  section  of  the 
first  article  of  the  constitution  requires  that  direct  taxation  shall 
be  extended  to  all  the  States  upon  the  principle  of  apportion- 
ment, there  is  no  necessity  created  for  extending  a  direct  tax 
to  the  District  or  territories,  because  the  ninth  section  of  the 
same  article  does  not  require  such  extension.  The  general  grant 
of  power  to  lay  and  collect  taxes,  on  the  other  hand,  was  made 
in  terms  which  comprehended  the  District  and  Territories  aa 
well  as  the  States.  The  constitution  may  therefore  be  under- 
stood to  give  a  rule  when  the  Territories  shall  be  taxed,  with- 
out imposing  the  necessity  of  taxing  them. 

§  569.  Uniformity  in  Federal  Taxation.— The  Constitution 
provides  that  all  duties,  imposts  and  excises  shall  be  uniform 
throughout  the  United  States.  The  uniformity  thus  required 
is  geographical  only,  that  is,  the  tax  must  operate  equally 
throughout  the  United  States.  Intrinsic  uniformity,  equality 
of  operation  upon  all  persons  similarly  situated  under  the  con- 
struction given  to  the  requirement  of  equality  and  uniformity 
in  State  constitutions  and  in  the  enforcement  of  the  equal  pro- 
tection of  the  laws  under  the  fourteenth  amondmont,  is  not  re- 
quired in  this  limitation  upon  Federal  taxation. 


648  THE   TAXING   POWER   OP    CONGRESS.  §    569 

Thus,  in  the  Head  Money  Cases,^  the  Act  of  Congress  regu- 
lating immigration  and  imposing  a  duty  of  fifty  cents  upon 
every  passenger  from  foreign  ports  was  held  to  be  a  uniform 
act,  because  it  operated  with  the  same  force  and  effect  in  every 
place  where  the  subject  of  it  was  found.  It  did  not  violate  the 
requirement  of  uniformity,  nor  another  provision  of  the  Con- 
stitution directing  that  no  preference  should  be  given  by  the 
regulation  of  commerce  to  the  ports  of  one  State  over  those  of 
another.^ 

This  question  of  uniformity  in  taxation  was  thoroughly  re- 
viewed and  definitely  determined  by  the  Supreme  Court  in  the 
recent  cases  already  referred  to,  involving  the  constitutionality 
of  the  War  Revenue  Act  of  1898.3  In  the  first  of  these  cases 
the  court  said  that  the  tax  upon  sales  made  upon  commercial 
exchanges  answered  the  requirement  of  uniformity,  whether 
that  term  was  to  be  understood  in  its  geographical  sense  or  as 
meaning  intrinsic  uniformity,  that  is,  uniformity  as  to  all  the 
taxpayers  similarly  situated  with  regard  to  the  subject-matter 
of  the  tax.  It  was  uniform  in  the  former  sense,  because  it  oper- 
ated wherever  such  sales  were  made,  and,  in  the  latter  or  in- 
trinsic sense,  because  the  classification  between  the  parties  using 
such  facilities  in  sales  and  those  not  using  them  was  natural 
and  therefore  proper  and  legal. 

But  in  the  other  case,  Knowlton  v.  Moore,  it  was  strongly 
argued  that  the  inheritance  taxation  in  question  was  lacking  in 
intrinsic  uniformity  because  it  exempted  legacies  and  distribu- 
tive shares  in  personal  property  below  $10,000,  classified  the 
rate  of  tax  according  to  the  relationship  or  absence  of  relation- 
ship to  the  decedent  of  the  legatee  or  distributee,  and  provided 
for  a  rate  of  tax  graded  according  to  the  amount  of  the  legacy 

1 112  U.  S.  580,  supra.  It  was  in  this  case  and  in  this  connection 
that  Justice  Miller,  delivering  the  opinion  of  the  court,  stated  the 
often  quoted  aphorism,  "perfect  uniformity  and  perfect  equality  in 
taxation,  in  all  the  aspects  in  which  the  human  mind  can  view  it,  is 
a  baseless  dream." 

2  Art.  I,  Sec.  9,  Par.  6. 

3  Nicol  V.  Ames,  supra,  Sec.  565,  and  Knowlton  v.  Moore,  supra, 
Sec.  564. 


§   570  THE  TAXING  POWER   OF   CONGRESS.  649 

or  share.  Under  the  decisions  in  some  of  the  State  courts  such 
a  tax  would  be  invalid  as  wanting  in  intrinsic  uniformity.  But 
the  court  held  in  a  learned  and  exhaustive  opinion  by  Justice 
White,  all  tlie  judges  concurring,  that  the  uniformity  required 
by  the  Constitution  in  Federal  taxation  does  not  mean  what  the 
word  "uniform"  means,  or  the  words  "equal  and  uniform" 
mean,  in  the  State  constitutions.  The  former  does  not  mean 
intrinsic,  but  only  geographical,  uniformity. 

It  was  contended  in  this  case  that  the  act  was  lacking  in  geo- 
graphical uniformity,  as  testamentary  and  intestate  laws  may 
vary  in  different  States.  The  ■court  replied  that  this  was  im- 
material, as  the  same  degree  of  relationship,  or  want  of  rela- 
tionship, to  the  deceased,  wherever  existing,  was  levied  on  at 
the  same  rate  throughout  the  United  States.  Geographical  uni- 
formity does  not  require  that  the  objects  of  the  tax  must  exist 
with  uniformity  in  the  several  States.  Taxes  are  uniform  in 
the  constitutional  sense  when  they  operate  generally  through- 
out the  United  States  and  uniformly  wherever  the  subjects  of 
the  tax  are  found.  Congress  may  select  the  subjects  of  taxation 
in  its  discretion,  and  it  is  immaterial  whether  the  requirements 
of  uniformity  and  equality,  as  understood  in  State  taxation,  are 
adhered  to  or  not.  The  court  called  attention  in  its  opinion  to 
the  fact  that  the  requirement  of  uniformity  in  Sec.  8  only  ap- 
plies to  duties,  imposts  and  excises,  and  is  not  essential  in  the 
levy  of  all  the  taxes  which  the  Constitution  authorizes.  Uni- 
formity is  not  required  in  the  levy  of  direct  taxes,  which  are 
required  to  be  apportioned.  The  effect  of  requiring  inherent 
or  intrinsic  uniformity,  therefore,  would  be  that  it  would  be 
applied  only  to  those  taxes  to  which,  in  the  nature  of  things, 
the  principle  of  such  uniformity  is  least  applicable  and  in  which 
it  is  least  susceptible  of  being  enforced.  Thus  excise  taxes  and 
import  duties,  which  are  refjuired  to  be  uniform,  look  to  par- 
ticular subjects  and  take  every  conceivable  form  which  may  by 
the  legislative  authority  be  deemed  best  for  the  general  wel- 
fare. ' 

§  570.  Uniformity  in  Levy  of  Duties. — The  requirement  of 
geographical  unil"(jrinily  tlien-fore  extends  to  any  form  of  tax- 


650  THE  TAXING  POWER   OF   CONGRESS.  §   571 

ation  not  included  in  the  term  direct  taxes.  Thus,  in  the  levy 
of  duties  upon  importations,  where  specific  and  ad  valorem 
duties  are  both  employed,  the  same  form  of  duty  must  be  levied 
upon  the  same  importation  at  whatever  port  it  may  be  entered. 
Mr.  Tucker,  in  his  Constitutional  Law,  calls  attention  to  an  in- 
teresting illustration  of  this  enforcement  of  uniformity  in  the 
duty  on  sugar,^  where  the  use  of  different  tests  in  the  different 
ports  to  measure  the  exact  saccharine  strength  was  held  by  the 
Secretary  of  the  Treasury  to  produce  a  difference  of  duty  in 
the  ports,  destroying  the  uniformity  established  by  the  Con- 
stitution. 

§  571.  Levying  Duties  Under  War  Power. — The  uniformity 
clause  of  the  Constitution  received  thorough  and  exhaustive 
discussion  in  the  Insular  Decisions  of  the  Supreme  Court,  in 
cases  involving  the  status  of  the  territory  acquired  by  the 
United  States  as  the  result  of  the  Spanish  War. 

It  was  agreed  by  all  of  Ihe  judges  that  duties  upon  imports 
from  the  United  States  to  Porto  Rico  collected  by  the  military 
commander  and  by  the  President  as  commander  in  chief,  from 
the  time  possession  was  taken  of  the  island  until  the  ratification 
of  the  treaty  of  peace,  were  legally  exacted  under  the  war 
power.  ^ 

The  question  of  the  collection  of  revenues  during  war  had 
been  considered  in  the  cases  growing  out  of  the  War  of  1812, 
and  also  of  the  Mexican  War.  Thus,  a  town  captured  by  the 
enemy  in  the  War  of  1812  was  deemed  a  foreign  country  as 
respected  our  revenue  laws  during  the  period  of  hostile  occu- 
pation, and  the  goods  imported  into  that  town  during  such  occu- 
pation did  not  become  liable  to  pay  duty  to  the  United  States 
by  reason  of  the  resumption  by  that  nation  of  its  sovereignty.' 
A  Mexican  port  acquired  by  the  United  States  in  the  Mexican 
War  and  held  by  its  military  authorities  did  not  thereby  be- 
come a  port  of  the  United  States,  but  remained  a  foreign  port, 


1  Tucker  on  Const,  Sec.  218. 

zDooley  v.  United  States,  182  U.  S.  222,  45  L.  Ed.  1074   (1901). 

3  United  States  v.  Rice,  4  Wheat.  246,  4  L.  Ed.  562   (1819). 


§   572  THE  T.VXING  POWER  OF   CONGRESS.  651 

and  duties  were  properly  levied  upon  goods  imported  there- 
from into  the  United  States.^  Duties  were  also  properly  levied 
in  San  Francisco,  after  it  was  taken  by  the  United  States  dur- 
ing the  Mexican  War  and  prior  to  the  treaty  of  peace,  under 
the  war  tariff  established  by  the  government;  and,  thereafter, 
duties  levied  by  order  of  the  government  in  accordance  with 
the  Act  of  Congress  were  held  properly  levied,  until  the  rev- 
enue laws  of  the  United  States  were  put  into  practical  opera- 
tion in  California.^ 

§  572.  Uniformity  Clause  as  Applied  to  Territorial  Acquisi- 
tions.— The  treaty  of  peace  with  Spain,  whereunder  Porto  Rico 
and  the  Philippine  Islands  were  ceded  to  the  United  States, 
was  ratified  on  February  6,  1899,  but  the  official  proclamation 
of  the  President  was  not  issued  until  April  11,  1899.  On  the 
following  day,  Congress  enacted  a  law  known  as  the  Foraker 
Act,^  declared  in  its  title  to  be  intended  *' temporarily  to  pro- 
vide a  revenue  and  civil  government  for  Porto  Rico,"  which 
established  special  tariff  rates  on  merchandise  going  into  Porto 
Rico  from  the  United  States  or  coming  into  the  United  States 
from  Porto  Rico,  and  provided  further  that  these  duties  should 
be  held  as  a  separate  fund  for  the  benefit  of  the  island  and  trans- 
ferred to  its  local  treasury. 

Thus,  before  the  treaty  of  peace,  duties  on  goods  from  the 
United  States  into  Porto  Rico  were  collected  by  the  military 
command  PI-  and  by  the  President  as  commander  in  chief,  and, 
as  stated  above,  it  was  held  that  such  duties  were  legally  ex- 
acted under  the  war  power.  After  the  ratification  of  the  treaty 
of  peace  and  until  the  passage  of  the  Foraker  Act  as  above 
stated,  the  rates  of  duty  established  by  the  tariff  laws  of  the 
United  States  were  collected,  both  in  the  ports  of  the  United 
States  and  in  Porto  Rico.  The  court  held,4  that,  with  the  rati- 
fication   of  peace  between    the   United    States   and    Spain,   the 


1  Fleming  v.  Page.  9  Howard  603,  13  L.  Ed.  276  (1850). 

2  Cross  V.  Harrison,  16  Howard  164,  14  L.  Ed.  889   (1853). 

3  31  Stat.  77,  c.  191. 

4  De  Lima  v.  Bldwell,  182  U.  S.  1,  45  L.  Ed.  1041    (1901).     Justices 
McKenna,  Shiras,  White  and  Gray  dissenting. 


652  THE   TAXING  POWER   OF    CONGRESS.  §    573 

island  of  Porto  Rico  ceased  to  be  a  foreign  country,  within  the 
meaning  of  the  tariff  laws,  and  that  the  right  to  exact  duties 
upon  importations  from  Porto  Rico  to  New  York,  and  upon 
those  from  New  York  to  Porto  Rico,  ceased  at  the  same  time.i 
But  this  decision  only  applied  to  the  status  prior  to  the  en- 
actment of  the  Foraker  Act,  and  on  the  question  of  the  validity 
of  this  act,  presented  in  the  ease  of  Downs  v.  Bidwell,2  five  of 
the  judges  concurred  in  holding  the  act  valid,  but  they  did  not 
concur  in  the  grounds  of  their  decision,  so  that  there  is  no  opin- 
ion of  the  court  as  such.s 

§  573.  Insular  Decisions. — Justice  Brown,  who  announced 
the  decision  of  the  court,  in  Downs  v.  Bidwell,  although  none 
of  the  other  justices  concurred  in  the  reasoning  of  his  opinion, 
maintained  that  the  island  of  Porto  Rico  is  not  a  part  of  the 
United  States  within  the  meaning  of  the  uniformity  clause  of 
the  Constitution ;  that  the  revenue  clause  of  the  Constitution 
applies  to  the  States  of  the  Union  and  not  to  the  Territories; 
and  that  the  practical  interpretation  put  by  Congress  upon  the 
Constitution  had  been  continuous  and  uniform  to  the  effect 
that  the  Constitution  is  applicable  to  territories  acquired  by 
conquest,  only  when  and  so  far  as  Congress  shall  so  direct.  It 
followed,  therefore,  that  the  island  of  Porto  Rico  was  a  terri- 
tory appurtenant  and  belonging  to  the  United  States,  but  not  a 
part  of  the  United  States  within  the  revenue  clause  of  the  Con- 
stitution. In  the  opinion,  however,  he  disclaimed  any  intention 
of  holding  that  the  inhabitants  of  the  Territories  are  subject 
to  the  unrestrained  power  of  Congress,  and  suggested  that  there 


iDooley  v.  United  States,  182  U.  S.  222,  45  L.  Ed.  1074  (1901).  Jus^ 
tices  McKenna,  Shiras,  White  and  Gray  dissented,  holding  that  the 
duties  collected  both  prior  and  subsequent  to  the  treaty  of  peace  were 
lawfully  imposed. 

2  182  U.   S.  244,  45  L.   Ed.  1088    (1901). 

3  Hon.  Charles  E.  Littlefield,  in  an  interesting  paper  upon  the  In- 
sular Cases,  read  before  the  American  Bar  Association  of  1901,  page 
242,  says:  "The  Insular  Cases,  and  the  manner  in  which  the  results 
were  reached,  the  incongruity  of  the  results  and  the  variety  of  in- 
consistent views  expressed  by  the  different  members  of  the  court,  are, 
I  believe,  without  a  parallel  in  our  judicial  history." 


§    573  THE   TAXING   POWER   OF    CONGRESS.  653 

is  a  clear  distinction  between  sucli  prohibitions  of  the  Consti- 
tution as  go  to  the  very  root  of  the  power  of  Congress  to  act 
at  all,  irrespective  of  time  or  place,  and  such  as  are  operative 
only  and  throughout  the  United  States  and  among  the  several 
States. 

Justices  "White,  McKenna  and  Shiras,  concurring  in  the  de- 
cision, maintained  that  Porto  Rico  occupied  a  position  between 
that  of  a  territory  absolute  and  that  of  a  domestic  territory 
absolute;  that  Congress,  in  governing  the  Territories,  is  sub- 
ject to  the  limitations  of  the  Constitution,  and  that  every  pro- 
vision of  the  Constitution  which  is  applicable  to  the  Territories 
is  controlling  therein.  But  territory  acquired  by  the  treaty- 
making  power  does  not  become  "incorporated"  in  the  United 
States  without  the  concurring  action  of  the  legislative  depart- 
ment of  the  government,  Porto  Rico,  therefore,  in  the  inter- 
national sense,  was  not  a  foreign  country,  since  it  was  subject 
to  the  sovereignty  of,  and  was  owned  by,  the  United  States; 
but  it  was  foreign  to  the  United  States  in  the  domestic  sense, 
because  the  island  had  not  been  incorporated  into  the  United 
States,  but  was  merely  "appurtenant  thereto'*  as  a  possession. 

Justice  Gray,  in  a  separate  concurring  opinion,  said  that  of 
necessity  there  is  a  "transition  period"  in  the  incorporation 
of  acquired  territorA^  and  that  a  system  of  duties  during  that 
period  may  be  established  temporarily  by  Congress,  within  the 
scope  of  its  authority  under  the  Constitution  of  the  United 
States. 

On  the  other  hand,  four  judges.  Chief  Justice  Fuller,  and 
Justices  Harlan,  Brewer  and  Peckham,  dissented  i7i  toto,  hold- 
ing that  there  is  no  constitutional  basis  for  the  theory  of  "incor- 
poration," that  all  territory  ceded  to  the  United  States  becomes 
thereby  an  integral  part  of  the  Union  and  entitled  to  the  pro- 
tection of  the  Constitution,  including  the  uniformity  clause  in 
regard  to  taxation.^ 


1  The  Reporter  appen(l.s  a  footnote  with  the  syllabi  in  this  case,  182 
U.  S.  244,  aa  follows:  "In  announcing  the  conclusion  and  judgment 
of  the  court  in  this  case.  Mr.  .Justice  Brown  delivered  an  opinion. 
Mr.  Justice  White  delivered  a  concurring  opinion  which  was  also  con- 


654  THE   TAXING   POWER   OP    CONGRESS.  §    574 

The  same  principle  was  applied  in  a  ease  decided  at  the  fol- 
lowing term  involving  fourteen  diamond  rings  brought  to  San 
Francisco  by  a  soldier  returning  from  the  Philippines.i  These 
goods  were  brought  to  the  United  States,  subsequent  to  the  rat- 
ification of  the  treaty  of  peace,  and  before  the  act  establishing 
a  rate  of  duty  between  the  United  States  and  the  Philippines. 
The  court  followed  its  opinion  in  the  case  of  DeLima  v.  Bidwell, 
supra,  and  held  that  the  duties  were  illegally  exacted,  Justice 
Brown  concurring  in  a  separate  opinion,  and  Justices  Gray, 
Shiras,  White  and  McKenna  dissenting,  so  that  the  same  divi- 
sion in  the  court  continued. 

§  574.  Tax  Upon  Exports. — The  taxing  power  of  Congress 
is  expressly  limited  by  the  prohibitions  that  no  tax  or  duty  shall 
be  laid  on  articles  exported  from  any  State.  This  is  reinforced 
by  the  following  provision:  ''No  preference  shall  be  given  by 
any  regulation  of  commerce  or  revenue  to  the  ports  of  one  State 
over  those  of  another;  nor  shall  vessels  bound  to,  or  from,  one 
State,  be  obliged  to  enter,  clear,  or  pay  duties,  in  another." 
The  Constitution  also  prohibitss  the  States  from  levying  any 
imposts  or  duties  on  imports  or  exports  without  the  consent  of 
Congress.4  The  term  "imports  and  exports"  in  both  of  these 
clauses,  limiting  the  taxing  power  of  the  States  and  national 
government,  relates  solely  to  foreign  commerces  It  will  be  ob- 
served that  the  term  "tax"  in  the  first  of  these  prohibitions 


curred  in  by  Mr.  Justice  Shiras  and  Mr.  Justice  McKenna.  Mr.  Jus- 
tice Gray  also  delivered  a  concurring  opinion.  The  Chief  Justice,  Mr. 
Justice  Harlan,  Mr.  Justice  Brewer  and  Mr.  Justice  Peckham  dis- 
sented. Thus  it  is  seen  that  there  is  no  opinion  in  which  a  majority 
of  the  court  concurred.  Under  these  circumstances  I  have,  after  con- 
sultation with  Mr.  Justice  Brown,  who  announced  the  judgment,  made 
head-notes  of  each  of  the  sustaining  opinions,  and  placed  before  each 
the  names  of  the  justices  or  justice  who  concurred  in  it." 

1  Fourteen  Diamond  Rings  v.  United  States,  183  U.  S.  177,  46  L.  Ed. 
138    (1902). 

2  Constitution,  Art.  I,  Sec.  9,  Par.  5. 

3  Art.  I,  Sec.  10,  Par.  2. 

4  See  supra.  Ch.   III. 

5  See  supra,  Ch.  III. 


§    574  THE   TAXING   POWER   OF    CONGRESS.  655 

appears  as  the  alternative  of  "duty."  It  has  been  suggested 
that  this  language  was  probably  intended  to  cover  the  ease  of 
a  tax  on  an  article  which  is  in  transitu  to  be  exported,  and  the 
case  of  a  duty  upon  the  article  when  it  becomes  the  subject  of 
export. 

The  exemption  only  applies  to  property  actually  exported  or 
in  transitu  to  be  exported,  and  the  intent  to  export  property  is 
not  sufficient.  This  question  was  raised  in  the  Supreme  Court 
in  regard  to  the  cotton  tax  levied  during  the  Civil  War.  Its 
collection  was  resisted  on  the  ground  that  it  was  necessarily  a 
tax  upon  exports,  as  four-fifths  of  all  the  cotton  raised  in  the 
country  was  in  fact  exported.  Justice  Miller  in  his  lectures i 
says  that  the  Supreme  Court  was  equally  divided  upon  this 
question,  and  it  was  not  decided.  It  was  subsequently  held  in 
other  cases  that  the  objection  was  not  valid,  and  that  the  only 
property  exempted  from  taxation  under  these  provisions  is  that 
actually  in  process  of  exportation,  which  has  begun  its  voyage 
or  its  preparation  for  the  voyage.2 

The  exportation  stamp  required  to  be  affixed  to  every  pack- 
age of  tobacco  intended  for  exportation  before  its  removal  from 
the  factory  was  held  constitutional, ^  the  court  saying  that  the 
stamp  required  was  a  means  devised  for  the  prevention  of  fraud 
by  separating  and  identifying  the  tobacco  intended  for  expor- 
tation. The  excise  tax  laid  on  tobacco  before  its  removal  from 
the  factory  is  not  a  duty  on  exports  within  the  prohibition  of 
the  Constitution,  even  though  the  tobacco  be  intended  for  ex- 
portation. ^  In  the  case  last  cited  the  court  cited  the  decision 
in  Coe  v.  Errol,^  where  property  intended  for  removal  to  an- 
other State  was  held  taxable,  the  court  saying  that  the  consti- 
tutional prohibition  against  taxing  exports  is  substantially  the 
same  when  directed  to  the  United  States  as  when  directed  to 
a  State. 


1  Miller's  Lectures,  pp.  252  and  592. 

2Co€  V.  Errol,  116  U.  S.  517,  supra;  Turpin  v.  Burgess,  117   U.   S. 
504,  supra. 

8  Pace  V.  Burgess,  92  U.  S.  372,  supra. 
4  Turpin  v.  Burgess,  117  U.  S.  504,  supra. 
6  Supra,  Sec.  132. 


656  THE  TAXING  POWER   OP   CONGRESS.  §    575 

§  575.    Tax  on  Foreign  Bills  of  Lading  is  Tax  on  Exports. — 

The  War  Revenue  Act  of  1898,  which  has  contributed  so  mate- 
rially to  the  judicial  discussion  of  the  congressional  taxing 
power,  included  a  stamp  tax  on  foreign  bills  of  lading,  and 
this  was  adjudged  by  the  court,  in  an  exhaustive  opinion  by 
Justice  Brewer,!  to  be  in  substance  and  effect  equivalent  to  a 
tax  upon  articles  included  in  that  bill  of  lading,  and  therefore 
a  tax  or  duty  upon  exports,  in  conflict  with  the  Constitution. 
It  was  strongly  urged  in  this  case  that  similar  stamp  duties 
had  been  enforced  at  different  periods,  since  the  foundation  of 
the  government,  and  never  before  been  challenged.  But  the 
court  replied  that  the  practical  construction  of  a  statute,  by 
those  having  actual  charge  of  its  execution,  is  to  be  relied  upon 
only  in  cases  of  doubt;  and  that,  when  the  meaning  and  scope 
of  a  constitutional  provision  are  clear,  it  cannot  be  overthrown 
by  legislative  action  although  several  times  repeated  and  never 
before  challenged.     The  court  added  at  page  311; 

"It  will  be  perceived  that  these  stamp  duties  have  been  in 
force  during  only  three  periods :  First,  from  1797  to  1802  ;  sec- 
ond, from  1862  to  1872 ;  and,  third,  commencing  with  the  recent 
statute  of  1898.  It  must  be  borne  in  mind  also  in  respect  to 
this  matter  that  during  the  first  period  exports  were  limited, 
and  the  amount  of  the  stamp  duty  was  small,  and  that  during 
the  second  period  we  w^ere  passing  through  the  stress  of  a  great 
civil  war  or  endeavoring  to  carry  its  enormous  debt ;  so  that  it 
is  not  strange  that  the  legislative  action  in  this  respect  passed 
unchallenged.  Indeed,  it  is  only  of  late  years,  when  the  bur- 
dens of  taxation  are  increasing  by  reason  of  the  great  expenses 
of  government,  that  the  objects  and  modes  of  taxation  have 
become  a  matter  of  special  scrutiny.  But  the  delay  in  present- 
ing these  questions  is  no  excuse  for  not  giving  them  full  consid- 
eration and  determining  them  in  accordance  with  the  true 
meaning  of  the  Constitution." 

It  was  urged  by  counsel  that  the  same  reasoning  would  in- 
validate the  tonnage  tax  and  stamp  duties  on  manifests.  The 
court  said  that,  without  deciding  the  question  as  to  those  taxes, 
there  might  be  a  valid  difference  as  indicated  by  the  decisions 


1  Fairbanks  v.  United  States,  181  U.  S.  283,  45  L.  Ed.  862   (1901). 


§    576  THE   T.VXING   POWER   OF  -  CONGRESS.  657 

of  the  court  with  respect  to  interstate  commerce.  Thus  a  State 
cannot  by  license  or  otherwise  impose  a  burden  on  the  business 
of  interstate  commerce,  but  it  can  tax  the  vehicles  and  property 
emploj^ed  in  that  business,  so  long  and  so  far  as  they  are  prop- 
erty in  the  State.  The  court  added :  ' '  This  difference  may  have 
significance  in  respect  to  these  other  taxes.  As  heretofore  said, 
we  do  not  decide  the  question,  but  only  make  these  suggestions 
to  indicate  that  the  matter  has  been  considered."^ 

Tt  was  later  held-  that  the  stamp  tax  assessed  under  the  War 
Revenue  Act  of  1898  upon  chartered  parties  which  were  used 
exclusively  for  the  carriage  of  cargo  from  State  ports  to  foreign 
ports  was  also  violative  of  the  Constitution,  and  no  less  so  when 
the  goods  were  not  on  the  vessel  when  the  chartered  party  was 
made,  where  the  charter  related  only  to  the  exportation  of  cargo 
from  State  ports  to  foreign  ports.     The  court  said: 

"The  charters  were  for  the  exportation;  they  related  to  it 
exclusively ;  they  served  no  other  purpose.  The  tax  on  these 
chartered  parties  was  in  substance  a  tax  on  the  exportation, 
and  a  tax  on  the  exportation  is  a  tax  on  the  exports. ' ' 

§  576.    Porto  Rican  Tariff  of  1900  Not  Tax  on  Exports.— An 

interesting  case  in  the  "Series  of  Insular  Decisions"  involved 
a  consideration  of  the  clause  prohibiting  a  duty  on  exports, 
with  reference  to  the  duties  levied  under  the  Foraker  Act  of 
1900  on  goods  shipped  from  New  York  to  Porto  Rico.  It  was 
strongly  contended  that,  if  Porto  Rico  is  a  "foreign  country," 
these  duties  were  clearly  duties  upon  exports,  and,  on  the  other 
hand,  if  it  is  a  domestic  country  and  part  of  the  United  States, 
the  duties  were  illegally  exacted,  because  the  act  was  an  inter- 
ference with  the  internal  commerce  of  the  country,  and  a  prefer- 


1  Justices  Harlan,  Gray,  White  and  McKenna  dissented,  saying  that 
a  stamp  duty  has  had  for  centuries  a  well  defined  meaning,  and  that, 
in  view  of  the  frequent  legislation  by  Congress  and  its  enforcement 
for  nearly  a  century,  the  question  must  have  arisen  if  it  had  been 
supposed  by  any  one  that  such  legislation  infringes  the  constitutional 
rights  of  the  citizen. 

2  United  States  v.  Hvoslef,  (;t  al.,  237  U.  S.  1,  59  L.  Ed.  813  (1915), 
affirming  217  Fed.  680. 


658  THE   TAXING   POWER   OF    CONGRESS.  §    577 

ence  of  one  port  thereof  over  another,  in  violation  of  the  Con- 
stitution.^ The  court  denied  this  contention  by  the  same  divi- 
sion as  in  the  other  Insular  Cases.^  Justice  Brown,  in  his  opin- 
ion, held  that  Porto  Rico  was  not  a  foreign  country  within  the 
meaning  of  the  tariff  act.  The  fact  that  the  duties  were  not 
paid  into  the  treasury  of  the  United  States,  but  held  as  a  sep- 
arate fund  to  be  used  for  the  purposes  and  benefit  of  Porto 
Rico,  subject  to  repeal  by  the  legislative  assembly  of  that  island, 
showed  that  the  tax  was  not  intended  as  a  duty  upon  exports. 
But  he  added  that  he  did  not  intend,  by  his  opinion,  to  inti- 
mate that  Congress  could  lay  a  tax  upon  the  merchandise  car- 
ried from  one  State  into  another. 

Chief  Justice  Fuller,  and  Justices  Harlan,  Brewer  and  Peck- 
ham  dissented,  saying,  page  175 : 

"Congress  may  lay  local  taxes  in  the  territories,  affecting 
persons  and  properties  therein,  or  authorize  territorial  legisla- 
tures to  do  so,  but  it  cannot  lay  tariff  duties  on  articles  ex- 
ported from  one  State  to  another,  or  from  any  State  to  the  ter- 
ritories, or  from  any  State  to  foreign  countries,  or  grant  a 
power  in  that  regard  which  it  does  not  possess.  But  the  deci- 
sion now  made  recognizes  such  powers  in  Congress  as  will  en- 
able it,  under  the  guise  of  taxation  to  exclude  the  products  of 
Porto  Rico  from  the  States  as  well  as  the  products  of  the  States 
from  Porto  Rico ;  and  this  notwithstanding  it  w^as  held  in  De 
Lima  v.  Bidw^ell,  182  U.  S.  1,  that  Porto  Rico  after  the  ratifica- 
tion of  the  treaty  with  Spain  ceased  to  be  foreign  and  became 
domestic  territory." 

§  577.  Act  Conferring  Reciprocity  Powers  on  President  Sus- 
tained.— The  Tariff  Act  of  1890  gave  authority  to  the  President 
to  equalize  duties  on  imports,  by  suspending  the  free  introduc- 
tion of  certain  commodities,  when   satisfied  that  any  country 


lArt.  I,  Sec.  9,  Par.  5:  "No  preference  shall  be  given  by  any  regula- 
tion of  commerce  or  revenue  to  the  ports  of  one  State. over  those  of 
another." 

2Dooley  v.  United  States,  183  U.  S.  151,  46  L.  Ed.  128  (1902).  There 
is  an  interesting  critical  review  of  the  decisions  in  this  case,  and  also 
of  Woodruff  V.  Parham,  supra,  Sec.  110,  in  a  paper  by  the  late  Ed- 
ward B.  Whitney,  ex-Ass't  Attorney-General  of  the  United  States,  on 
the  Insular  Decisions  in  the  Columbia  Law  Review  of  February,  1902. 


§    578  THE   TAXING   POWER   OF    CONGRESS.  659 

producing  such  articles  imposes  duties  or  other  exactions  upon 
the  agricultural  or  other  products  of  the  United  States,  which 
he  may  deem  to  be  reciprocally  unequal  or  unreasonable.  All 
of  the  judges  concurring  held  that,  even  if  this  reciprocal  pro- 
vision was  invalid,  it  would  not  invalidate  the  other  provisions 
of  the  act.^  But  it  was  held  also,  Chief  Justice  Fuller  and 
Justice  Lamar  dissenting,  that  the  provision  was  not  open  to 
the  objection  that  it  delegated  legislative  power  to  the  Presi- 
dent; that  weight  should  be  given  to  the  fact  that  such  powers 
had  been  given  to  the  President  with  reference  to  trade  and 
commerce  since  the  foundation  of  the  government;  and  that  no 
discretion  was  allowed  to  the  President,  but  it  was  made  his 
duty  to  act  when  he  ascertained  the  facts.  The  court  said,  at 
page  693: 

"He  had  no  discretion  in  the  premises  except  in  respect  to 
the  duration  of  the  suspension  so  ordered.  But  that  related 
only  to  the  enforcement  of  the  policy  established  by  Congress. 
As  the  suspension  was  absolutely  required,  when  the  President 
ascertained  the  existence  of  a  particular  fact,  it  cannot  be  said 
that  in  ascertaining  that  fact  and  in  issuing  his  proclamation, 
in  obedience  to  the  legislative  will,  he  exercised  the  function  of 
making  laws.  Legislative  power  Avas  exercised  when  Congress 
declared  that  the  suspension  should  take  effect  upon  a  named 
contingency.  What  the  President  was  required  to  do  was  sim- 
ply in  execution  of  the  Act  of  Congress.  It  was  not  the  making 
of  law^  He  was  the  mere  agent  of  the  law^-making  department 
to  ascertain  and  declare  the  event  upon  which  its  expressed 
will  Avas  to  take  effect.  It  was  a  part  of  the  law  itself  as  it  left 
the  hands  of  Congress  that  the  provisions,  full  and  complete  in 
themselves,  permitting  the  free  introduction  of  sugars,  molasses, 
coffee,  tea  and  hides,  from  particular  countries,  should  be  sus- 
pended, in  a  given  contingency,  and  that  in  case  of  such  sus- 
pensions certain  duties  should  be  imposed." 

§  578.     Taxing  Power  of  Congress  with  Reference  to  Treaty 

Power. — It  is  no  oljjection  to  the  validity  of  any  tax  imposed 
by  Act  of  Congress,  that  it  violates  provisions  contained  in  the 
treaties  of  the  government  with  other  nations.     This  was  deter- 


1  Field  V.  Clark,  143  U.  S.  649,  26  L.  Ed.  294    (1892). 


660  THE   TAXING   POWER    OF    CONGRESS.  §    579 

mined  "bj  the  court  in  the  Head  Money  Cases,^  and  the  same 
principle  has  been  since  declared.  While  a  treaty  is  a  law  of 
the  land,  it  has  no  superiority  over  an  Act  of  Congress,  and 
may  therefore  be  repealed  or  modified  by  an  act  of  a  later  date. 
It  was  said  by  the  court,  in  the  case  cited,  that  there  is  nothing 
in  its  essential  character  or  in  the  branches  of  the  government 
by  which  a  treaty  is  made,  to  give  it  any  superior  sanctity.  The 
general  principle  was  laid  down,  that  so  far  as  a  treaty  made 
by  the  United  States  with  a  foreign  nation  can  become  the  sub- 
ject of  judicial  cognizance  in  the  courts  of  this  country,  it  is 
subject  to  such  enactments  as  Congress  may  pass  for  its  en- 
forcement, modification  or  repeal. ^^  This  principle  is,  of  course, 
applicable  in  the  case  of  customs  duties.  The  validity  of  the 
duty,  as  enacted  by  Congress,  cannot  be  affected  by  the  pro- 
visions of  any  prior  treaty,  so  far  as  the  courts  are  concerned.3 

§  579.  State  Instrumentalities  and  Agencies  Exempt  from 
Federal  Taxation. — In  the  language  of  the  Supreme  Court  in 
the  Income  Tax  case  of  1895.  "As  the  States  cannot  tax  the  pow- 
ers, the  operations,  or  the  property  of  the  United  States,  nor  the 
means  which  they  employ  to  carry  their  powers  into  execution, 
so  it  has  been  held  that  the  United  States  have  no  power  under 
the  Constitution  to  tax  either  the  instrumentalities  or  the  prop- 
erty of  a  State."  It  was  the  unanimous  opinion  of  the  justices 
in  this  case,  and  this  was  the  only  point  on  which  there  was  a 
unanimous  concurrence,  that  so  much  of  the  income  tax  law  of 
1894  as  imposed  a  tax  upon  the  income  derived  from  the  interest 
of  bonds  issued  by  a  municipal  corporation  was  a  tax  upon  the 


1 112  U.  S.  580,  supra. 

2  As  to  the  igeneral  principle  involved,  see  Chinese  Exclusion  case, 
130  U.  S.  581,  32  L.  Ed.  1068  (1889),  and  Fong  You  Ting  v.  U.  S.,  149 
U.  S.  721,  37  L.  Ed.  905  (1893),  and  Whitney  v.  Robinson,  124  U.  S. 
190,  31  L.  Ed.  386   (1888). 

3  As  to  effect  upon  tax  or  duty  of  a  subsequent  treaty  inconsistent 
therewith,  the  Supreme  Court  said  in  the  Cherokee  Tobacco  case, 
11  Wall.  616,  20  L.  Ed.  227  (1871):  "A  treaty  may  supersede  a  prior 
act  of  Congress,  and  an  act  of  Congress  may  supersede  a  prior  treaty." 
As  to  relation  of  tref.ty  to  legislation,  see  Marshall,  J.,  in  Foster  v. 
Nelson,  2nd  Peters  314,  7  L.  Ed.  415   (1829). 


§    579  THE   TAXIXG   POWER   OF    CONGRESS.  661 

power  of  the  State  in  its  instrumentalities  to  borrow  money,  and 
was  consequently  repugnant  to  the  Constitution  of  the  United 
States.  **The  Constitution,"  the  court  said,  "contemplates  the 
independent  exercise  by  the  nation  and  the  States  severally  of 
their  constitutional  powers." 

It  had  been  before  decided,^  with  reference  to  the  Income 
Tax  Law  of  1864,  that  it  was  not  competent  for  Congress  to 
impose  a  tax  upon  the  salary  of  a  State  judicial  officer.  The 
court  ruled  there  that  the  case  was  controlled  by  the  same  prin- 
ciple as  that  of  Dobbins  v.  Erie  County,-  deciding  that  a  State 
cannot  tax  the  salaries  of  officers  of  the  United  States;  for,  in 
respect  to  its  reserved  powers,  the  State  is  a  sovereign  as  inde- 
pendent as  the  general  government.     It  said,  at  page  127: 

"It  is  admitted  that  there  is  no  express  provision  in  the  Con- 
stitution that  prohibits  the  general  government  from  taxing 
the  means  and  instrumentalities  of  the  States,  nor  is  there  any 
prohibiting  the  States  from  taxing  the  means  and  instrumen- 
talities of  that  government.  In  both  cases  the  exemption  rests 
upon  necessary  implication,  and  is  upheld  by  the  great  law  of 
self-preservation ;  as  any  government,  whose  means  employed 
in  conducting  its  operations,  if  subject  to  the  control  of  an- 
other and  distinct  government,  can  exist  only  at  the  mercy  of 
that  government.  Of  what  avail  are  these  means  if  another 
power  may  tax  them  at  discretion?"^ 

The  Internal  Revenue  Act  of  1864  provided  that  railroads 
and  certain  other  companies  should  pay  a  five  per  cent  tax  on 
the  amount  of  all  interest  paid  on  their  bonds.  The  city  of 
Baltimore  held  five  million  dollars  of  the  bonds  of  the  Baltimore 
&  Ohio  Railroad  issued  for  a  loan  by  the  city  to  the  railroad 
of  its  own  bonds  to  that  amount.  It  had  already  been  decided 
by  the  Supreme  Court  that  this  was  not  a  tax  upon  the  cor- 


1  Collector  v.  Day,  11  Wall.  113,  20  L.  Ed.  122  (1871).  See  also 
United  States  v.  Railroad  Co.,  17  Wall.  322,  21  L.  Ed.  597  (1874),  and 
Van  Brocklin  v.  Tennessee,  117  U.  S.  151,  178,  29  L.  Ed.  145  (1886). 

2  Hupra,  Sec.  14. 

3  Justice  Bradley  dissented  in  this  case,  saying  that  the  decision 
established  a  limitation  of  the  power  of  taxation  which  he  thought 
would  be  found  very  difficult  to  control. 


662  THE   TAXING    POWER    OF    CONGRESS.  §    579 

porations  on  their  own  account,  but  they  were  used  as  a  con- 
venient means  of  collecting  the  tax  from  the  creditor  or  stock- 
holder upon  whom  this  tax  was  really  laid/  and  it  was  there- 
fore held  that  this  tax  could  not  be  collected  from  the  revenue 
of  the  city,  as  it  was  not  within  the  power  of  Congress  to  tax 
the  muuicipal  income  or  property.  The  court  in  this  ease  made 
a  distinction  between  municipal  revenues  proper  and  revenues 
from  property,  which  was  held  in  trust  by  the  city  for  char- 
itable or  other  purposes,  and  said  it  was  quite  possible  that  the 
latter  would  be  subject  to  taxation,  but  that  the  railroad  loan 
was  a  proper  municipal  purpose  for  the  benefit  of  the  city  as 
well  as  the  railroad  company,  and  the  city's  interest  therein 
was  therefore  beyond  the  taxing  power  of  Congress.^ 

Bonds  required  to  be  given  to  a  State  and  city  as  a  condition 
precedent  to  the  issuance  of  a  liquor  license  were  exempt  from 
the  stamp  tax  requirements  of  the  Act  of  1878,  as  they  were 
taken  in  the  exercise  of  a  function  strictly  belonging  to  the 
State  and  city  in  their  ordinary  governmental  capacity  and 
therefore  held  to  come  within  the  exemption  clause  of  the  act.^ 


1  Railroad  Co.  v.  Jackson,  7  Wallace  262,  supra;  Haight  v.  Railroad 
Co.,  6  Wallace  17,  supra. 

2  United  States  v.  Railroad  Co.,  17  Wallace  322,  supra.  Justice 
Bradley  concurred  on  the  special  ground  that  Congress  did  not  intend 
by  the  internal  revenue  laws  to  tax  property  belonging  to  the  States 
of  municipal  corporations;  and  Justices  Clifford  and  Miller  dissented, 
holding  that  private  property  owned  by  a  municipal  corporation 
merely  in  a  proprietary  right  and  not  for  governmental  purposes  is 
not  entitled  to  exemption.  It  was  held  by  the  U.  S.  Circuit  Court  in 
Georgia,  Georgia  v.  Atkins,  1  Abbott  (U.  S.)  22  (1866),  that  the  word 
"corporation"  in  the  Revenue  Act  of  1864,  declaring  that  every  person  or 
corporation  owning  a  railroad  should  pay  a  tax,  did  not  include  the 
Western  &  Atlantic  Railroad  owned  by  the  State  of  Georgia,  and 
managed  by  the  State  agents,  and  the  profits  from  which  were  part 
of  the  revenue  of  the  State. 

sAmbrosini  v.  United  States,  187  U.  S.  1,  47  L.  Ed.  49  (1902),  re- 
versing 105  Fed.  239. 

See  also  Bettman  v.  Warwick,  108  Fed.  46,  C.  C.  A.  6th  Circuit,  47 
C.  C.  A.  185  (1901),  holding  that  under  the  same  act  a  stamp  could  be 
required  on  the  bond  of  a  Notary  Public.  It  was  held  in  several  State 
cases  that  the  requirement  that  instruments  should  not  be  admissible 


§    581  THE   TAXING   POWER   OP    CONGRESS.  663 

§  580.  Exemption  Does  Not  Extend  to  the  State 's  Assump- 
tion of  Business  of  Liquor  Selling. — Persons  employed  by  the 
State  of  South  Carolina  in  selling  liquor  were  not  relieved  from 
liability  for  the  internal  revenue  tax  by  the  fact  that  they  had 
no  interest  in  the  profits  of  the  business  and  were  simply  the 
agents  of  the  State,  which,  in  the  exercise  of  its  sovereign  power, 
had  taken  charge  of  the  business  of  selling  intoxicating  liquors.^ 
The  court  said  that  the  exemption  of  State  agencies  from  the 
taxing  power  of  the  government  necessarily  grew  out  of  the 
dual  form  of  government,  and  it  did  not  extend  to  the  assump- 
tion by  the  State  of  a  private  business,  that  is,  the  exemption 
of  State  agents  and  instrumentalities  from  national  taxation 
was  limited  to  those  of  a  governmental  character,  and  did  not 
extend  to  those  which  are  used  by  the  State  in  the  carrying  out 
of  an  ordinary  private  business.  The  court  therefore  concluded 
that  the  license  taxes  charged  by  the  Federal  government  upon 
persons  selling  liquor  were  not  invalidated  by  the  fact  that  they 
were  the  agents  of  the  State  which  had  itself  engaged  in  that 
business. 

§  581.    Federal  Succession  Tax  on  Bequests  to  Municipality. 

— The  succession  tax  imposed  under  the  "War  Tax  Bill  of  June, 
1898,  was  adjudged  lawfully  levied  upon  a  bequest  to  a  munici- 
pality for  public  purposes,  that  is,  for  maintaining,  improving 
and  beautifying  a  public  park,  since  the  tax,  collected  from  the 


in  evidence  unless  stamped  applied  only  to  Federal  courts,  Congress 
having  no  power  to  control  evidence  in  the  State  courts.  Garland  v. 
Gaines,  73  Conn.  662  (1901);  Southern  Ins.  Co.  v.  Estes,  106  Tenn.  472, 
and  52  L.  R.  A.  915  (1901).  In  Minnesota  it  was  held,  Spoon  v.  Fram- 
bach,  83  Minn.  301  (1901),  that  the  unstamped  paper  would  be  received 
in  evidence  unless  the  omission  of  the  stamp  was  shown  to  be  fraudu- 
lent. 

1  South  Carolina  v.  United  States,  199  U.  S.  437.  50  L.  Ed.  261  (1905), 
affirming  39  St.  of  CI.  257. 

Justices  White,  Peckham  and  McKenna  dissenting,  saying  that  as 
the  State  of  South  Carolina  had  complete  and  absolute  power  over 
the  liquor  traffic  and  could  exert  in  dealing  with  that  subject  to 
methods  and  instrumentalities  as  were  deemed  best.  The  United 
States  was  without  authority  to  tax  the  agencies  which  the  State 
called  in  to  be  for  the  purpose  of  dealing  with  the  liquor  traffic. 


664  THE   TAXING   POWER    OP    CONGRESS.  §    583 

property  while  in  the  hands  of  the  executor,  who  was  required 
by  Sec.  30  of  that  act  to  liquidate  it  "before  payment  and  dis- 
tribution to  the  legatees,"  could  not  be  regarded  as  a  tax  upon 
the  municipality,  although  it  might  operate  incidentally  to  re- 
duce the  bequest  by  the  amount  of  the  tax.^  The  court  said 
that  this  case  was  to  a  certain  extent  the  converse  of  that  of  the 
United  States  v.  Perkins,^  M^herein  the  State  taxes  upon  be- 
quests of  the  Federal  government  had  been  sustained.  The 
court  said  that  as  Congress  had  the  power  to  tax  succession, 
and  the  States  had  the  same  power,  and  such  power  extended 
to  bequests  to  the  United  States,  it  would  seem  to  follow  log- 
ically that  Congress  had  the  same  power  to  tax  the  transmis- 
sion of  property  by  legacy  to  States  or  their  municipalities. 

§  582.  State  Securities  are  Not  Exempt  from  Federal  Inher- 
itance Taxes. — The  exemption  of  State  agencies  and  instrumen- 
talities from  Federal  taxation  does  not  extend  to  the  exemption 
of  State  and  municipal  securities  from  a  Federal  inheritance 
tax.  These  last  are  subject  to  Federal  taxation  on  the  same 
principle  that  Federal  securities  are  subject  to  a  State  inher- 
itance tax.  The  tax  is  upon  the  right  of  inheritance,  and  not 
upon  the  property  inherited. 3 

§  583.  Federal  Securities  Subject  to  Federal  Inheritance 
Taxes. — It  was  also  held,  under  the  War  Revenue  Act  of  1898,4 
that,  as  a  State  inheritance  tax  may  lawfully  be  measured  by 
the  value  or  amount  of  the  legacy,  even  if  United  States  bonds 
are  included  in  the  legacy,  the  reasoning  that  justifies  such  a 
principle  must,  when  applied  to  the  case  of  a  Federal  inher- 
itance tax  upon  the  same  legacy,  lead  to  the  same  conclusion. 
The  court  declined  to  consider  the  question  whether  the  United 
States,  in  the  exercise  of  the  power  of  taxation,  can  be  estopped 
by  a  contract  that  such  power  should  not  be  exercised,  as  in  this 


1  Snyder  v.  Bettman,  190  U.  S.  249,  47  L.  Ed.  1035   (1903).     Justices 
White,  Fuller  and  Peckham  dissenting. 

2  Supra,  Sec.  35. 

3  Knowlton  v.  Moore,  supra. 

4Murdocli  V.  Ward,  178  U.  S.  139,  44  L.  Ed.  1009   (1900). 


§    585  THE   T.VXING   POWER   OP    CONGRESS.  '      665 

case  the  tax  was  not  levied  upon  the  bonds  which  had  been  ex- 
empted from  taxation,  State  and  Federal,  but  upon  the  right  of 
inheritance.! 

§  584.    Taxing  Power  of  Congress  and  State  Authority. — 

The  relation  to  State  authority  of  the  taxing  power  of  Congress 
was  also  considered  in  the  cases  involving  the  War  Revenue 
Act  of  1898,  supra.  It  was  claimed  that  the  inheritance  tax  in 
that  act  was  invalid, 2  since  the  transmission  of  property  by 
death  was  exclusively  subject  to  the  legislative  authority  of  the 
several  States.  But  the  court  said  that  the  tax  was  imposed 
upon  the  transmission  or  receipt  of  the  inheritance  or  legacy, 
and  not  upon  the  right  existing  in  the  State  to  regulate  that 
transmission  or  receipt.  It  was  urged  that  the  power  to  tax 
inheritances  involves  the  power  to  destroy  them.  But  that  con- 
sideration, said  the  court,  had  no  application  to  a  lawful  tax, 
because  on  that  reasoning  every  such  tax  would  become  unlaw- 
ful, and  therefore  none  whatever  could  be  levied.     It  added : 

"Under  our  constitutional  system  both  the  national  and  the 
State  governments  moving  in  their  respective  orbits  have  a 
common  authority  to  tax  many  and  diverse  objects.  But  this 
does  not  cause  the  exercise  of  its  lawful  attributes  by  one  to  be 
a  curtailment  of  the  powers  of  government  of-  the  other,  for  if 
it  did,  there  would  practically  be  an  end  of  the  dual  system  of 
government  which  the  Constitution  established. ' ' 

§  585.  Taxing'  Power  of  Congress  and  State  Franchises. — 
The  lawful  exercise  of  the  taxing  power  by  Congress  may  de- 
stroy a  business  or  franchise  exercised  under  State  authority. 
This  was  illustrated  by  the  Act  of  Congress  imposing  a  tax  of 
ten  per  cent  upon  the  notes  of  State  banks  used  for  circulation 


1  The  court  said,  by  Justice  Miller,  in  Mitchell  v.  Clark,  110  U.  S. 
643,  28  L.  Ed.  279  (1884):  "It  is  no  answer  to  this  to  say  that  it  in- 
terferes with  the  validity  of  contracts,  for  no  provision  of  the  Consti- 
tution prohibits  Congress  from  doing  this,  as  it  does  the  States,  and 
where  the  question  of  the  power  of  Congress  arises,  as  in  the  legal 
tender  cases,  and  in  bankruptcy  cases,  it  does  not  depend  upon  the 
incidental  effect  of  its  exercise  on  contracts,  but  on  the  existence  of 
the  power  itself." 

2Knowlton  v.  Moore,  supra. 


Q66  THE  TAXING  POWER   OF   CONGRESS.  §   585 

after  the  1st  of  August,  1866.  The  purpose,  substantially  ad- 
mitted, was  to  drive  the  notes  from  circulation,  so  as  to  open 
the  means  for  circulating  the  notes  of  the  national  banks  organ- 
ized by  Congress.  This  act  was  said  by  Justice  Miller^  to  be 
a  forcible  illustration  of  the  famous  saying  of  Chief  Justice 
Marshall :  ' '  The  power  to  tax  is  the  power  to  destroy. ' '  It  was 
sustained  by  the  Supreme  Court.^  The  argument  was  advanced 
that  the  tax  was  direct  and  therefore  should  have  been  appor- 
tioned to  the  States,  and  that  it  impaired  a  franchise  granted 
by  them,  but  the  court  said,  in  an  opinion  by  Chief  Justice 
Chase,  that  these  objections  were  untenable ;  that  it  was  a  duty 
or  excise  tax,  and  not  direct;  that  franchises  granted  by  the 
State  are  subject  to  taxation  like  other  property,  and  even  if 
the  tax  was  excessive  and  indicative  of  a  purpose  to  destroy 
the  franchise,  that  was  a  question  for  Congress  and  not  for  the 
court.  But  apart  from  this.  Congress  having  undertaken  to 
provide  a  currency  for  the  whole  country,  it  could  constitu- 
tionally secure  the  benefit  of  it  to  the  people  by  appropriate 
legislation.  It  could,  therefore,  by  suitable  enactments,  restrain 
the  circulation,  as  money,  of  any  notes  not  issued  under  its  own 
authority. 

The  act  provided  that  this  tax  should  be  paid  by  any  bank 
on  the  notes  of  any  town,  city  or  municipal  corporation  paid 
out  by  it,  and  the  court  enforced  the  collection  of  the  tax  against 
the  National  Bank  of  Little  Rock  on  account  of  notes  issued 
by  the  city  of  Little  Rock  and  paid  out  by  the  bank.  The  court 
said^  that  the  tax  was  not  laid  on  the  obligation,  but  on  its  use 
in  a  particular  way;  that  a  municipality  could  not,  against  the 
law  of  Congress,  put  its  notes  in  circulation  as  money,  and  that 
the  bank  which  helped  to  keep  up  the  use  by  paying  them  out, 


1  In  Loan  Assn.  v.  Topeka,  20  Wall.  1.  c.  663,  supra,  Sec.  380. 

2Veazie  Bank  v.  Fennell,  8  Wall.  533,  19  L.  Ed.  482  (1868).  Jus- 
tices Nelson  and  Davis  dissented,  holding  that,  while  Congress  had 
power  to  tax  the  property  of  the  banks,  the  tax  in  question  was  really 
one  upon  the  powers  and  faculties  of  the  State  to  create  the  banks,  and 
the  decision  in  fact  struck  at  this  latter,  which  was  essential  to  the 
sovereignty  of  the  States. 

3  National  Bank  v.  United  States,  101  U.  S.  1,  25  L.  Ed.  979  (1880). 


§    586  THE   TAXING   POWER   OF    CONGRESS.  667 

that  is,  employing  them  as  the  equivalent  of  money  in  discharg- 
ing its  obligations,  was  taxed  for  what  it  did.  "The  taxation 
was  no  doubt  intended  to  destroy  the  use.  But  that,  as  has 
just  t)een  seen.  Congress  had  the  power  to  do." 

§  586.    Taxing  Power  of  Congress  and  Police  Power  of  State. 

— While  Congress  may  thus  tax  any  property  or  franchise  en- 
joyed under  State  authority,  the  exercise  of  its  power  of  taxa- 
tion can  give  no  rights  as  against  the  lawful  exercise  of  the 
police  power  of  the  State.  In  other  words.  Congress  cannot 
authorize  a  trade  or  business  within  a  State  where  it  is  pro- 
hibited in  order  to  tax  it.  A  license  granted  by  Congress  there- 
fore may  prohibit  the  carrying  on  of  the  business  before  pay- 
ment of  the  tax,  but  this  is  only  a  mode  of  enforcing  the  pay- 
ment. Such  licenses,  so  far  as  they  relate  to  trade  within  the 
State  limits,  give  no  authority  to  carry  on  the  business,  and  can 
give  none.  They  simply  express  the  purpose  of  the  government 
not  to  interfere  by  penal  proceedings  with  the  trade,  if  the  taxes 
are  paid.  It  follows,  therefore,  that  a  party  failing  to  take  out 
a  license  thus  required  may  be  indicted  therefor.  On  the  other 
hand,  the  possession  of  a  license  from  the  Federal  government 
to  sell  liquors  is  no  bar  to  an  indictment  under  a  State  law 
prohibiting  such  sales.^ 

This  subject  was  also  considered  by  the  Supreme  Court  in 
reference  to  the  Act  of  Congress  of  August  2,  1886,  imposing 
special  taxes  upon  manufacturers  of  oleomargarine,  as  well  as 
upon  the  wholesale  and  retail  dealers  in  that  compound.  The 
State  of  Massachusetts  enacted  a  law  prohibiting  the  manufae- 


iMcGuire  v.  Commonwealth,  3  Wallace  387,  18  L.  Ed.  164  (1868); 
License  Tax  Cases,  5  Wall.  462,  supra;  Pervear  v.  Commonwealth,  5 
Wall.  475,  18  L.  Ed.  608  (1867).  It  was  held  in  Massachusetts,  Com- 
monwealth v.  Crane,  158  Mass.  218,  that  a  statute  requiring  everyone 
selling  oleomargarine  from  a  vehicle  to  put  on  both  sides  of  the 
vehicle  the  sign  "Licensed  to  sell  oleomargarine,"  was  not  in  conflict 
with  the  Act  of  Congress  of  August  2d,  1886,  taxing  and  licensimg  the 
sale  of  oleomargarine.  The  court  said  that  defendant's  possession  of 
a  license  under  the  Act  of  Congress  afforded  him  no  immunity  from 
the  police  control  of  the  State. 


668  THE   TAXING   POWER   OP    CONGRESS.  §    587 

ture  or  sale  of  oleomargarine  in  imitation  of  butter.  It  was 
claimed  that  this  latter  act  was  an  interference  with  interstate 
commerce,  as  Congress  had  legislated  fully  on  the  subject.  But 
the  Supreme  Court  said^  that  the  Act  of  Congress  was  not  in- 
tended as  a  regulation  of  commerce  between  the  States,  and  that 
the  taxes  prescribed  by  that  act  were  imposed  for  national  pur- 
poses. Their  imposition  did  not  give  authority  to  those  who 
paid  them  to  engage  in  the  manufacture  or  sale  of  oleomarga- 
rine in  any  State  whose  law  forbade  such  manufacture  or  sale, 
or  to  disregard  any  regulation  which  the  State  might  lawfully 
prescribe  in  reference  to  that  act. 

§  587.  Municipal  Corporations  Subject  to  Internal  Reve- 
nue Taxation. — ^A  municipality  which  engages  in  the  business 
of  distilling  spirits  is  not  exempt  from  the  tax  levied  upon  that 
business  by  the  United  States,  and  it  is  immaterial,  so  far  as 
the  liability  to  the  tax  is  concerned,  that  it  had  no  lawful  au- 
thority to  engage  therein.  Salt  Lake  City,  in  what  was  then 
the  Territory  of  Utah,  set  up  this  claim  in  a  suit  against  the 
collector  to  recover  the  amount  of  taxes  alleged  to  have  been 
illegally  exacted.  But  the  court,  in  an  interesting  opinion  by 
Justice  Miller,  said  .-2 

*'A  municipal  corporation  cannot,  any  more  than  any  other 
corporation  or  private  person,  escape  the  taxes  due  on  its  prop- 
erty, whether  acquired  legally  or  illegally,  and  it  cannot  make 
its  want  of  legal  authority  to  engage  in  a  particular  transaction 
or  business  a  shelter  from  the  taxation  imposed  by  the  govern- 


iPlumley  v.  Massachusetts,  155  U.  S.  461,  39  L.  Ed.  223  (1895).  It 
was  also  held  in  this  case  that  the  doctrine  of  Leisy  v.  Hardin,  135  U. 
S.  100,  supra.  Sec.  116,  did  not  justify  the  contention  that  the  State  was 
powerless  to  prevent  the  sale  of  deceitful  imitations  of  articles  of  food 
in  general  use  among  the  people.  On  this  point  Chief  Justice  Fuller 
and  Justices  Field  and  Brewer  dissented,  denying  that  a  State  can  ex- 
elude  from  commerce  legitimate  objects  of  commercial  dealings  be- 
cause of  the  possibility  that  their  appearance  may  deceive  purchasers 
in  regard  to  their  qualities. 

2  Salt  Lake  City  v.  Hollister,  118  U.  S.  256,  1.  c.  p.  262,  30  L.  Ed.  176 
(1887). 


§    588  THE   TAXING   POWER   OP    CONGRESS.  669 

ment  on  such  business  or  transaction    by    Avliomsoever    con- 
ducted." 

§  588.  Diminution  of  Salaries  by  Taxation. — The  Constitu- 
tion of  the  United  States  provides  that  the  compensation  of  the 
judges  both  of  the  Supreme  and  inferior  Federal  courts  shall 
not  be  diminished  during  their  continuance  in  office,^  and  that 
the  compensation  of  the  President  shall  neither  be  increased 
nor  diminished  during  the  period  for  which  he  shall  have  been 
elected.2  An  income  tax  was  imposed  during  the  Civil  War 
upon  the  salaries  of  both  the  judges  and  the  President,  on  the 
ground  that  it  did  not  diminish  their  salaries,  but  only  im- 
posed a  tax,  and  hence  did  not  violate  the  constitutional  pro- 
visions. But  Chief  Justice  Taney,  on  February  16,  1863,  in 
behalf  of  the  court,  in  a  letter  to  the  Secretary  of  the  Treasury, 
protested  that  such  exaction,  although  called  an  income  tax, 
was  nevertheless  a  diminution  of  salaries,  in  violation  of  the  Con- 
stitution. The  matter  was  not  acted  on  at  the  time,  but  subse- 
quently, on  October  23,  1869,  the  Attomey-Ceneral  of  the 
United  States,  Hon.  E.  R.  Hoar,  in  a  written  opinion,  advised 
the  Secretary  of  the  Treasury  to  the  same  effect. 3  The  amounts 
collected  were  afterwards  returned.  The  opinion  of  the  Attor- 
ney-General advised  that,  undei"  the  doctrine  of  Dobbins  v.  Erie 
County, 4  the  compensation  of  an  officer  of  the  United  States 
fixed  by  a  law  of  Congress  is  not  subject  to  taxation  under 
State  authority,  because  the  effect  of  such  a  tax  would  be  to 
diminish  the  compensation  which  the  officer  is  by  law  entitled 
to  receive,  and  that,  as  Congress  is  prohibited  by  the  Consti- 
tution from  diminishing  the  salaries  paid  the  President  and  the 
judges  during  their  respective  terms  of  office,  it  can  no  more 
diminish  such  salaries  by  imposing  excise  taxes  or  duties  thereon 
and  deducting  the  amount  from  them,  than  can  a  State  make 
such   deductions  from  the   salary   of  an   officer  of  the   United 


lArt.  IIL  Sec.  1. 

2  Art.  II,  Sec.  1,  Par.  7. 

3  Opinions  of  Attorney-Generals,  Vol.  1?,,  p.  161;  see  also  Mis.  Docs., 
No.  214,  5od  Congress,  2d  Session,  containimg  a  copy  of  the  letter  of 
Chief  Justice  Taney. 

*  Supra,  Sec.  14. 


670  THE   TAXING   POWER   OP    CONGRESS.  §    589 

States,    The  tax  operates  as  a  direct  diminution  of  the  compen- 
sation of  the  officer  in  either  case.i 

§  589.  Progressive  Taxation. — It  was  strongly  urged  in 
Knowlton  v.  Moore,  supra,  that  the  progressive  feature  of  the 
inheritance  tax  of  1898  was  invalid,  and  so  repugnant  to  funda- 
mental principles  of  equality  and  justice  that  the  law  should 
be  held  void,  even  though  it  transgressed  no  express  limitation 
of  the  Constitution.  The  court  had  already  held  that  the  pro- 
gressive feature  in  the  inheritance  tax  of  Illinois  was  not  vio- 
lative of  the  Fourteenth  Amendment.  Such  provisions,  how- 
ever, had  been  held  invalid  by  some  of  the  State  courts,2  as 
violating  the  uniformity  required  by  their  respective  constitu- 
tions. The  court  declined  to  intimate  in  the  opinion  as  to 
whether  it  had  the  right  to  exercise  the  power  thus  invoked, 
of  declaring  void  a  statute  not  in  conflict  with  any  express 
provision  of  the  Constitution,  and  said  that  the  facts  in"  the 
case  before  them  did  not  justify  them  in  declaring  the  tax  in 
question  invalid.  It  said  that  some  authoritative  thinkers  and 
a  number  of  economic  writers  contend  that  a  progressive  tax 
is  more  just  and  equal  than  a  proportionate  one,  and  that,  in 
the  absence  of  constitutional  provisions,  the  .question  whether 
it  is  or  not  is  legislative  and  not  judicial.  In  answer  to  a  sug- 
gestion of  the  grave  consequences  of  recognizing  the  right  to 
levy  progressive  taxes,  the  court  said : 

**If  a  case  should  ever  arise,  where  an  arbitrary  and  confisca- 
tory exaction  is  imposed  bearing  the  guise  of  a  progressive  or 
any  other  form  of  tax,  it  will  be  time  enough  to  consider 
whether  the  judicial  power  can  afford  a  remedy  by  applying 
inherent  and  fundamental  principles  for  the  protection  of  the 
individual,  even  though  there  be  no  express  authority  in  the 
Constitution  to  do  so.  That  the  law  which  we  have  construed 
affords  no  ground  for  the  contention  that  the  tax  imposed  is 
arbitrarv  and  confiscatory  is  obvious.  "3 


1  See  Miller's  Lectures  on  Const.,  p.  247. 

2  bupra,  Sec.  516. 

3  Justice  Brewer  dissented  from  so  much  of  the  opinion  as  held  that 
a  progressive  rate  of  tax  can  be  validly  imposed,  adhering  to  the  Tiews 
expressed  by  him  in  the  Illinois  case,  supra,  Sec,  517. 


§    590  THE  TAXING   POWER   OF   CONGRESS.  671 

§  590.  Scope  of  Federal  Taxing  Power.— The  great  scope  of 
the  Federal  taxing  power  is  illustrated  in  the  decision  of  the 
court  sustaining  the  provision  of  the  Spanish  War  Revenue 
Act  of  1898.  imposing  a  tax  upon  sales  made  upon  boards  of 
trade  or  exchanges.^  This  tax  was  upon  any  sales  or  agree- 
ments of  sale  at  any  exchange  or  board  of  trade,  or  other  simi- 
lar place,  either  for  present  or  future  delivery,  and  required 
a  memorandum  to  be  delivered  by  the  seller  to  the  buyer  in- 
every  such  case,  to  which  should  be  affixed  a  stamp  or  stamps 
equal  in  value  to  the  amount  of  the  tax.  It  was  claimed  that 
this  tax  was  an  illegal  interference  with  the  internal  commerce 
of  the  States;  that  Congress  had  no  power  to  require  a  written 
memorandum  to  be  made  of  transactions  within  the  State,  so 
that  a  stamp  might  be  placed  thereon ;  that  there  was  no  proper 
basis  for  a  privilege  tax,  and  that  it  was  in  effect  a  direct  tax. 
But  the  court  held  that  none  of  these  objections  were  well 
founded.  It  said  that  this  was  not  a  direct  tax  in  the  consti- 
tutional sense,  using  the  language  already  quoted.2  It  was  not 
a  tax  on  the  property,  but  on  the  privilege,  or  for  the  facilities 
afforded  at  exchanges  or  boards  of  trade  for  the  transaction  of 
business,  and  was  therefore  in  the  nature  of  a  duty  or  excise. 
It  was  not  lacking  in  uniformity  either  in  the  intrinsic  or  geo- 
graphical sense,  and  there  was  no  legal  interference  with  com- 
merce in  the  State. 

And  the  court  added,  p.  516 : 

"In  searching  for  proper  subjects  of  taxation  to  raise  moneys 
for  the  support  of  the  government,  Congress  must  have  the 
right  to  recognize  the  manner  in  which  the  business  of  the 
country  is  actually  transacted;  how,  among  other  things,  the 
exchange  of  commodities  is  effected;  what  facilities  for  the 
conduct  of  business  exist ;  what  is  their  nature  and  how  they 
operate ;  and  what,  if  any,  practical  and  recognizable  distinc- 
tion there  may  be  between  a  transaction  which  is  effected  by 
means  of  using  certain  facilities,  and  one  where  such  facilities 
are  not  availed  of  by  the  parties  to  the  same  kind  of  a  transac- 
tion.    Having  the  power  to  recognize  these  various  facts,  it 


iNicol  V.  Ames,  173  U.  S.  509,  43  L.  Ed.  786    (1899). 
*  Supra,  Sec.  565. 


672  THE   TAXING   POWER    OF    CONGRESS.  §    591 

must  also  follow  that  Congress  is  justified,  if  not  compelled,  in 
framing  a  statute  relating  to  taxation,  to  legislate  with  direct 
reference  to  the  existing  conditions  of  trade  and  business 
throughout  the  whole  country  and  to  the  manner  in  which 
they  are  carried  on." 

§  591.  Taxing  Power  of  Congress  in  Relation  to  Interstate 
Commerce. — The  power  of  Congress  over  interstate  commerce 
is  declared  in  the  same  clause  of  the  Constitution  with  the 
power  over  foreign  commerce.  Congress  is  given  power  to  reg- 
ulate commerce  with  foreign  nations  and  among  the  several 
States  and  with  the  Indian  tribes ;  and  this  power,  in  the  lan- 
guage of  the  Supreme  Court,  acknowledges  no  limitations  other 
than  those  prescribed  in  the  Constitution.^  The  Supreme  Court 
in  several  cases  has  declared  that  Congress  has  the  same  power 
over  interstate  commerce  as  over  foreign  commerce.^  This  lan- 
guage, however,  was  used  in  cases  which  involved  State  inter- 
ference with  interstate  commerce,  and  in  connection  with  the 
assertion  that  the  States  can  no  more  interfere  with  such  com- 
merce than  with  foreign  commerce.  On  the  other  hanfl,  it  has 
been  argued  that  the  power  over  domestic  commerce  is  not  iden- 
tical with  the  power  over  commerce  with  foreign  nations  and 
with  the  Indians,  for  the  United  States  deals  with  a  foreign 
nation  as  one  sovereign  with  another;  and  that  the  right  to  in- 
terdict foreign  commerce  which  may  adhere  in  the  power  to 
regulate  commerce  with  foreign  or  dependent  nations,  cannot 
be  attributed  by  analogy  to  the  power  to  regulate  our  own.^ 

Comprehensive  as  is  the  commerce  power  in  the  Constitution, 
the  taxing  power  is  clearly  distinct  and  is  expressly  limited  by 
the  qualifications  and  exceptions  stated.  Thus  the  Constitution 
provides*  that  no  preference  shall  be  given  by  any  regulation 


iLeisy  v.  Hardin,  135  U.  S.  108,  supra.  Sec.  116. 

2Crutcher  v.  Kentucky,  141  U.  S.  47,  57,  35  L.  Ed.  649  (1891); 
Pittsburgh  Co.  v.  Bates,  156  U.  S.  577,  587,  39  L.  Ed.  538  (1895); 
Brown  v.  Houston,  114  U.  S.  630,  29  L.  Ed.  257  (1895).  See  also 
Champion  v.  Ames,  188  U.  S.  321,  47  L.  Ed.  492  (1903),  and  Francis  v. 
U.  S.,  188  U.  S.  375,  47  L.  Ed.  508  (1903),  reversing  106  Fed.  896. 

3  Randolph  on  Law  and  Policy  of  Annexation,  pp.  94  to  98. 

*Art.  I,  Sec.  9,  Par.  5. 


§    591  THE   TAXING   POWER   OF    CONGRESS.  673 

of  commerce  or  revenue  to  the  ports  of  one  State  over  those  of 
another. 

Congress,  in  levying  taxes  under  the  constitutional  grant,  is 
not  restrained,  as  are  the  States,  from  interfering  with  inter- 
state commerce.  Thus  it  may  levy,  subject  to  the  requirement 
of  geographical  uniformity,  indirect  taxes  or  excises  on  the  sub- 
jects or  facilities  of  commerce,  as  in  the  stamp  duties  levied 
upon  the  bills  of  lading  of  public  carriers  and  telegraph  mes- 
sages. This  the  States  cannot  do.  Under  the  rule  laid  down, 
however,  in  the  Income  Tax  cases  of  1895,  as  reaffirmed  in 
Knowlton  v.  Moore,  supra,  Congress  cannot  tax  directly  any 
property,  whether  of  individuals  or  corporations,  solely  with 
reference  to  the  general  ownership  of  such  property,  except 
upon  the  rule  of  apportionment;  and  this  requirement  of  ap- 
portionment would,  under  this  rule,  apply  to  the  direct  taxa- 
tion of  property  employed  in  interstate  commerce. 

The  question  was  discussed,  though  not  decided,  in  Dooley 
V.  United  States,^  whether  Congress  could  lay  an  export  tax 
upon  the  merchandise  carried  from  one  State  to  another.  Jus- 
tice Brown  said  that  the  question  was  not  involved  in  the  case, 
but  intimated  that,  while  such  a  tax  is  not  forbidden  by  express 
words  in  the  Constitution,  it  would  be  extremely  difficult,  if 
not  impossible,  to  lay  such  a  tax  without  violation  of  the  re- 
quirement that  all  duties,  imposts  and  excises  shall  be  uniform 
throughout  the  United  States.  Justice  White,  in  his  concur- 
ring opinion,  page  165,  said: 

"Certainly  the  argument  cannot  be  that  because  a  power 
has  been  conferred  upon  Congress  by  the  Constitution  to  levy 
a  tax  on  foreign  commerce,  therefore  the  Constitution  has 
taken  away  from  Congress  power  to  tax  even  indirectly  do- 
mestic commerce." 

He  quoted  the  language  of  Chief  Justice  Chase  in  the  License 
Tax  Cases,^  that  the  taxing  power  of  Congress,  as  limited  by 
the  Constitution,  and  thus  only,  reaches  every  subject,  and  may 
be  exercised  at  discretion,  adding: 


1  183  U.  S.  151,  supra. 

2  5  "Wallace  462,  p.  471,  supra 


674  THE   TAXING   POWER   OF    CONGRESS.  §    592 

"Of  course,  the  Constitution  contemplates  freedom  of  com- 
merce between  the  States,  but  it  also  confers  upon  Congress 
the  powers  of  taxation  to  which  I  have  referred." 

The  dissenting  opinion,  by  Justices  Fuller,  Peckham,  Brewer 
and  Harlan,  said  that  the  power  to  regulate  interstate  com- 
merce was  granted  in  order  that  trade  between  the  States  might 
be  left  free  from  discriminating  legislation,  and  not  to  impart 
the  power  to  create  antagonistic  relations  between  them.  If  the 
power  of  regulation  was  absolutely  unrestricted  as  respects  in- 
terstate commerce,  then  the  vqry  unity  the  Constitution  was 
framed  to  secure  could  be  set  at  -naught  by  a  legislative  body 
created  by  that  instrument.    It  was  also  said  that 

"Congress  may  lay  local  taxes  on  territories,  affecting  the 
persons  or  property  therein,  or  authorize  territorial  legisla- 
tures to  do  so,  but  it  cannot  lay  tariff  duties  on  articles  ex- 
ported from  one  State  to  another,  or  from  any  State  to  the 
Territories,  or  from  any  State  to  foreign  countries,  or  grant  a 
power  in  that  regard  which  it  does  not  possess."^ 

§  592.  Congress  May  Increase  Excise  as  Well  as  Property 
Tax. — The  power  of  taxation  is  not  exhausted  when  once  exer- 
cised. Taxes  are  not  debts  in  the  sense  that  having  been  once 
established  and  paid  all  further  liability  of  the  individual  to 
the  government  ceases.     Thus  the  Supreme  Court  said:^ 

"The  obligation  of  the  individual  to  the  State  is  continu- 
ous and  proportioned  to  the  extent  of  the  public  wants.  No 
human  wisdom  can  always  foresee  what  may  be  the  exigencies 
of  the  future,  or  determine  in  advance  exactly  what  the  gov- 
ernment must  have  in  order  'to  provide  for  the  common  de- 
fense' and  'promote  the  general  welfare.*  .  .  .  Taxation 
may  run  pari  passu  with  expenditure.  .  .  .  Courts  may  not 
in  this  respect  revise  the  action  of  Congress."  If  emergencies 
arise  calling  for  loan  or  tax,  and  Congress  "determines  in 
whole  or  in  part  on  a  tax,  that  means  an  increase  in  the  existing 
rate  or  perhaps  in  the  subjects  of  taxation,  and  the  judgment 
of  Congress  in  respect  thereto  is  not  subject  to  judicial  chal- 
lenge." 


1  See  also  remarks  of  Justice  Brewer  in  Pairbank  v.  TJ.   S.,  supra, 
Sec.   575. 

2Patton  V.  Brady,  184  U.  S.  608,  619,  46  L.  Ed.  713   (1902). 


§    593  THE   TAXING   POWER    OP    CONGRESS.  675 

This  principle  was  applied  by  the  court  to  the  increased  ex- 
cise tax  upon  manufactured  tobacco.  The  court  said  that  not 
only  may  a  general  tax  be  imposed  upon  property,  which  has 
once  paid  an  excise  tax,  but  an  excise  tax  may  be  increased, 
at  least  while  the  property  is  held  for  sale,  and  before  it  has 
passed  into  the  hands  of  the  consumer.  The  exercise  of  the 
power  is  limited  solely  by  the  rule  of  geographical  uniformity. 

§  593.  Taxation  of  Property  of  Non-resident  Aliens. — The 
taxing  power  of  Congress  extends  to  all  the  subjects  of  taxa- 
tion within  its  jurisdiction,  and  therefore  includes,  if  Congress 
deems  proper,  the  property  of  alien  non-residents,  which  is  lo- 
calized within  the  jurisdiction.  Thus,  under  the  Internal  Rev- 
enue Act  of  1866,  a  tax  was  imposed  on  alien  non-resident  hold- 
ers of  securities  of  domestic  railroad  companies.  The  court  had 
expressed  a  doubt  as  to  the  validity  of  such  a  tax/  but  it  was 
held  that  the  tax  levied  by  the  Act  of  1866  was  essentially  an 
excise  on  the  business  of  that  class  of  corporations  and  prop- 
erly collectible  from  the  company.  The  tax  was  really  levied 
on  the  corporation  which  paid  the  interest,  not  on  the  bond- 
holders who  received  it,  and  it  was  therefore  immaterial  where 
the  latter  resided.^  As  in  the  case  of  State  taxation,  it  is  a 
question  of  construction  and  not  of  power,  whether  such  prop- 
erty of  alien  non-residents  is  subjected  to  taxation.  Thus  the 
Inheritance  Tax  Law  of  1898  w^as  construed  as  not  applying 
to  the  estates  in  this  country  of  decedents  domiciled  abroad, 
although  the  Supreme  Court  held  that  it  is  within  the  power 
of  Congress  to  impose  an  inheritance  tax  upon  property  in  tliis 
country,  no  matter  where  it  is  owned  or  transmitted,  provided 
the  intention  to  tax  is  expressed  in  clear  and  unambiguous  lan- 
guages   The  same  ruling  was  made  in  a  case  where  the  will  of 


1  Railroad  Co.  v.  Jackson,  7  Wall.  262,  supra. 

2  Railroad  Co.  v.  Collector,  100  U.  S.  595,  25  L.  Ed.  647  (1880),  and 
United  States  v.  Erie  Ry.  Co.,  106  U.  S.  327,  supra,  Justice  Field  dis- 
senting. 

3  Eldman  v.  Martinez,  184  U.  S.  578,  supra.  The  opinion  in  this  ca.se 
contains  a  careful  review  of  the  decisions  in  England  and  in  the  dif- 
ferent States  of  this  country,  on  the  subject  of  the  application  of  in- 


676  THE   T.VXING   POWER   OF    CONGRESS.  §    594 

the  alien  was  actually  executed  in  this  country,  the  court  hold- 
ing that  Congress  had  not  expressed  the  intention  to  subject 
such  estates  to  taxation,  i 

§  594.    Taxation  of  Property  of  Residents  Invested  Abroad. 

— The  same  principle,  that  the  sovereign  power  of  the  taxing 
authority  extends  over  all  subjects  of  taxation  within  its  juris- 
diction, which  was  enforced  in  Kirtland  v.  Hotchkiss,  an  anal- 
ogous case  of  State  taxation,  where  the  court  held  that  a  State 
can  tax  her  resident  citizens  for  debts  held  by  them  against  non- 
residents and  secured  by  a  mortgage  on  property  in  another 
State,2  ^xas  applied  to  a  tax  levied  by  Congress  upon  the  prop- 
erty of  residents  located  in  another  jurisdiction.  Thus,  in  a 
suits  brought  by  a  bank  in  California  to  recover  taxes  alleged 
to  have  been  illegally  levied  and  collected  on  its  capital,  because 
part  of  the  capital  was  invested  in  foreign  countries,  the  court 
said  that  the  ease  was  controlled  by  the  principle  announced  in 
Kirtland  v.  Hotchkiss.  The  bank  was  subject  to  the  sovereign 
power  of  the  United  States  and  a  proper  object  of  taxation, 
saying : 

"The  investments  abroad  are  still  the  property  of  the  bank 
and  part  of  its  capital.  In  the  absence  of  any  averments  to 
the  contrary,  we  must  presume  they  were  such  as  banks  usu- 
ally make  in  doing  a  banking  business,  and  that  their  legal 
situs  was  at  the  home  office  of  the  corporation.  We  need  not 
consider,  therefore,  whether,  if  they  had  been  made  in  fixed 
property  subject  exclusively  to  another  jurisdiction,  a  different 
rule  would  apply." 


heritance  tax  laws  to  property,  within  the  jurisdiction  of  decedents 
domiciled  abroad.  See  also  United  States  v.  Hunnewell,  13  Fed.  617 
(1882).  Under  the  inheritance  on  "estate"  tax  provisions  of  Revenue 
Act  of  September  8,  1916,  the  estates  in  this  country  of  non-residents 
were  specifically  subjected  to  the  tax,  and  stocks  of  non-residents  in 
domestic  companies  are  declared  to  be  property  within  the  United 
States  under  the  Act. 

1  Moore  v.  Ruckgaber,  184  U.  S.  593,  46  L.  Ed.   705    (1902). 

2  Kirtland  v.  Hotchkiss,  100  U.  S.  491,  supra.  Sec.  483. 

3  Sedgwick  v.  Bank,  104  U.  S.  Ill,  26  L.  Ed.  703  (1882). 


§    595  THE   TAXING   POWER   OF    CONGRESS.  677 

§  595.    Taxing  Power  of  Congress  Over  Territories. — The 

status  of  the  Territories  with  reference  to  the  uniformity  clause 
of  the  Constitution  was  discussed  in  the  Insular  Decisions,  and 
the  judges  concurred  in  the  opinion,  though  on  different 
grounds,  that  "incorporated"  Territories  of  the  Union  are  en- 
titled to  all  the  privileges  of  the  Constitution,  including  the 
protection   of  the  uniformity  clause  in  Federal  taxation.^ 

The  power  of  Congress  over  the  Territories  is  general  and 
plenary,  arising  from  the  right  to  acquire  the  territory  itself, 
and  the  power  given  by  the  Constitution  to  make  all  needful 
rules  and  regulations  restricting  territory  belonging  to  the 
United  States.^  Congress,  in  the  exercise  of  its  power  to  organ- 
ize and  govern  the  territories,  combines  Federal  and  State  au- 
thority. It  may  not  only  abrogate  laws  of  the  Territorial  legis- 
lature, but  it  may  itself  legislate  directly  for  the  local  govern- 
ment. It  may  make  a  void  act  of  the  Territory  valid  and  a 
valid  act  void.  It  was  said  by  the  Supreme  Court  through 
Justice  Bradley  in  the  Mormon  Church  case,  page  ,44: 

"Doubtless  Congress,  in  legislating  for  the  territories  would 
be  subject  to  those  fundamental  limitations  in  favor  of  per- 
sonal rights  which  are  formulated  in  the  Constitution  and  its 
amendments;  but  these  limitations  would  exist  rather  by  in- 
ference and  the  general  spirit  of  the  Constitution  from  which 
Congress  derives  all  its  powers,  than  by  any  express  and  direct 
application  of  its  provisions." 

In  the  organization  of  the  incorporated  Territories,  Congress 
has  conferred  the  power  of  local  taxation.  Under  the  general 
territorial  system,  as  expressed  in  the  various  organic  acts,  the 
power  of  local  taxation  in  the  Territorial  governments  is  abso- 
lute, save  as  restricted  by  the  constitutional  or  congressional 
enactments.  Thus,  it  was  held  that  the  Territories  of  the  United 
States  have  the  power  of  taxing  the  national  bank  shares  to  the 
same  extent  as  the  States,  that  is,  equally  with  other  moneyed 

1  Sec.  57.3,  supra.  In  the  opinion  of  Mr.  Justice  Brown,  this  was 
based  upon  the  action  of  Congress  in  extending  the  Constitution  and 
laws  of  the  United   States  over  the  territories. 

-'  -Mormon  Church  v.  United  States,  136  U.  S.  1,  34  L.  Ed.  229 
(1900). 


678  THE   TAXING   POWER   OF    CONGRESS.  §    597 

capital,  although  ''Territories"  are  not  mentioned  in  the  Na- 
tional Banking  Act.  The  court  said  that  the  word  "State"  in 
national  legislation  of  the  character  of  the  National  Banking 
Act  should  be  construed  as  including  Territories.^  Congress 
therefore  has  plenary  power  to  establish  such  system  of  local 
taxation  in  the  Territories,  directly  or  through  the  authority 
given  to  the  Territorial  legislature,  as  it  deems  proper;  but 
duties,  imposts  and  excises,  levied  for  national  purposes  by  the 
United  States,  must  be  uniform  over  the  organized  and  incor- 
porated Territories  as  well  as  in  the  States. 

§  596.  Classification  in  Territorial  Taxation  of  Indian  Res- 
ervation.— Although  the  Organic  Act  organizing  the  Territory 
of  Oklahoma  prohibited  discrimination  in  taxation  and  required 
that  all  property  should  be  taxed  in  proportion  to  its  value, 
there  was  no  unlawful  discrimination  in  the  laws  of  Oklahoma 
providing  a  different  form  of  taxation  for  property  in  an  In- 
dian reservation  attached  to  a  county  in  the  Territory  from 
that  enforced  in  other  parts  of  the  Territory. 2  The  court  said 
that  the  general  rule  that  there  should  be  a  uniformity  of  the 
same  kind  of  property  in  the  same  taxing  district  rested  on  the 
assumption  that  in  such  district  the  circumstances  regarding 
the  property  to  be  taxed  were  ordinarily  the  same,  but  where 
the  difference  was  deep  and  radical,  as  between  an  Indian  res- 
ervation and  other  lands  in  the  county  to  which  it  was  attached 
for  judicial  purposes,  such  differences  could  properly  be  con- 
sidered by  the  legislative  body,  and  the  Supreme  Court  of  the 
Territory  was  therefore  sustained. 

The  Organic  Act  of  a  Territory  supersedes  a  prior  Indian 
treaty  and  the  Territorial  tax  laws  enacted  thereunder  have  a 
valid  operation  over  property  lying  within  Indian  reservations. 3 

§  597.  Taxing"  Power  in  Case  of  "Unincorporated"  Terri- 
tories.— What  was  said  in  Sec.  595,  supra,   with   reference   to 


iTalbott  V.  Silver  Bow  County,  139  U.  S.  438,  35  L.  Ed.  210   (1891). 

2  Poster  V.  Pryor,  189  U.  S.  325,  47  L.  Ed.  855    (1903),  affirming  66 
Pac.    348. 

3  Thomas  v.  Gay,  169  U.  S.  264,  42  L.  Ed.  740   (1898). 


§    597  THE   TAXING   POWER   OP    CONGRESS.  .  679 

the  taxing  power  of  Congress  in  case  of  organized  contiguous 
Territories  in  the  United  States  obviously  applies  with  even 
greater  force  in  case  of  the  non-contiguous  "unincorporated" 
territorial  possessions  of  the  United  States,  including  those 
whose  status  was  discussed  in  the  Insular  decisions.  As  the 
organized  contiguous  territories  have  become  States  of  the 
Union,  the  term  "Territories"  now  includes  (other  than  the 
District  of  Columbia  and  the  Panama  Zone)  only  Alaska  and 
the  so-called  Insular  possessions.  The  power  of  Congress  is 
clearly  general  and  plenary  to  make  all  needful  rules  and  regu- 
lations for  the  government  of  these  territorial  possessions,  as 
it  exercises  both  State  and  Federal  authority.  Thus  it  has  legis- 
lated directly  in  the  imposition  of  taxes  and  exempting  prop- 
erty, and  has  also  delegated  the  power  of  taxation  to  the  terri- 
torial legislatures  which  it  has  authorized  to  be  organized. 

This  power  of  Congress  is  illustrated  by  its  exercise  in  the 
General  Revenue  Act  of  September  8,  1916,  wherein  it  is  pro- 
vided in  title^  (the  Income  Tax)  that  the  word  "State"  or 
"United  States"  when  used  in  that  title  shall  be  construed  to 
include  any  territory  in  the  District  of  Columbia,  Porto  Rico 
and  the  Philippine  Islands,  when  such  construction  is  neces- 
sary to  carry  out  its  provisions.  And  it  is  also  provided^  that 
the  provisions  of  that  Title  I  should  extend  to  Porto  Rico  and 
Philippine  Islands,  and  that  all  revenues  collected  in  Porto 
Rico  and  Philippine  Islands  shall  accrue  to  the  general  govern- 
ment thereof.  In  Title  11^  (the  Estate  or  Inheritance  Tax)  the 
term  "United  States"  is' declared  to  mean  only  the  States,  the 
District  of  Columbia  and  Territories  of  Alaska  and  Hawaii, 
and  the  same  provision  is  made  in  Title  III  as  to  the  Munition 
Manufacturers'  Tax.* 


,1  Sec.  23,  infra,  appendix. 

2  Sec.  200,  infra,  appendix. 

3  Sec,  300,  infra,  appendix. 

4  The   general    taxing   system    prevailing    in   Alaska  and    the   Island 
possessions  is  as  follows: 

Alaska.     In  the  case  of  Alaska,  see  Act  of  July  18,  1914,  authoriz- 
ing additional   tax  of  1%    on   gross   income  of  railroads  on   business 


680  THE   TAXING   POWER   OF    CONGRESS.  §    598 

§  598.  Taxation  in  District  of  Columbia. — The  same  gen- 
eral principle  applies  to  congressional  taxation  in  the  District 
of  Columbia.     Congress  is  vested  by  the  Constitution  with  ex- 


done  in  Alaska  to  be  paid  to  Alaska  for  general  territorial  purposes. 
See  also  Act  of  June  26,  1906,  regulating  a  license  tax  on  the  business 
of  canning  and  curing  fish;  also  Act  of  August  24,  1912,  regulating  the 
exercise  of  the  taxing  power  by  the  Legislative  Assembly.  The  Legis- 
lature of  Alaska  imposed  a  poll  tax  upon  each  male  person  between 
twenty-one  and  fifty  years  of  age.  Domestic  and  foreign  corporations 
pay  a  license  tax  of  fifteen  dollars  per  annum,  and  licenses  and  taxes 
are  imposed  on  a  number  of  lines  of  business.  There  is  also  a  gen- 
eral property  tax. 

As  to  the  incorporation  of  Alaska,  though  not  contiguous,  in  the 
United  States,  see  Rasmussen  v.  U.  S.  197  U.  S.  516,  49  L.  Ed.  862 
(1905),  holding  that  in  a  jury  trial  for  misdemeanor  in  Alaska  there 
was  a  right  to  a  common  law  jury  of  twelve. 

Hawaii.  In  the  case  of  Hawaii,  by  Act  of  April  30,  1900,  the  legis- 
lative power  was  declared  to  extend  to  all  rightful  subjects  of  legis- 
lation not  consistent  with  the  constitution  and  laws  of  the  United 
States  locally  applicable.  There  was  no  express  limitation  in  the 
matter  of  taxation.  The  Legislative  Assembly  imposed  an  ad  valorem 
tax  on  all  property  with  an  exemption  of  $300.00,  also  an  annual  poll 
tax  of  one  dollar,  and  sundry  license  taxes. 

The  income  tax  enacted  in  1901,  was  sustained  by  the  Circuit  Court 
of  Appeals  for  the  Ninth  Circuit  in  Peacock  v.  Pratt,  C.  C.  A.  9th  Cir- 
cuit (1903),  121  Fed.  772,  affirming  13  Hawaii  590,  the  court  holding 
that  the  income  tax  law  was  within  the  lawful  powers  of  the  territory, 
and  that  the  requirement  of  uniformity  in  Sec.  1,  Art.  I  of  the  Constitu- 
tion had  no  application  to  the  power  of  taxation  of  territorial  legisla- 
tion. It  was  held  that  the  exemption  of  incomes  under  $1000.00  was 
not  illegal;  and  that  the  failure  to  exempt  the  salaries  of  judicial  ofli- 
cers  and  compelling  taxpayers  to  furnish  evidence  against  themselves 
would  not  invalidate  the  whole  law;  and  the  injunction  was  there- 
fore dismissed. 

By  Act  of  April  30,  1900,  all  persons  who  were  citizens  of  the  Re- 
public of  Hawaii  on  August  12,  1898,  were  declared  to  be  citizens  of 
the  United  States  and  citizens  of  the  Territory  of  Hawaii;  and,  except 
as  otherwise  provided,  all  the  laws  of  the  United  States,  including 
laws  carrying  general  appropriations  which  were  not  locally  inap- 
plicable, were  declared  to  have  the  same  force  and  effect  within  the 
territory  as  elsewhere  within  the  United   States. 

PoRTO  Rico.  Under  the  Act  of  April  12,  1900,  the  Island  of  Porto 
Rico  and  adjacent  islands  were  included  in  the  civil  government  pro- 


§    598  THE  TAXING  POWER  OF   CONGRESS.  .  681 

elusive  legislative  authority  over  the  District,  but,  irrespective 
of  this  grant   of  power,   as  was  decided   in  Loughborough  v. 


vided  by  that  Act.  Whenever  the  Legislative  Assembly  put  in  oper- 
ation a  system  of  local  taxation  to  meet  the  necessity  of  the  igovern- 
ment,  all  tariff  duties  between  Porto  Rico  and  the  United  States  were 
to  cease,  and  the  statutory  laws  of  the  United  States  not  locally  in- 
applicable, except  as  otherwise  provided,  had  the  same  force  and 
effect  in  Porto  Rico  as  in  the  United  States,  except  the  Internal  Rev- 
enue laws.  By  this  act,  all  the  inhabitants  who  were  Spanish  subjects 
at  the  time  of  the  annexation,  and  their  children  born  subsequent 
thereto,  were  declared  to  be  citizens  of  Porto  Rico,  and,  as  such,  en- 
titled to  the  protection  of  the  United  States;  and  they,  together  with 
such  citizens  of  the  United  States  as  may  reside  in  Porto  Rico,  con- 
stitute a  body  politic  under  the  name  of  "The  People  of  Porto  Rico" 
with  governmental  powers  under  that  name. 

The  Legislative  Assembly  of  Porto  Rico  has  enacted  a  system  of 
taxation,  including  inheritance  tax,  where  the  property  passing 
amounts  to  $200.00  or  more,  the  limit  being  $500.00  in  the  case  of  a 
father,  child  or  grandchild,  and  the  rate  of  tax  varying  according  to 
amount  of  inheritance  and  the  degree  of  relationship.  There  is  a 
general  ad  valorem  tax,  and  corporations  are  assessed  in  the  same 
manner  as  individuals.  There  is  also  a  special  tax  on  insurance  com- 
panies. 

Philippine  Islands.  Under  the  Act  of  July  1,  1902,  all  inhabitants 
of  the  Philippine  Islands  who  were  Spanish  subjects  at  the  time  of  the 
accession,  are  held  to  be  citizens  of  the  Philippine  Islands,  except  those 
who  are  entitled  to  preserve  their  allegiance  to  Spain.  The  rule  of 
taxation  on  the  Islands  was  declared  to  be  uniform.  An  extensive 
degree  of  self-government  was  provided  by  the  Act  of  August  29,  1916, 
in  which  the  uniform  rule  of  taxation  was  again  declared.  The  rev- 
enue of  the  Islands  is  partly  derived  from  customs  duties  from  a  sys- 
tem of  internal  revenue  taxes,  including  what  is  termed  a  cedula  or 
what  was  in  effect  a  poll  tax,  the  stamp  tax  upon  documents  and 
papers,  and  privilege  taxes  upon  business  and  occupations.  Governor- 
General  Harrison  says  in  his  Annual  Report  of  1916: 

"It  is  noticeable  that  in  imposing  these  new  taxes,  the  Philippine 
legislature  followed  the  correct  principles  in  levying  taxes  upon 
luxuries  and  amusements,  and  upon  commerce,  so  that  those  best  able 
should  bear  the  necessary  burden."  There  is  also  a  real  estate  tax, 
subject,  however,  to  extended  exemption  of  government  and  church 
lands,  and  not  including  certain  department.s;  and  the  exemptions  in- 
clude machinery  used  for  industrial,  agricultural,  or  manufacturing 
purposes,  fruit  trees  and  bamboo  plants.     The  Governor-General  is  em- 


682  THE   TAXING   POWER   OF    CONGRESS.  §    598 

Blake/  the  District  as  well  as  the  Territories  are  included  in 
the  grant  of  the  'general  taxing  power.  The  sovereign  power 
over  the  District,  therefore,  is  lodged,  not  with  the  corporation 
created  by  Congress  for  its  administration,  but  in  the  govern- 
ment of  the  United  States.  Its  essential  character  as  a  munici- 
pal corporation  has  not  been  changed  by  the  Act  of  Congress 
abolishing  the  local  legislature  and  providing  for  local  admin- 
istration through  appointed  officials.-  The  court  said  that  it 
was  not  necessary  to  a  municipal  government  or  to  municipal 
responsibility  that  the  officers  should  be  elected  by  the  people, 

"All  municipal  governments  are  but  agencies  of  the  supe- 
rior power  of  the  State  or  government  by  which  they  are  con- 
stituted, and  are  invested  with  only  such  subordinate  powers 
of  local  legislation  and  control  as  the  superior  legislature  sees 
fit  to  confer  upon  them. ' ' 


powered  to  remit  the  tax  when  he  deems  the  public  interest  requires, 
in  any  province. 

The  Inheritance  Tax  of  one  per  centum  when  the  surviving  spouse 
of  child  is  a  beneficiary  if  the  estate  does  not  exceed  50,000  pesos; 
one  and  one-half  per  centum  if  the  estate  is  between  50,000  and  250,000 
pesos;  two  and  one-half,  between  250,000  and  500,000  pesos;  and  four 
per  centum  if  in  excess  of  that  amount.  Where  the  parents,  brothers 
or  sisters,  are  beneficiaries  the  taxes  increase  one  hundred  per  centum; 
where  other  relatives  are  beneficiaries,  taxes  increase  to  two  hundred 
per  centum;  strangers,  three  hundred  per  centum.  Share  of  wife  and 
child  are  exempt  if  not  in  excess  of  3,000  pesos. 

This  Act  took  effect  July  1,  1916. 

There  is  also  a  igeneral  tax  upon  sponges,  and  on  the  gathering  of 
moluska  (August  29,  1916). 

By  Act  of  August  29,  1916,  c.  416,  Sec.  5,  the  Statutory  Laws  of  the 
United  States  thereafter  enacted  shall  not  apply  to  the  Philippine 
Islands,  except  when  they  specifically  so  provide  or  it  is  so  provided 
in  the  act. 

There  is  in  force  in  the  Islands  the  Philippine  Tariff  Act  of  Con- 
gress of  1909,  the  Income  Tax  law  of  Congress,  approved  September 
8,  1916,  supra,  and  the  Harrison  Narcotic  Act. 

Neither  the  provisions  of  the  Inheritance  or  Estate  Tax  provisions 
Act  of  September  8,  1916,  nor  the  Munitions  Manufacturers'  Tax  are 
in  force  in  the  Islands. 

1  Supra,    Sec.    568. 

2  Metropolitan  Railroad  v.  District  of  Columbia,  132  U.  S.  1,  33  L. 
Ed.  231  (1899). 


§    598  TPIE   TAXING   POWER   OF    CONGRESS.  683 

Congress,  however,  is  the  legal  legislature  over  this  munici- 
pality, exercises  over  it  full  and  entire  jurisdiction  both  of  a 
political  and  municipal  nature,  and  may  legislate  with  refer- 
ence to  people  and  property  therein  as  may  the  legislature  of 
a  State  over  any  of  its  subordinate  municipalities.  Thus  it  is 
within  the  constitutional  power  of  Congress  to  tax  different 
classes  of  property  in  the  District  at  different  rates.  The  Su- 
preme Court  held  valid  an  act  which  taxed  lands  within  the 
District  outside  of  the  cities  of  Washington  and  Georgetown, 
used  solely  for  agricultural  pui-poses,  at  $1.25  on  the  $100  and 
all  other  real  and  personal  property  in  the  District,  not  ex- 
pressly exempted,  at  $1.50  on  the  $100,  saying  that,  in  the  exer- 
cise of  this  power,  Congress,  like  any  State  legislature  unre- 
stricted by  constitutional  provisions,  may  at  its  discretion 
wholly  exempt  certain  classes  of  property  for  taxation,  or  may 
tax  them  at  a  lower  rate  than  other  property.^ 

Congress  may  also  confer  upon  the  city  authority  to  assess 
adjacent  proprietors  with  the  expense  of  repairing  streets,-  and 
the  tax  need  not  be  a  general  one  over  the  city.  In  exercising 
this  legislative  power  over  persons  and  property  within  the  Dis- 
trict, Congress  can  also,  provided  no  intervening  rights  are  im- 
paired, confirm  the  proceedings  of  an  officer  in  the  District,  or 
of  a  subordinate  municipality  or  other  authority  therein,  which, 
without  such  confirmation,  would  be  void,^  and  can  also  pro- 
vide for  the  cost  of  a  public  improvement  to  the  District  by 
assessing  a  proportionate  part  on  the  property  specially  bene- 
fited.*   It  was  held  in  this  case  that  the  United  States  possesses 


1  Gibbons  v.  District  of  Columbia,  116  U.  S.  404,  29  L.  Ed.  680  (1886). 
zWillard  v.  Presbury,  14  Wall.  676,  20  L.  Ed.  719  (1872). 
3Mattingly   v.    District   of  Columbia,   97   U.    S.    687,   24   L.    Ed.    1098 
(1879). 

*  Shoemaker  v.  United  States,  147  U.  S.  282,  Sec.  415,  supra.  In  this 
case  it  was  claimed  that  the  owner  of  the  lands  should  be  allowed  in 
the  assessment  of  damages  for  the  value  of  prospective  gold  mines; 
but  the  Supreme  Court  sustained  the  court  below  in  holding  that,  if 
there  were  any  such  mines,  they  were  reserved  to  the  Crown  in  the 
original  grant  by  Charles  I  in  the  charter  to  Lord  Baltimore,  and 
therefore  passed  to  the  State  and  thence  to  the  United  States. 


684  THE   TAXING   POWER   OP    CONGRESS.  §    598 

full  and  unlimited  jurisdiction,  both  of  a  political  and  munici- 
pal nature,  over  the  District,  including  the  power  of  eminent 
domain,  and»this  is  not  controlled  by  any  provision  in  the  act 
of  cession  by  the  State  of  Maryland. 

While  Congress  can  constitute  the  District  a  body  corporate 
for  municipal  purposes,  it  can  only  authorize  the  municipality 
thus  created  to  exercise  municipal  powers.  It  cannot,  there- 
fore, delegate  legislative  power  to  levy  a  tax  interfering  with 
interstate  commerce.  Thus,  an  act  of  the  legislative  assembly 
of  the  District  of  Columbia  established  by  Congress,  requiring 
commercial  agents  offering  merchandise  for  sale  by  sample  to 
take  out  and  pay  for  a  license,  was  adjudged  void^  as  being  a 
regulation  of  interstate  commerce,  and  not  within  the  authority 
granted  by  Congress,  nor  within  the  authority  which  Congress 
was  competent  to  grant.  It  was  argued  in  this  case  that  it  is 
beyond  the  power  of  Congress  to  pass  a  law  of  this  character 
solely  for  the  District  of  Columbia,  because  whenever  Congress 
acts  upon  the  subject  the  regulations  it  establishes  must  con- 
stitute a  system  applicable  to  the  whole  country.  The  court 
said  that  the  disposition  of  the  case  called  for  no  expression 
upon  this  point. 

■Congress  has  vested  the  executive  authority  of  the  District 
in  a  board  of  three  commissioners,  one  of  whom  is  required  to 
be  an  officer  of  the  Engineer's  Corps  of  the  United  States  Army, 
and  the  others  citizens  of  the  United  States  and  actual  and  per- 
manent residents  of  the  District  for  at  least  three  years  before 
their  appointment,  while  the  legislative  authority,  as  stated,  re- 
mains in  Congress.2  rpj^g  District,  therefore,  has  been  defined 
as  neither  a  sovereignty  nor  a  territory,  but  simply  a  municipal 
corporation  with  such  powers  and  liabilities  as  are  common  to 


1  Stoutenburgh  v.  Hennick,  129  U.  S.  141,  32  L.  Ed.  637  (1889). 
Justice  Miller  dissented  on  the  ground  that  this  was  not  interstate 
commerce,  as  the  District  of  Columbia  was  not  a  State. 

2  The  Engineer  Commissioner  is  detailed  for  service  by  the  Presi- 
dent, and  the  civilian  commissioners  are  appointed  by  the  President 
and  confirmed  by  the  Senate  for  a  term  of  three  years.  See  20  U.  S. 
Stat,  at  L.  102. 


§    599  THE   TAXING   POWER   OF    CONGRESS.  685 

municipal  corporations  in  general,  except  so  far  as  they  are 
affected  by  Acts  of  Congress,  i 

§  599.    Power  of  Congress  in  Enforcing  Collection  of  Taxes 

— The  power  of  Congress  is  both  "to  lay  and  collect  taxes,'* 
and  the  grant  of  the  taxing  power  is  reinforced  by  what  has 
been  termed  the  "co-efficient  power"  contained  in  the  last  para- 
graph of  the  same  section,2  "the  power  to  make  all  laws  which 
shall  be  necessary  and  proper  for  carrying  into  execution  the 
foregoing  powers  and  all  other  powers  vested  by  this  Constitu- 
tion in  the  government  of  the  United  States,  or  in  any  depart- 
ment or  officer  thereof." 

It  was  said  by  Mr.  Madison  in  the  Federalist:^  "Had  the 
Constitution  been  silent  on  this  head,  there  can  be  no  doubt 
that  all  the  particular  powers  requisite  as  means  of  executing 
the  general  powers  would  have  resulted  to  the  government,  by 


1  Metropolitan  Railway  Co.  v.  District  of  Columbia,  supra. 

There  is  no  inheritance  tax  law  in  the  District  except  that  enacted 
by  Congress,  September  8,  1916,  supra,  561n.  There  is  a  system  of 
license  taxes  for  different  kinds  of  business,  trades  and  professions 
and  occupations,  see  32  U.  S.  Stat.  622.  The  rate  of  taxation  on  real 
estate  and  personal  property  is  $1.50  on  $100  payable  in  the  month  of 
May  with  the  privilege  of  paying  one-half  of  the  taxes  in  the  previous 
month  of  November.  If  not  paid  in  May  a  penalty  of  1%  per  month 
attaches  until  the  property  is  sold.  The  valuation  placed  by  the 
owner  of  personal  property  is  subject  to  review  by  the  Board  of  Per- 
sonal Tax  Appraisers.  A  report  of  personal  property  must  be  made 
before  August  1st.  Real  estate  may  be  sold  by  the  Collector  of  Taxes 
after  advertisement  as  fixed  by  statute.  If  the  property  is  not  re- 
deemed within  two  years  from  date  of  sale,  the  purchaser  is  entitled 
to  a  deed  from  the  commissioners.  Corporations  are  taxed  on  the 
same  basis  as  individuals,  that  is,  one  and  one-half  per  cent  on  the 
assessed  value,  but  from  the  assessed  value  is  deducted  the  value  of 
any  real  estate  owned  by  the  corporation  in  the  District.  Business 
companies  having  no  special  franchise  or  privilege  are  assessed  and 
taxed  as  individuals. 

By  Act  of  September  1,  1916,  a  tax  of  four  mills  is  levied  on  moneys 
and  credits,  including  moneys  loaned  and  invested,  and  bonds  and 
shares  of  stock,  with  certain  exceptions. 

2  Tucker  on  Const,  p.   600;    Federalist,  No.  33. 
8  Federalist,  No.  44. 


686  THE   TAXING   POWER   OF    CONGRESS.  §    599 

unavoidable  implication.  No  axiom,  is  more  clearly  established, 
in  law,  or  in  reason,  than  that  wherever  the  end  is  required,  the 
means  are  authorized;  wherever  a  general  power  to  do  a  thing 
is  given,  every  particular  power  for  doing  it  is  included."^ 

It  follows,  therefore,  that  Congress,  in  levying  taxes,  has  the 
right  to  select  the  reasonable,  appropriate  and  customary  meth- 
ods of  collection.  The  due  process  of  law  in  the  Fifth  Amend- 
ment, which  restrains  the  powers  of  Congress  as  the  Fourteenth 
Amendment  restrains  the  powers  of  the  States,  is  consistent 
with  summary  procedure  in  the  collection  of  taxes.^  The  col- 
lection of  the  direct  tax  upon  land  levied  by  Congress  during 
the  Civil  War  was  therefore  enforced  through  the  sale  of  delin- 
quent lands,  the  collection  of  excises  and  duties  upon  commodi- 
ties by  summary  seizure  and  forfeiture,  and  license  taxes  upon 
business  through  the  requirement  under  penalties  of  a  license 
as  a  condition  precedent  to  the  right  of  carrying  on  the  busi- 
ness. In  the  Spanish  War  Revenue  Act,  the  tax  upon  commer- 
cial exchange  sales  was  collected  through  the  requirement  of  a 
stamped  memorandum  required  to  be  delivered  by  the  seller  to 
the  buyer.  In  reply  to  the  argument  that  this  was  an  unreason- 
able requirement  and  an  interference  with  strictly  intrastate 
commerce,  the  court  said^  that  Congress  might  have  required 
a  sworn  report  instead  of  a  memorandum,  but  whether  the 
means  adopted  was  the  best  and  most  convenient  was  a  ques- 
tion for  the  judgment  of  Congress,  and  its  decision  must  be 
conclusive.  "As  Congress  had  the  power  to  impose  the  tax, 
the  means  adopted  for  its  collection  within  reasonable  and  ra- 
tional  limits  must  be  a  question  for  Congress  alone." 


1  McCullough  V.  Maryland,  supra,  Sec.  555. 

-  Murray  v.  Hoboken  Land  Co.,  supra,  Sec.  340. 

3  Nicol  V.  Ames,  173  U.  S.  524,  supra.  Sec.  565. 


CHAPTER    XVIII. 

THE    ENFORCEMENT    OF    FEDERAL    LIMITATIONS    UPON    THE 
STATE   TAXING   POWER. 

§  600.  Judicial  remedies   for  illegal,  taxation. 

601.  Two  forums  for  Federal  question  in  taxation. 

602.  Amount  of  tax  as  affecting  procedure. 

603.  Value  of  the  right  involved  as  affecting  jurisdiction  of  Federal 

court. 

604.  Pleading  Federal  question  in  U.  S.  courts. 

605.  Federal  question  and  right  of  removal. 

606.  Federal  questioif  on  writ  of  error  to  State  court. 

607.  What  is  a  Federal  question. 

608.  Party   admitting    correctness    of   his    own    tax   cannot    invoke 

Federal  protection. 

609.  Questions  of  fact  not  considered  on  writ  of  error  to  State  court. 

610.  Writ  of  error  is  to  highest  State  court  having  jurisdiction. 

611.  A  personal  interest  necessary  for  writ  of  error  to  State  court. 

612.  Practical   considerations   in   selection   of  procedure. 

613.  Jurisdiction  over  case  and  over  Federal  question  distinguished. 

614.  When  is  Federal  question  In  taxation  involved? 

615.  Federal  right  must  be  set  up  in  adversary  proceeding. 

616.  Injunction  against  taxation  in  Federal  courts. 

617.  Want  of  adequate  remedy  at  law  must  be  shown. 

618.  Injunction  often  only  proper  remedy. 

619.  Fraud  as  warrantinig  injunction  in  taxation. 

620.  Procedure  in  Income  Tax  Cases. 

621.  Injunction  only  allowed  on  payment  of  taxes  actually  due. 

622.  Injunction  will  not  lie  when  assessment  incomplete. 

623.  When  application  must  first  be  made  to  State  Board. 

624.  State  statutory  remedies  do  not  oust  equitable  jurisdiction  of 

Federal  courts. 

625.  Jurisdiction  and  procedure  in  equity. 

626.  Equity  no  jurisdiction  to  levy  a  tax. 

627.  Habeas  corpus  as  remedy  for  illegal  taxation. 

628.  Allowances  of  interest  and  penalties   in   tax  procedure. 

629.  Equitable  relief  barred  by  collusion. 

630.  State  can  only  be  sued  with  its  consent. 

631.  Suits  against  State  and  against  State  officials  distinguished. 

632.  Where  jurisdiction  depends  upon  party,  it  is  party  named   in 

record. 

633.  Collection   of   taxes   on   property   in   possession   of  receiver  of 

Federal   court. 

(687) 


688  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    600 

634.  Objections  to  jurisdiction  and  defenses  to  merits. 

635.  Overvaluation  not  a  defense  in  action  at  law. 

636.  Effect  of  prior  adjudication  in  State  court. 

637.  Judiciary    concluded    by    decision    of    political    department    of 

government. 

638.  No  equity  jurisdiction  in  Federal  courts  to  enforce  levy  of  tax. 

639.  Mandamus  to  issue  tax. 

640.  Duty  of  taxing  oflBcers  in  mandamus. 

641.  Mandamus  must  be  based  upon  statute  authorizing  tax. 

642.  Local  tax  laws  administered  in  Federal  courts. 

643.  Local  law  and  general  law  distinguished. 

644.  Suits  by  stockholders  in  right  of  corporation. 

645.  Burden  of  proof  in  resisting  taxation. 

646.  Remedy  against  tax  officials. 

647.  Importance  of  speedy  remedy  in  taxation. 

§  600.  Judicial  Remedies  for  Illegal  Taxation. — Where  a 
tax  is  levied  under  the  provisions  of  an  unconstitutional  act, 
the  official  enforcing  such  tax  is  no  more  justified  in  contem- 
plation of  law  than  if  the  act  had  not  been  passed.  The  official 
in  such  case  has  no  legal  sanction  for  his  conduct,  and  is  guilty 
of  a  personal  violation  of  the  taxpayer's  rights.  In  the  lan- 
guage of  the  Supreme  Court,  *'an  unconstitutional  act  is  not  a 
law ;  it  binds  no  one  and  protects  no  one. '  '^ 

It  is  a  cherished  maxim  of  the  law  that  where  there  is  a  right 
there  is  a  remedy.  It  is  also  a  fundamental  principle  of  our 
jurisprudence  that  the  ordinary  courts  of  justice  are  open  for 
the  protection  of  the  citizen  against  those  acting  under  govern- 
mental authority  without  due  process  of  law.  We  have  no  official 
or  administrative  courts,  such  as  those  in  the  Continental  States 
of  Europe,  where  courts  of  law  have  not  as  a  rule  the  power  to 
decide  upon  the  legality  or  illegality  of  the  administrative  acts 
of  executive  officials.^  Such  controversies  in  our  jurisprudence 
are  adjudged  and  determined  by  the  due  course  of  law,  that  is, 
by  the  law  of  the  land,  wherein  the  official  stands  as  any  other 
litigant,  and  must  justify  by  due  process  of  law. 

"No  man  in  this  country,"  said  Mr.  Justice  Miller,^  "is  so 


1  Justice  Field  in  Huntington  v.  Worthen,  120  U.  S.  101,  supra. 

2  Brinton  Coxe,  "Judicial  Power  and   Unconstitutional   Legislation," 
Ch.  102;  Introduction  to  Thayer's  "Cases  on  Constitutional  Law,"  p.  5. 

3  United  States  v.  Lee,  106  U.  S.  196,  p.  220,  27  L.  Ed.  171  (1882). 


§    600  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  689 

high  that  he  is  above  the  law.  No  officer  of  the  law  may  set 
that  law  at  defiance  with  impunity.  All  the  officers  of  the  gov- 
ernment, from  the  highest  to  the  lowest,  are  creatures  of  the 
law,  and  are  bound  to  obey  it."^ 

In  the  practical  regulation  of  the  remedial  procedure  of  tax- 
ation, these  fundamental  principles  must  be  reconciled  with  the 
public  necessity,  which  requires  that  the  collection  of  public 
revenues  must  be  made  at  stated  periods,-  with  the  principle  of 
public  law,  which  prohibits  a  suit  against  a  sovereign  State  ex- 
cept with  its  o\^^l  consent  and  under  conditions  imposed  by 
itself,  and  ^\\ih  the  principles  of  public  policy  which  protect 
administrative  officers  in  the  erroneous  exercise  of  official  dis- 
cretion, and  executive  officers  in  the  enforcement  of  process  reg- 
ularly issued  and  fair  upon  its  face. 

It  is  not  within  the  scope  of  this  work  to  discuss  in  detail 
the  statutes  and  rules  regulating  the  jurisdiction  of  the  Fed- 
eral Courts,  still  less  is  it  the  purpose  to  consider  the  varying 
systems  of  procedure  of  the  several  States  which  may  be  fol- 
lowed in  testing  the  validity  of  State  taxation.  Thus,  some 
States  collect  taxes  through  plenary  actions  at  law,  wherein  the 
illegality  of  the  tax  may  be  pleaded  and  determined.^  In  other 
States,  as  in  the  United  States,  the  payment  of  taxes  under 
protest,   with  an  action  to  recover  back  the   amount  illegally 


1  Judge  Dillon,  in  his  Laws  and  Jurisprudence  of  England  and 
America,  p.  225,  says:  "Arbitrary  power  and  special  administrative 
tribunals,  such  as  we  find  in  France  and  other  countries,  administering 
what  the  French  call  droit  administratif,  do  not  exist.  In  England 
the  same  law  applies  to  all  persons,  and  it  is  administered  for  and 
against  all  persons  in  the  great  law  courts.  The  law  of  England 
knows  nothing  of  exceptional  offenses  punished  by  extraordinary 
tribunals.  So  also  direct  personal  responsibility  for  torts — for  any  in- 
vasion of  the  legal  rights  of  another,  exists  without  limit  or  exception. 
No  command  of  an  official,  not  even  of  the  crown,  can  be  pleaded  in 
bar  of  any  wrongful  act." 

2  "If  there  existed  in  the  courts.  State  or  national,  any  .general 
power  of  impeding  or  controlling  the  collection  of  taxes  by  relieving 
the  hardship  incident  to  taxation,  the  very  existence  of  the  govern- 
ment might  be  placed  in  the  power  of  a  hostile  judiciary."  Miller,  J., 
in  Cheatham  v.  United  States.  92  U.  S.  89,  23  L.  Ed.  561   (1876). 

3  As  in  Missouri,  see  author's  "Taxation  in  Missouri,"  Ch.  XV. 


690  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    601 

paid,  is  authorized  and  regulated  by  statute.^  In  some  States 
special  statutory  procedure  for  determining  the  validity  of  tax- 
ation and  the  equality  of  assessments  is  provided.  The  ques- 
tions of  procedure  involving  the  construction  of  these  widely 
varying  statutes  will  be  found  in  the  local  statutes  and  deci- 
sions. The  subject  of  the  procedure  in  the  collection  of  taxes, 
required  by  due  process  of  law,  under  the  Federal  and  State 
constitutions,  has  been  considered.^  It  is  the  purpose  here  to 
consider  only  those  matters  of  procedure  which  are  involved  in 
determining  the  lawfulness  of  the  exercise  of  the  taxing  power, 
State  and  Federal,  imder  the  Constitution  of  the  United  States. 

§  601.    Two  Forums  for  Federal  Question  in  Taxation. — 

There  are  two  distinct  forums  and  modes  of  procedure  for  se- 
curing, on  the  Federal  question  in  taxation,  the  judgment  of 
the  Supreme  Court,  that  tribunal  being  the  final  arbiter  in  the 
construction  and  application  of  the  Federal  Constitution  and 
laws. 

One  method  of  procedure  is  by  raising  the  Federal  question, 
that  is,  the  claim  of  right  or  exemption  under  the  Constitution 
and  laws  of  the  United  States,  in  the  State  court,  by  way  of 
defense  in  whatever  proceeding  is  brought  to  enforce  the  tax, 
or  by  resisting  the  collection  in  whatever  form  of  proceeding 
is  authorized  by  the  law  of  the  State.  It  is  not  only  essential 
that  the  claim  of  Federal  right  should  be  distinctly  made  upon 
the  record,  but  also  that  the  procedure  adopted  in  resisting  the 
tax  should  be  appropriate  under  the  State  law,  as  the  decision 
of  the  State  court  upon  this  latter  question  is  conclusive.  If 
the  Federal  claim  is  "specially  set  up"  in  the  record,  and  de- 
cided adversely  by  the  highest  court  of  the  State  having  juris- 
diction, that  decision  may  be  reviewed  upon  writ  of  error  by 
the  Supreme  Court. 

Under  the  amendments  of  1914  and  1916  the  Supreme  Court 


1  As  in  Tennessee,  see  Tennessee  v.  Sneed,  96  U.  S.  69,  24  L.  Ed.  610 
(1877);  also  Sees.  3226,  3228,  R.  S.  5949,  5951  Comp.  Stat.  U.  S.,  infra, 
Ch.   XIX. 

2  Supra,  Ch.  XI. 


§  601     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.       691 

may  in  its  discretion  review  the  decision  of  the  highest  State 
court  by  certiorari,  if  the  Federal  claim  is  sustained  by  the  State 
court. ^ 

The  other  method  of  procedure,  Avhich  may  be  employed  in 
asserting  a  Federal  right  against  taxation,  is  by  invoking  the 
Federal  jurisdiction  in  the  first  instance  by  suit  in  the  United 
States  District  Court  for  the  proper  district,  either  on  the 
ground  of  adverse  citizenship  if  it  exists  in  the  case,  or  on  the 


1  The  Act  of  December  23,  1914,  amending  the  Judicial  Code,  Sec.  237, 
p.  347,  supra,  was  amended  by  Act  of  September  6,  1916,  so  that  Section 
237  of  the  Judicial  Code,  as  amended,  reads  as  follows:  "A  final  judg- 
ment or  decree  in  any  suit  in  the  highest  court  of  a  State  in  which 
a  decision  in  the  suit  could  be  had,  where  is  drawn  in  question  the 
validity  of  a  treaty  or  statute  of,  or  an  authority  exercised  under  the 
United  States,  and  the  decision  is  against  their  validity;  or  where  is 
drawn  in  question  the  validity  of  a  statute  of,  or  an  authority  exercised 
under  any  State,  on  the  ground  of  their  being  repugnant  to  the  Consti- 
tution treaties,  or  laws  of  the  United  States,  and  the  decision  is  in 
favor  of  their  validity,  may  be  re-examined  and  reversed  or  affirmed 
in  the  Supreme  Court  upon  a  writ  of  error.  The  writ  shall  have  the 
same  effect  as  if  the  judgment  or  decree  complained  of  had  been  ren- 
dered or  passed  in  a  court  of  the  United  States.  The  Supreme  Court 
may  reverse,  modify,  or  affirm  the  judgment  or  decree  of  such  State 
court,  and  may,  in  its  discretion,  award  execution  or  remand  the  same 
to  the  court,  from  which  it  was  removed  by  the  writ.  It  shall  be 
competent  for  the  Supreme  Court,  by  certiorari  or  otherwise,  to  require 
that  there  be  certified  to  it  for  review  and  determination  with  the  same 
power  and  authority  and  with  like  effect  as  if  brought  up  by  writ  of 
error,  any  cause  wherein  a  final  judgment  or  decree  has  been  rendered 
or  passed  by  the  highest  court  of  a  State  in  which  a  decision  could  be 
had,  where  is  drawn  in  question  the  validity  of  a  treaty  or  statute  of, 
or  an  authority  exercised  under  the  United  States,  and  the  decision  is 
in  favor  of  their  validity;  or  where  is  drawn  in  question  the  validity 
of  a  statute  of,  or  an  authority  exercised  under  any  State,  on  the  ground 
of  their  being  repugnant  to  the  Constitution,  treaties,  or  laws  of  the 
United  States,  and  the  decision  is  against  their  validity;  or  where  any 
title,  right,  privilege,  or  immunity  is  claimed  under  the  Constitution, 
or  any  treaty  or  statute  of,  or  commission  held  or  authority  exercised 
under  the  United  States,  and  the  decision  is  either  in  favor  of  or 
against  the  title,  right,  privilege,  or  immunity  especially  set  up  or 
claimed,  by  either  party,  under  such  Constitution,  treaty,  statute,  com- 
mission, or  authority." 


692  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    602 

ground  that  the  case  arises  under  the  Constitution  and  laws  of 
the  United  States,  i  When  suit  is  thus  brought  in  the  United 
States  court,  the  unsuccessful  litigant  may  go  directly  by  ap- 
peal, if  in  equity,  or  by  writ  of  error,  if  the  action  is  at  law, 
to  the  Supreme  Court,  the  appellate  jurisdiction  depending 
only  on  the  claim,  in  the  case  of  a  State  tax,  that  the  State  law 
is  repugnant  to  the  Constitution  of  the  United  States.  This 
right  of  appeal  extends  to  both  parties  and  the  whole  case  is 
brought  to  the  Supreme  Court. 2  The  construction  or  applica- 
tion of  the  Constitution  involved  in  the  ease,  in  order  to  main- 
tain such  an  appeal,  must  be  controlling,  although  other  ques- 
tions may  be  open  to  determination  and  may  be  decided.^ 

§  602.    Amount  of  Tax  as  Affecting  Procedure.  —  Where 

the  jurisdiction  of  the  Supreme  Court  is  invoked  on  writ  of 
error  to  the  highest  court  of  the  State  having  jurisdiction,  the 
amount  of  the  tax  involved  in  controversy  is  immaterial ;  the 
only  essential  is  the  denial  by  the  State  court  of  a  Federal 
right.4     Neither  is  there  any  pecuniary  limit  in  the  appellate 


1  It  is  provided  by  the  Judicial  Code,  Sec.  24,  as  amended  December 
21,  1911,  that  the  District  Courts  of  the  United  States  shall  have  orig- 
inal jurisdiction  as  follows:  "Of  all  suits  of  a  civil  nature  at  common 
law  or  in  equity  brought  by  the  United  States,  or  any  officer  thereof 
authorized  by  law  to  sue  .  .  .;  or  where  the  matter  in  controversy 
exceeds,  exclusive  of  interest  and  costs,  the  sum  or  value  of  $3,000.00, 
and  arises  under  the  Constitution  and  laws  of  the  United  States,  or 
treaties  made,  or  which  shall  be  made  under  their  authority,  or  as 
between  citizens  of  different  states,  or  as  between  citizens  of  the  State 
and  foreign  states,  citizens,  or  subjects.     .     .     ." 

2  Loeb  v.  Columbia  Township,  179  U.  S.  472,  45  L.  Ed.  280  (1901). 

3  Carey  v.  Houston  &  Texas  Cen.  Ry.,  150  U.  S.  171,  37  L.  Ed.  1041 
(1893);   Horner  v.  United  States,  143  U.  S.  570,  36  L.  Ed.  266   (1892). 

4  In  Sentell  v.  Railroad  Co.,  166  U.  S.  698,  41  L.  Ed.  1169  (1897), 
the  Supreme  Court  determined  on  a  writ  of  error  a  claim  for  the 
value  of  a  dog,  and  sustained,  as  valid  under  the  Fourteenth  Amend- 
ment, a  statute  of  Louisiana,  providing  that  no  dog  should  be  en- 
titled to  the  protection  of  the  law  unless  placed  upon  the  assessment 
rolls.  The  court  held  also  that,  in  a  civil  action  for  killing  a  dog,  the 
owner  cannot  recover  beyond  the  value  fixed  by  himself  in  the  last 
assessment. 


§    602  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  693 

jurisdiction  of  the  Supreme  Court  or  of  the  Circuit  Court  of 
Appeals  over  the  United  States  District  Court.i 

On  the  other  hand,  the  jurisdiction  of  the  United  States  Dis- 
trict Court,  whether  by  original  suit  therein  or  by  removal  from 
the  State  court,  only  attaches  where  the  amount  in  controversy 
"exceeds,  exclusive  of  interest  and  costs,  the  sum  or  value  of 
$3,000.00."  In  a  suit  involving  the  legality  of  a  tax  the 
"amount  in  controversy"  is  the  amount  of  the  tax,  not  the 
value  of  the  land  or  the  property  upon  which  it  is  levied. 2  If 
the  claim  is  only  that  the  tax  is  excessive  in  amount,  then  the 
alleged  excess  is  the  amount  in  controversy,  and,  as  will  be 
seen,  the  pajTiient  of  what  is  not  claimed  to  be  excessive  is  re- 
quired as  a  condition  of  litigating  the  excess. 

Separate  and  distinct  assessments  against  different  property 
owners,  although  made  under  the  same  law  and  in  the  same 
taxing  district,  cannot  be  "lumped"  for  the  purpose  of  giving 
jurisdiction,  but  each  of  such  cases  involves  a  separate  contro- 
versy, requiring  the  jurisdictional  amount.3 

It  therefore  follows  that,  where  the  amount  of  the  tax  claimed 
to  be  illegal  or  excessive  does  not  exceed  $3,000,  the  Federal 
claim  must  be  asserted  in  the  State  court  in  such  proceeding  as 
may  be  authorized  by  the  State,  subject  to  the  right  of  review 


1  The  Paquete  Habana,  175  U.  S.  677,  44  L.  Ed.  320  (1900).  The 
only  pecuniary  limit  in  appellate  jurisdiction  of  the  Supreme  Court 
is  the  limit  of  $1,000  in  cases  decided  on  appeal  in  the  Circuit  Court 
of  Appeals,  and  on  which  the  judgment  of  that  court  is  not  made  final, 
as  provided  in  Sec.  6  of  the  Act  of  March  3,  1891. 

2  Woodman  v.  Ely,  2  Fed.  839  (1880) ;  Coulter  v.  Fargo,  127  Fed.  912, 
C.  C.  A.  6th  Circuit  (1904) ;  Purnell  v.  Page,  128  Fed.  496,  N.  C.  (1902). 
In  this  case  the  court  declined  to  entertain  jurisdiction  of  a  bill  to 
restrain  the  enforcement  of  a  State  income  tax  on  a  Federal  judge 
amounting  to,  only  $80.00,  although  the  tax  constituted  a  cloud  on 
the  complainant's  title  to  realty,  the  value  of  which  exceeded  the 
jurisdictional  amount. 

3  Woodman  v.  Latimer,  2  Fed.  842  (1880);  Linehan  Ry.  Trans.  Co.  v. 
Pendergrass,  16  C.  C.  A.  585  (8th  Circuit),  70  Fed.  1  (1895);  Ogden 
City  V.  Armstrong,  168  U.  S.  224,  42  L.  Ed.  444  (1897),  affirming  12 
Utah  476;  Wheless  v.  St.  Louis,  180  U.  S.  379,  45  L.  Ed.  583  (1901), 
affirming  96  Fed.  865. 


694  FEDERAL    REMEDIAL   LAW    IN    STATE   TAXATION.  §    603 

in  the  Supreme  Court  on  writ  of  error  if  the  Federal  claim  is 
denied. 

This,  however,  only  applies  where  the  validity  of  a  State  tax 
is  involved.  It  is  provided  by  the  United  States  statutesi  that 
the  Circuit  (now  District)  Courts  are  vested  with  jurisdiction 
of  all  suits  at  law  or  equity  arising  under  any  act  providing 
for  a  revenue  upon  imports  or  tonnage,  irrespective  of  the 
amount.  2 

It  is  sufficient  to  state,  in  this  proceeding  in  the  United  States 
District  Court,  that  the  taxes  assessed  and  claimed  to  be  illegal 
are  a  specified  sum,  larger  than  the  jurisdictional  limit,  and  it 
is  not  necessary  to  state  how  the  taxes  should  be  parcelled  out 
by  the  State  if  collected. 3 

§  603.  Value  of  the  Right  Involved  as  Affecting  Jurisdic- 
tion of  Federal  Courts. — While  it  is  the  rule  that  where  the 
validity  of  the  tax  only  is  involved  the  amount  of  the  tax  de- 
termines the  amount  in  controversy,  it  also  has  been  held  that 
if  the  complainant  sues  to  enjoin  the  enforcement  of  an  ordi- 
nance or  statute  imposing  a  license  or  occupation  tax  which 
he  must  pay  in  order  to  continue  the  prosecution  of  his  busi- 
ness, and  irreparable  injury  may  ensue  from  his  inability  to  go 
on  in  business,  the  Federal  jurisdiction  is  determined  in  such 
cases  by  the  value  of  the  riglit  to  be  protected,  and  the  extent 
of  the  injury  to  be  prevented,  and  such  jurisdiction  is  therefore 
not  avoided  by  reason  of  the  fact  that  the  license  tax  sought  to 
be  enjoined  amounted  to  less  than  the  jurisdictional  amount  of 
$3,000.00.  The  court  said  in  the  case  cited  that  such  a  suit  was 
not  merely  to  enjoin  the  collection  of  a  tax,  but  involved  the 
asserted  right  of  the  complainant  to  do  an  interstate  business 
without  a  tax  or  burden  thereon,  and  that  in  such  case  the  jur- 
isdiction is  determined  by  the  value  of  the  right  to  be  protected 


1  See  infra.,  Ch.  XIX. 

2  See  Downes  v.   Bidwell,   182   U.   S.   248,  one  of  the  Insular   Cases, 
supra. 

3 Illinois  Central  R.  R.  Co.  v.  Adams,  180  U.  S.  28,  45  111.  410  (1901). 


§    604  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  695 

or  the  extent  of  the  injury  to  be  prevented,  and  not  by  the 
mere  amount  of  the  license  fee  involved.^ 

§  604.    Pleading"  Federal  Question  in  United  States  Courts. 

— ^When  the  original  jurisdiction  of  the  United  States  District 
Court  is  invoked  in  a  tax  suit,  on  the  sole  ground  that  the  con- 
troversy arises  under  the  Constitution  and  laws  of  the  United 
States,  there  being  no  adverse  citizenship,  the  Federal  question 
is  clearly  jurisdictional  and  must  be  distinctly  pleaded  in  plain- 
tiff's statement  of  his  cause  of  action.  In  the  language  of  the 
Supreme  Court :^  ''It  must  appear,  at  the  outset,  from  the 
declaration  or  the  bill  of  the  party  suing,  that  the  suit  is  of  that 
character ;  in  other  words,  it  must  appear,  in  that  class  of  cases, 
that  the  suit  was  one  of  which  the  District  Court,  at  the  time  its 
jurisdiction  is  invoked,  could  properly  take  cognizance.  If  it 
does  not  so  appear,  then  the  court,  upon  demurrer,  or  motion, 
or  upon  its  own  inspection  of  the  pleading,  must  dismiss  the 
suit.  "3 

It  is  not  sufficient  that  jurisdiction  may  be  inferred  argu- 
mentatively  from  averments  in  the  pleadings,  but  the  averments 
must  be  positive.* 

Even  if  the  jurisdictional  adverse  citizenship  exists,  the  plead- 
ing of  the  Federal  question  as  a  distinct  ground  of  jurisdiction 
is  proper,  as  that  issue  will  warrant  an  appeal  to  the  Supreme 


1  City  of  Lee's  Summit  v.  Jewell  Tea  Co.,  217  Fed.  968,  C.  C.  A.  8th 
Circuit  (1914),  affirming  198  Fed.  532. 

2  Colorado  Central  Mining  Co.  v.  Turck,  150  U.  S.  138,  1.  c.  143,  37 
L.  Ed.  1030    (1893),  dismissing  54  Fed.  262. 

3  See  also  Borgmeyer  v.  Idler,  159  U.  S.  408,  40  L.  Ed.  199  (1895), 
dismissing  65  Fed.  910. 

4Hanford  v.  Davies,  163  U.  S.  273,  45  L.  Ed.  157  (1896),  affirming 
51  Fed.  258,  where  the  court  said,  1.  c.  280:  "We  are  not  required  to 
say  that  it  is  essential  to  the  maintenance  of  the  jurisdiction  of  the 
Circuit  Court  of  such  a  suit  that  the  pleading  should  refer,  in  words, 
to  the  particular  clause  of  the  Constitution  relied  on  to  sustain  the 
claim  of  immunity  in  question,  but  only  that  the  essential  facts 
averred  must  show,  not  by  inference  or  argumentatively.  but  clearly 
and  distinctly,  that  the  suit  is  one  of  which  the  Circuit  Court  is  en- 
titled  to   take   cognizance." 


696  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  §    605 

Court  instead  of  the  Court  of  Appeals.  It  seems,  however,  that 
the  Supreme  Court,  in  determining  whether  the  case  is  properly 
brought  there  as  involving  a  Federal  question,  will  look  into 
the  opinion  of  the  District  Court,  not  for  the  purpose  of  ascer- 
taining the  evidence  or  the  facts  upon  which  the  judgment  is 
hased,  but  for  the  purpose  of  ascertaining  whether  either  party- 
claimed  in  the  proper  form  that  the  State  law  was  in  contra- 
vention of  the  Constitution.^ 

§  605.    Federal  Question  and  Right  of  Removal.  —  Under 

the  removal  statute,  since  its  amendment  in  1887,  the  defend- 
ant in  a  State  court  claiming  a  Federal  right  cannot  remove  the 
case  to  the  United  States  court  on  that  ground,  irrespective  of 
adverse  citizenship  in  the  cause,  as  the  District  Court  has  no 
jurisdiction,  either  original  or  by  removal,  of  a  suit  arising 
under  the  Constitution,  treaties  or  laws  of  the  United  States, 
unless  the  Federal  claim  appears  by  plaintiff's  statement  of  his 
cause  of  action.^  The  test  of  the  right  to  remove  is  that  it  must 
be  a  case  over  which  the  District  Court  might  have  exercised 
original  jurisdiction  under  Section  1  of  the  act.^  The  Supreme 
Court  has  said  that  the  change  made  from  the  former  statute 
was  in  accordance  with  the  general  policy  of  the  acts  to  contract 
the  jurisdiction  of  the  United  States  District  Courts.* 

It  is  not  sufficient  for  the  plaintiff's  appeal  to  contain  a  sug- 
gestion, that  the  defendants  will  contend  that  the  law  under 
which  the  plaintiff  claims  is  void  as  violative  of  the  Constitution 
of  the  United  States.  The  suggestion  of  one  party,  that  the 
other  will  or  may  set  up  a  claim  under  the  Constitution  or  laws 
of  the  United  States,  does  not  make  the  suit  one  arising  under 
the  Federal  Constitution  or  laws.    Neither  can  resort  be  had  to 


1  Columbia  Tp.  T.  Loeb,  supra,  Sec.  519. 

2  Tennessee  v.  Union  &  Planters'  Bank,  152  U.  S.  454,  38  L.  Ed.  511 
(1894). 

3  See  Sec.  2  of  the  Act  of  March  3,  1887,  corrected  by  the  Act  of 
August  13,  1888;  Arkansas  v.  Kansas  &  Texas  Coal  Co.,  183  U.  S.  185, 
46  L.  Ed.  144   (1901),  reversing  96  Fed.  353. 

4  The  case  of  Southern  Pac.  Ry.  Co.  v.  California,  118  U.  S.  109,  30 
L.  Ed,  103   (1886),  was  decided  under  the  former  statute. 


§    606  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  697 

judicial  knowledge  to  raise  controversies  not  presented  in  the 
pleadings.^  But  in  such  case  the  defendant,  who  has  a  Federal 
claim,  is  not  without  remedy,  for,  if  he  pleads  and  relies  on  such 
claim  as  a  defense  in  the  State  court  and  that  court  decides 
against  him,  he  can  avail  himself  of  the  other  method  of  pro- 
cedure and  carry  the  case  by  writ  of  error  to  the  United  States 
Supreme  Court.^ 

A  judgment  of  the  Circuit  Court  of  Appeals  which  is  made 
final  by  the  Judiciary  Act  of  March,  1891,  is  not  reviewable  by 
the  Supreme  Court  on  writ  of  error,  although  the  suit  involves 
constitutional  rights,  and  therefore  might  have  been  brought 
directly  from  the  Circuit  (now  District)  court  to  the  Supreme 
Court ;  so  if  such  a  party  entitled  to  go  directly  to  the  Supreme 
Court  does  not  do  so  and  carries  his  case  to  the  Circuit  Court 
of  Appeals  he  must  abide  by  the  judgment  of  that  court,^ 

But  where  such  judgment  of  the  Court  of  Appeals  is  entered 
in  a  case  wherein  the  jurisdiction  of  the  Circuit  (District) 
Court  depended  on  the  sole  ground  that  the  cause  of  action 
arose  under  the  Constitution  or  laws  of  the  United  States,  it 
will  on  appeal  to  the  Supreme  Court  be  reversed  for  lack  of 
jurisdiction  in  the  Circuit  Court  of  Appeals  to  review  the  Cir- 
cuit (District)  Court  judgment.^  If  this  were  not  so,  said  the 
court,  the  right  to  two  appeals  would  exist  in  every  similar 
case,  although  it  had  been  repeatedly  held  that  such  was  not  the 
intention  of  the  act. 

§  606.    Federal  Question  on  Writ  of  Error  to  State  Court. 

— ^Whenever  the  Federal  question  is  the  basis  of  the  jurisdiction, 
it  should  be  distinctly  pleaded,  and,  in  a  review  of  the  decision 
of  the  State  coiirt  by  writ  of  error  in  the  Supreme  Court,  it 
must  appear  from  the  record  that  the  Federal   question  was 


1  Mountain  View  Mining  &  Milling  Co.  v.  McFadden,  180  U.  S.  533, 
45  L.  Ed.  656  (1901).  reversing  97  Fed.  670. 

2  Railroad  Co.  v.  Mississippi,  102  U.  S.  135,  144,  26  L.  Ed.  96   (1880). 

3  Carey  Mfg.  Co.  v.  Acme  Flexible  Clasp  Co.,  187  U.  S.  427,  47  L.  Ed. 
244    (1903),  dismissing  writ  of  error  from  108  Fed.   873. 

*  Union  &  Planters  Bank  v.  Memphis,  189  U.  S.  71,  47  L.  Ed.  712, 
reversing  111  Fed.  561   (1903). 


698  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    606 

raised  and  adversely  decided  by  the  State  court.  This  adverse 
decision  must  be  necessary  to  a  complete  adjudication  of  the 
controversy  and  decisive  of  the  ease.  The  statute  requires  that 
the  Federal  right  must  be  distinctly  "set  up  or  claimed."  The 
jurisdiction  cannot  be  sustained  by  mere  inference,  but  only  by 
averment  so  distinct  and  positive  as  to  place  it  beyond  question 
that  the  party  bringing  the  case  from  the  State  court  intended 
there  to  assert  the  Federal  right. i 

The  jurisdiction  of  the  Supreme  Court,  however,  depends, 
not  so  much  upon  the  form  of  the  statement  of  the  claim  in  the 
State  court,  as  upon  the  fact  that  the  State  court  considered  and 
decided  a  Federal  question.  Thus,  in  a  case  where  the  opinion 
of  the  State  court  did  not  consider  Federal  questions,  but  did 
construe  and  decide  them  in  overruling  a  motion  for  rehearing, 
the  Supreme  Court  held  that  there  was  sufficient  to  give  juris- 
diction on  the  writ  of  error,  distinguishing  this  case  from  one 
where  the  court  overruled  the  motion  for  rehearing,  which  set 
up  for  the  fii*st  time  the  Federal  question,  without  passing  upon 
the  Federal  question. 2  It  is  also  sufficient  to  sustain  the  juris- 
diction of  the  Supreme  Court,  though  the  allegations  asserting 
the  Federal  right  are  general  and  even  ambiguous,  pro^^ded 
they  are  treated  as  sufficient  by  the  State  court  ;3  and,  in  con- 
demnation cases  where  no  formal  answer  is  required,  the  Fed- 
eral claim  may  be  set  up  by  written  motion  to  set  aside  the 
verdict.4     Thus  in  such  a  case,  the  Supreme  Court  said : 

"If  the  State  court  in  deciding  the  case  has  actually  consid- 
ered and  determined  a  Federal  question,  although  arising  on 


1  Oxley  Stave  Co.  v.  Butler  County,  166  U.  S.  649,  41  L.  Ed.  1149 
(1897),  dismissing  writ  of  error,  121  Mo.  614;  Chicago  &  N.  W.  Ry. 
Co.  V.  Chicago,  164  U.  S.  454,  41  L.  Ed.  511  (1896);  Michigan  Sugar 
Co.  V.  Dix,  185  U.  S.  112,  46  L.  Ed.  829  (1902),  dismissing  writ  of  error 
to  124  Mich.  674. 

sMallett  V.  North  Carolina,  181  U.  S.  589,  45  L.  Ed.  1015  (1901), 
affirming  149  111.  457. 

3  M.  K.  &  T.  R.  R.  Co.  Elliott,  184  U.  S.  530,  532,  46  L.  Ed.  673 
(1902),  reversing  77  Mo.  App.  652. 

4C.  B.  &  Q.  R.  Co.  V.  Chicago,  166  U.  S.  226,  41  L.  Ed.  979  (1897), 
affirming  149  111.  457. 


§  606     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.       699 

ambiguous  averments,  then  a  Federal  controversy  having  been 
actually  decided  the  right  of  this  court  to  review  obtains.  All 
that  is  essential  is  that  the  Federal  questions  must  be  presented 
in  the  State  court  in  such  a  manner  as  to  bring  them  to  the 
attention  of  that  tribunal.  And,  of  course,  where  it  is  shown 
by  the  record  that  the  State  court  considered  and  decided  the 
Federal  question,  the  purpose  of  the  statute  is  subserved.  "^ 

If  the  judgment  of  the  State  court  can  be  affirmed  on  other 
grounds  broad  enough  to  sustain  it,  without  deciding  the  Fed- 
eral question,  there  is  no  basis  for  the  jurisdiction  of  the  Fed- 
eral court,  which  extends,  not  to  the  case,  but  to  the  Federal 
question  controlling  the  case,  and  the  writ  of  error  will  there- 
fore be  disraissed.2  The  Federal  question  is  not  sufficiently  es- 
tablished, as  having  been  set  up  or  claimed  in  the  State  court, 
when  the  specific  question  does  not  appear  in  the  record.^  The 
court  said  in  the  case  cited  that  it  was  not  required  to  search 
the  statutes  of  Mississippi  to  find  one  which  could  be  construed 
as  impairing  the  obligation  of  the  contract. 

The  fact  that  the  State  court,  while  deciding  the  Federal 
question,  erroneously  holds  that  it  is  not  a  Federal  question 
does  not  take  tlie  case  out  of  the  rule  that,  where  a  Federal 
question  has  been  decided  below,  jurisdiction  exists  to  review.* 
The  court  said  that  the  result  of  the  contrary  doctrine  would  be 
that  no  case,  where  the  question  of  a  Federal  right  had  been 
actually  decided,  could  be  reviewed  in  the  Supreme  Court,  if 
the  State  court,  in  passing  upon  the  question,  had  also  decided 
that  it  was  non-Federal  in  its  character.  But  if  the  record 
shows  that  the  State  court  did  nothing  more  than  decline  to  pass 
upon  the  Federal  question,  because,  under  the  State  practice,  it 
was  not  properly  brought  to  the  attention  of  the  trial  court, 


1  M.  K.  &  T.  R.  R.  Co.  V.  Elliott,  supra. 

B  Rutland  R.  R.  Co.  v.  Cen.  Vt.  R.  Co.,  159  U.  S.  630,  40  L.  Ed.  284 
(1895),  dismissing  writ  of  error,  63  Vt.  1,  and  cases  cited. 

8  Yazoo  &  Miss.  Valley  R.  Co.  v.  Adams,  180  U.  S.  41,  45  L.  Ed. 
415    (1901),  dismissing  writ  of  error,  76  Miss.   545. 

■»M.  K.  &  T.  R.  R.  Co.  V.  Elliott,  supra;  Carter  v.  Texas,  177  U.  S. 
442,  44  L.  Ed.  839   (1900). 


700  FEDERAL   REMEDIAL   LAW   IN    STATE   TxVXATION.  §    607 

there  is  no  Federal  question  whereon  to  base  the  jurisdiction  of 
the  Supreme  Court. i 

An  objection  raised  in  the  State  court  that  a  State  statute 
is  "unconstitutional  and  void"  will  be  assumed  to  relate  only 
to  the  power  of  the  State  legislature  under  the  State  Constitu- 
tion and  raises  no  question  that  will  give  the  Supreme  Court  of 
the  United  States  jurisdiction  to  review  a  judgment  of  the  State 
court  sustaining  the  validity  of  the  statute.2 

A  Federal  question  first  raised  in  a  petition  for  rehearing  in 
the  highest  State  court  is  raised  too  late  to  convey  jurisdiction 
upon  the  ■  Supreme  Court  of  the  United  States,  where  such 
petition  was  denied  without  opinion.s  . 

§  607.  What  is  a  Federal  Question? — A  Federal  question 
is  one  which  is  directly  involved  in  the  assertion  of  a  Federal 
right  QV  claim.  Thus  the  validity  of  a  tax  under  the  Federal  Con- 
stitution may  involve  incidentally  other  questions  which  are  not 
Federal  and  the  judgment  of  the  State  court  thereon  is  final. 
The  mere  determination  as  to  who  are  merchants  within  a  State 
tax  law  involves  no  Federal  question,  which  can  be  reviewed  on 
writ  of  error  to  a  State  court  where  the  levy  of  the  merchants' 
tax  involves  no  Federal  right.^ 

Wliere  a  State  statute  imposing  a  tax  on  cigarette  selling 
violates  the  Constitution  of  the  State,  because  it  does  not  dis- 
tinctly state  the  tax  and  the  object  to  which  it  is  applied  is  a 
purely  local  question,  which  cannot  be  considered  by  the  Supreme 
Court  on  writ  of  error. 


1  Erie  Railroad  Co.  v.  Purdy,  185  U.  S.  148,  46  L.  Ed.  847  (1900), 
dismissing  writ  of  error  to  162  N.  Y.  42. 

2  Layton  v.  Missouri,  187  U.  S.  356,  47  L.  Ed.  214  (1902),  dismissing 
writ  of  error  from  160  Mo.  64.  See  also  Commercial  Pub.  Co.  t. 
Beckwith,  188  U.  S.  567,  47  L.  Ed.  598  (1903),  affirming  167  N.  Y.  329, 
where  the  Federal  question  was  held  to  have  been  sufficiently  pre- 
sented. 

3  Mutual  Life  Ins.  Co.  v.  McGrew,  188  U.  S.  291,  47  L.  Ed.  480  (1903), 
dismissing  writ  of  error  to  132  Cal.  85. 

4  American  Steel  &  W.  Co.  v.  Speed,  192  U.  S.  500,  48  L.  Ed.  538 
(1904),  affirming  67  S.  W.   (Tenn.)   806. 


§    607  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  701 

If  it  appears  that  the  acts  complained  of  are  not  the  acts  of 
the  State  within  the  meaning  of  the  Fourteenth  Amendment 
prohibiting  a  State  from  denying  the  equal  protection  of  the 
laws,  but  the  acts  of  certain  officials  who  are  acting  without 
statutory  authority  and  contrary  to  the  law  of  the  State  as  de- 
clared by  the  State  Supreme  Court,  the  jurisdiction  of  the  Fed- 
eral court  cannot  be  invoked  on  the  ground  that  the  action  of 
these  officials  is  a  violation  of  the  Federal  law,  the  remedy  of 
complainant  in  such  cases  being  in  the  State  court,  i 

Thus  where  a  petition  to  escape  forfeiture  of  lands  under  a 
State  statute  because  the  petition  did  not  contain  a  description 
of  the  land  sufficient  to  identify  it  involves  no  Federal  question, 
unless  the  ruling  was  so  arbitrary  and  baseless  as  to  amount  to 
a  deprivation  of  due  process  of  law.2 

Where  the  Supreme  Court  of  the  State  upholds  a  tax  title 
on  the  ground  that  the  State  statute  made  the  tax  deed  valid 
upon  its  face  prima  facie  evidence  of  the  sufficiency  of  the  no- 
tice, and  that  possession  under  such  a  deed  for  a  prescribed 
time  met  the  requirements  of  the  State  statute  of  limitation, 
such  decision  was  adequate  to  dispose  of  the  case,  so  that  a 
question  of  the  validity  of  a  publication  of  the  notice  placed 
only  in  a  Sunday  newspaper  was  not  open  for  consideration  on 
writ  of  error.3 

It  is  for  the  State  courts  to  determine  whether  a  law  is  valid 
under  the  State  Constitution  and  as  it  was  said  by  the  Supreme 
Court,  "the  Constitution  of  the  State  was  not  taken  up  in  the 
Fourteenth  Amendment,"  and  where  such  a  case  was  brought 
from  the  District  Court,  the  Supreme  Court  held  that  it  would 
not  pass  upon  the  validity  of  the  act  complained  of  under  the 
State  Constitution  in  advance  of  a  decision  of  that  question 
by  the  State  Supreme  Court.4 


1  St.  Louis  I.  M.  &  S.  Ry.  Co.  v.  Davis,  C.  Ct.  132  Fed.  629  (1904) . 

2  Kentucky  Union  County  Co.  r.  Kentucky,  219  U.  S.  140,  55  L.  Ed. 
137   (1910),  affirming  128  Ky.  610. 

3  See  Elder  v.  Wood,  208  U.  S.  226,  52  L.  Ed.  464   (1908),  affirming 
37  Colo.  174. 

•  Pullman  Co.  v.  Knott,  235  U.  S.  23,  59  U  Ed.  105   (1914). 


702  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    610 

§  608.  Party  Admitting  Correctness  of  His  Own  Tax  Can- 
not Invoke  Federal  Protection. — ^A  taxpayer  who  admits  that 
his  own  tax  is  correct,  cannot,  on  the  ground  that  he  will  be 
deprived  of  his  property  without  due  process  of  law  and  denied 
the  equal  protection  of  the  laws,  have  a  writ  of  error  to  the 
United  States  Supreme  Court  to  review  a  construction  by  the 
Supreme  Court  of  the  State  of  the  statutes  of  such  State  as 
exempting,  in  whole  or  in  part,  certain  corporations  whereon  he 
is  not  interested  from  the  payment  of  such  taxation.* 

§  609.  Questions  of  Fact  Not  Considered  on  Writ  of  Error 
to  State  Court. — On  writ  of  error  to  the  State  court,  it  is  im- 
material whether  the  suit  is  an  action  at  law  or  in  chancery.  In 
either  case,  when  the  facts  are  found  by  the  State  court,  the 
Supreme  C6urt  is  controlled  by  such  finding.  If  these  questions 
of  fact  are  adequate  to  determine  the  controversy  and  broad 
enough  to  maintain  the  judgment,  independent  of  any  Federal 
question,  the  Supreme  Court  is  without  jurisdiction,  although 
the  State  court  may  also  have  determined  the  Federal  ques- 
tion. 2  When  the  question  decided  by  the  State  court  is  not 
merely  of  the  weight  or  sufficiency  of  the  evidence  to  prove  a 
fact,  but  is  of  the  competency  and  legal  effect  of  the  evidence 
as  relating  to  a  question  of  Federal  law,  the  decision  may  be  re- 
viewed by  the  Supreme  Court  on  writ  of  error.s 

It  was  said  by  the  Supreme  Court,  in  dismissing  a  writ  of 
error  to  the  Supreme  Court  of  the  State  of  Missouri  to  review 
a  judgment  quashing  an  alternative  writ  of  mandamus  to  the 
State  Board  of  Equalization,  that  questions  which  might  arise 
on  a  writ  of  error  to  a  subordinate  court  of  the  United  States, 
could  not  be  considered  on  a  writ  of  error  to  the  State  court. * 

§  610.  Writ  of  Error  is  to  Highest  State  Court  Having- 
Jurisdiction. — The  writ  of  error  from    the    Supreme    Court, 


1  State  ex  rel.  Hill  v.  Dockery,  191  U.  S.  165,  48  L.  Ed.  133   (1903). 

2  Egan  V.  Hart,  165  U.  S.  188,  41  L.  Ed.  680  (1897),  dismissing  writ 
of  error  to  45  La.  Ann.  1358. 

3  Dower  v.  Richards,  151  U.  S.  658,  38  L.  Ed.  305   (1894),  affirming 
81  Cal.  44. 

4  State  ex  rel.  Hill  v.  Dockery,  supra. 


§    612  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  703 

under  Sec.  709,  R.  S.,  U.  S.,  is  not  necessarily  to  tlie  highest 
court  of  the  State,  but  to  "the  highest  court  of  a  State  in  which 
a  decision  of  the  suit  can  be  had."  It  is  therefore  immaterial 
how  the  appellate  jurisdiction  under  the  State  judicial  system 
is  distributed,  the  writ  of  error  goes  to  whatever  court  of  the 
State  has  the  final  jurisdiction  in  that  case,  and  the  decision  of 
the  State  court  as  to  what  court  has  final  jurisdiction  is  con- 
clusive. If  the  case  is  not  appealable,  and  the  trial  court  is  the 
court  of  final  jurisdiction,  then  the  writ  goes  to  that  court.  The 
judgment,  however,  must  be  j^nal  and  dispose  of  the  case.  A 
judgment  reversing  and  remanding  a  cause  for  another  trial  is 
not  a  final  judgment,  though  a  decision  of  an  appellate  court  of 
last  resort,  reversing  and  remanding  a  cause,  and  directing  the 
specific  judgment  to  be  entered  by  the  lower  court,  is  a  final 
judgment  within  the  meaning  of  the  Judiciary  Act. 

§  611.  A  Personal  Interest  Necessary  for  Writ  of  Error  to 
State  Court. — A  jDersonal,  and  not  an  official,  interest  is  neces- 
sary^ to  entitle  one  to  a  writ  of  error  from  the  United  States 
Court  to  review  the  judgment  of  a  State  court.  This  was  ruled 
in  a  case  where  the  county  auditor  sought  a  writ  of  error  to  re- 
view the  judgment  of  the  State  court  of  Indiana,  requiring  him 
to  deduct  from  the'  assessed  value  of  certain  real  estate  the 
amount  of  a  mortgage  thereon  in  accordance  with  the  statute 
of  such  State,  even  though  a  judgment  personal  in  form  had 
been  rendered  against  him  for  costs,  where  he  did  not  move 
for  a  modification  of  the  judgment  in  that  particular.  It  was 
therefore  held  that  the  auditor  did  not  have  the  necessary  in- 
terest to  maintain  the  appeal,  and  the  writ  of  error  was  dis- 
missed.'' 

§  612.    Practical  Consideration  in  Selection  of  Procedure. 

— Assuming  that  the  tax  litigant  has  a  choice  of  original  forums, 
ill  that  the  tax  in  dispute  is  of  the  jurisdictional  amount  re- 
quired for  suit  in  the  United  States  District  Court,  there  are 
eventualities,  not  to  be  overlooked,  which  grow  out  of  the  exer- 


1  Smith  V.  Indiana,  ex  rel.,  191   U.  S.   138,  48  L.   Ed.   125,  affirming 
158  Indiana  543    (1903). 


704  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    612 

» 

cise  of  concurrent  jurisdiction  by  tlie  courts  of  distinct  sover- 
eignties, and  the  limited  appellate  jurisdiction  of  the  Supreme 
Court  over  courts  of  the  State.  Thus,  if  the  original  concurrent 
jurisdiction  of  the  United  States  District  Court  is  invoked, 
there  being  the  necessary  amount  in  controversy,  whether  the 
jurisdiction  is  based  on  adverse  citizenship  or  on  a  cause  aris- 
ing under  the  Constitution,  laws  or  treaties  of  the  United  States, 
the  court  has  jurisdiction  not  merely  of  the  Federal  question 
involved,  but  of  the  entire  cause  concurrent  with  the  State 
courts.'-  In  such  a  case  the  United  States  Court  of  Appeals  or 
Supreme  Court,  in  the  exercise  of  their  appellate  jurisdiction, 
will  construe  for  themselves  the  State  constitution  and  statutes, 
if  there  is  any  question  in  the  case  requiring  such  construction. 
It  is  true  that  as  a  rule  the  Federal  courts  follow  the  State 
courts  in  such  construction;  but  it  is  not  an  infrequent  occur- 
ence that  the  Federal  court  is  required  to  construe  the  State 
law  without  the  assistance  of  a  prior  or  authoritative  construc- 
tion by  the  State  court,  and  in  such  case  the  court  must  exer- 
cise its  own  judgment  upon  general  principles  of  constitutional 
law.^  Thus  it  may  well  happen  that  a  case  may  be  decided  one 
way  by  the  United  States  District  Court,  when  the  State  court 
would  have  rendered  a  different  decision,  which,  being  the  judg- 
ment of  the  State  court  on  a  question  of  State  law,  could  not 
have  been  reversed  by  the  Federal  court. 

On  the  other  hand,  there  have  been  several  cases  where  the 
claim  of  the  invalidity  of  a  State  tax,  as  violative  of  Federal 
law,  has  been  sustained  in  the  highest  State  court,  and  this 
judgment,  being  in  favor  of  the  Federal  claim,  is  final,  so  that  it 
cannot  be  reviewed  by  writ  of  error  in  the  Supreme  Court.  In 
view  of  the  indisposition  of  the  latter  court  to  overturn  the  tax 
systems  of  the  States  and  its  liberal  construction  of  the  State 
power  of  classification  in  taxation,  a  tax  may  be  declared  void 
by  the  State  court  as  violative  of  Federal  law,  when  it  would 


1  Greene  v.  Louisville  &  I.  R.  R.  Co.    (June,  1917),  —  U.  S.  — ,  61 
L.  Ed.  — . 

2  See  remarks  of  Miller,  J.,  in  Davidson  v.  New  Orleans,   96   U.  S. 
97,  24  L.  Ed.  616   (1878). 


§    613  FEDERAL   REMEDIAL.   LAW   IN   STATE   TAXATION.  705 

have  been  held  valid  by  the  Federal  court,  had  its  jurisdiction 
been  invoked. 

This  may  be  illustrated  by  the  decisions  of  the  Supreme  Court 
and  some  of  the  State  courts  as  to  the  power  of  the  State  to 
make  progressive  rates  of  inheritance  taxation.^  A  still  more 
notable  illustration  is  the  decision  of  the  Supreme  Court  of 
Missouri  holding  invalid,  as  violative  of  the  ''equal  protection 
of  the  laws"  under  the  Fourteenth  Amendment,  the  constitu- 
tional amendment  taxing  mortgages  as  interests  in  the  property 
mortgaged  and  excepting  railroad  mortgages  from  its  oper- 
ation.^  This  decision  by  a  State  court  construing  and  applying 
the  Federal  Constitution  was  final.  "While  the  result  was  doubt- 
less fortunate  for  the  State,  it  is  by  no  means  clear,  in  view  of 
the  liberal  construction  by  the  Supreme  Court  of  the  State 
power  of  classification  in  taxation,  that  the  same  result  would 
have  been  reached,  if  the  suit  Kad  been  brought  originally  in 
the  Federal  court.' 

§  613.  Jurisdiction  Over  Case  and  Over  Federal  Question 
DistingTiished. — "When  the  Supreme  Court  takes  jurisdiction 
on  appeal  from,  or  writ  of  error  to,  the  United  States  District 
Court,  on  the  ground  that  a  Federal  question  is  involved  in  the 
case,  it  takes  jurisdiction  of  and  decides  the  whole  case  and  all 
the  questions  involved  therein,  and  not  merely  the  Federal 
question  to  which  its  jurisdiction  is  limited  under  writs  of 
error  to  the  State  courts.  If  the  case  involves  therefore  not 
merely  a  Federal  question,  but  also  questions  of  general  law, 
whereon  the  Federal  courts  do  not  as  of  course  follow  the  deci- 
sions of  the  State  courts,  the  judgment  of  the  Supreme  Court 
through  this  procedure  may  be  secured  upon  the  whole  case, 
and  not  merely  upon  the  Federal  question.  On  the  other  hand, 
in  the  review  of  the  decisions  of  the  State  courts,  the  jurisdic- 


iSce  Ch.  XV. 

2  Russell  V.  Croy,  164  Mo.  69,  supra.  Sec.  524. 

3  Under  the  Acts  of  December  23,  1914.  and  September  6.  1916,  amend- 
ing Sec.  237,  Judicial  Code,  it  is  competent  for  the  Supreme  Court  to 
require  by  certiorari  or  otherwise  a  final  decision  of  a  State  court  In 
favor  of  the  Federal  claim.     See  supra.  Sec.  336,  and  Sec.  601. 


706  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  §    614 

tion  of  the  Supreme  Court  is  based  upon  and  limited  to  the 
Federal  question,  which  is  involved  in  and  decisive  of  the  case.^ 

§  614.    When  is  Federal  Question  in  Taxation  Involved? — 

A  Federal  question  in  taxation  is  clearly  raised,  when  it  is 
claimed  that  the  tax  law  as  construed  and  enforced  by  the  State 
impairs  a  right,  privilege  or  exemption  enjoyed  under  or  pro- 
tected by  the  Constitution,  laws  or  treaties  of  the  United  States.* 
There  is  no  Federal  question  involved  in  the  claim  that  a  State 
statute  is  not  sufficiently  definite  and  certain  in  its  character, 
so  that  the  amount  of  tax  to  be  paid  can  be  ascertained.  The 
decision  of  the  State  court  as  to  the  proper  construction  and 
sufficiency  of  the  statute  is  conclusive. 

Neither  is  there  any  Federal  question  involved  in  a  decision 
of  a  State  court  that  assessors,  in  the  absence  of  fraud  or  inten- 
tional wrong,  are  not  personally  liable  for  error  in  the  assess- 
ment.3  The  Supreme  Court  said  that,  whether  the  State  court 
decided  the  question  correctly  or  not,  it  is  not  a  Federal  ques- 
tion, but  one  of  general  municipal  law  to  be  governed  either  by 
the  statute  law  or  the  common  law  of  the  State. 

There  is  no  Federal  question  involved  in  a  suit  between  the 
lessor  and  lessee  of  a  railroad,  where  the  lessee  has  paid  a  tax 
and  deducted  it  from  the  rent,  and  was  sued  by  the  lessor  for 
the  amount  of  deduction  on  the  ground  that  the  tax  was  illegal 
as  an  attempted  regulation  of  commerce.  The  State  court  held 
that,  independently  of  this  question  of  constitutionality  of  the 
tax,  it  was  the  duty  of  the  lessor  to  pay  the  tax,  that,  since  the 


1  See  remarks  of  Justice  Miller  in  Davidson  v.  New  Orleans,  96  U. 
S.  97,  supra;  also  Central  Land  Co.  v.  Laidley,  159  U.  S.  103,  40  L.  Ed. 
91  (1895),  dismissing  writ  of  error  to  30  W.  Va.  505.  For  illustra- 
tions of  both  forms  of  procedure,  see  Huntington  v.  Worthen,  120  U. 
S.  97,  supra:  Little  Rock  &  Ft.  Smith  Ry.  Co.  v.  Same.  120  U.  S.  97; 
Swofford  V.  Templeton,  185  U.  S.  487,  46  L.  Ed.  1005  (1902),  reversing 
108  Fed.  309. 

2  For  cases  involving  alleged  impairment  of  the  obligation  of  con- 
tracts, where  the  Supreme  Court  construes  the  State  law  and  deter- 
mines for  itself  the  existence  of  the  contract,  see  supra.  Sec.  61. 

X  Williams  v.  Weaver,  100  U.  S.  547,  25  L.  Ed.  708  (1880);  see  also 
Tyler  v.  Cass  Co.,  142  U.  S.  288,  35  L.  Ed.  1016  (1892). 


§  615     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.        707 

lessee  had  been  compelled  to  pay  it,  the  law  implied  a  promise 
to  repay  the  lessee,  and  that  the  latter  was  under  no  obligation 
to  test  the  constitutionality  of  the  tax.  The  Supreme  court  held 
that  it  had  no  jurisdiction  to  review  the  judgment.  i 

§  615.  Federal  Right  Must  be  Set  Up  in  Adversary  Pro- 
ceeding.— To  give  the  Supreme  Court  jurisdiction  by  writ  of 
error  to  the  State  court,  this  claim  of  Federal  right  must  be 
raised  in  an  adversary  proceeding  where  there  are  opposing 
parties,  and  wherein  the  court  can  render  a  binding  adjudica- 
tion. This  was  illustrated  in  a  case  from  California,2  where  the 
statute  authorized  the  board  of  directors  of  an  irrigation  dis- 
trict3  to  commence  proceedings  in  a  court  of  the  State  asking  de- 
termination of  the  validity  of  the  bonds  it  was  about  to  issue. 
A  resident  of  the  district  appeared  and  claimed  that  the  issue 
of  the  bonds  would  deprive  him  of  his  property  "without  due 
process  of  law."  The  Supreme  Coiirt  held  that  the  judgment 
of  the  State  court  holding  the  bonds  valid  was  not  subject  to 
review  on  writ  of  error.  The  proceeding  was  one  in  effect  to  se- 
cure evidence,  a  mere  ex  parte  case  to  obtain  a  judicial  opinion, 
upon  which  the  parties  might  base  further  action.  It  said, 
1,  c,  189: 

"The  State  may  determine  for  itself  in  what  way  it  will 
secure  evidence  of  the  regularity  of  the  proceedings  of  any  of 
its  municipal  corporations,  and  unless  in  the  course  of  such 
proceeding  some  constitutional  right  is  denied  to  the  individ- 
ual, this  court  cannot  interfere  on  the  ground  that  the  evidence 
may  thereafter  be  used  in  some  further  action  in  which  there 
are  adversary  claims.  So  on  this  ground,  and  not  because  no 
Federal  question  was  insisted  upon  in  the  State  court,  the  writ 
of  error  will  be  dismissed.  "< 


1  Rutland  R.  R,  Co,  v.  Central  Vt.  R.  R.,  159  U.  S.  630,  supra. 

2  Tregea  v.  Modesto  Irrigation  District,  164  U.  S.  179,  41  L.  Ed. 
395   (1896),  dismissing  writ  of  error  to  88  Cal.  334. 

"Under  the  statute  declared  valid  in  Fallbrook  Irrigation  District 
V.  Bradley,  supra.  Sec.  399. 

*  .Justices  Harlan,  Gray  and  Brown  dissented,  holding  that  the  pay- 
ment would  conclude  all  the  taxpayers  in  the  district,  and  that  it  was 
therefore  the  duty  of  the  court  to  consider  the  case  on  the  merits, 


708  FEDERAL    REMEDIAL    LAW    IN    STATE   TAXATION.  §    616 

§  616.    Injunction  Against  Taxation  in  Federal  Courts. — 

The  remedy  by  injunction  against  illegal  taxation  is  obviously 
the  speediest,  and  frequently  is  the  only,  effective  remedy.  But 
the  rule  is  well  established  in  the  Federal  courts  and  generally 
in  the  State  courts  that  a  tax  will  not  be  enjoined  solely  on  the 
ground  of  unconstitutionality.  The  general  rule  that  relief  in 
equity  can  only  be  sought  in  the  absence  of  an  adequate  remedy 
at  law  is  reinforced  in  the  Federal  courts  by  the  provision  of 
the  United  States  statute.i  Although  this  statute  is  only  de- 
claratory of  what  was  always  the  law,  "it  must,  at  least,"  said 
the  Supreme  Court,  "have  been  intended  to  emphasize  the  rule, 
and  to  impress  it  upon  the  attention  of  the  courts. 2 

It  is  also  provided  by  statute  of  the  United  States  that  the 
writ  of  injunction  should  not  be  granted  by  any  court  of  the 
United  States  to  stay  proceedings  in  any  suit  of  the  State  ex- 
cept in  cases  where  such  injunction  may  be  authorized  by  any 
law  relating  to  proceedings  in  bankruptcy.^ 

Other  provisions  of  the  Federal  statute  provided  that  no  suit 
for  the  purpose  of  restraining  the  assessment  of  collection  of 
any  tax  shall  be  maintained  in  any  court. * 

This  latter  statute,  however,  relates  only  to  taxes  levied  by 
the  United  States  and  will  hereafter  be  considered  in  connection 
with, the  provisions  of  the  internal  revenue  law  providing  for 
taxes  under  protest,  for  suits  against  collectors,  and  against  the 
United  States  under  the  Judicial  Code.s 


but   that   the  judgment   should   be   affirmed   under   the   principles  an- 
nounced in  Fallbrook  Irrigation  Dist.  v.  Bradley,  supra. 

1  Sec.  723  R.  S.  U.  S.:  "Suits  in  equity  shall  not  be  sustained  in 
either  of  the  courts  of  the  United  States  in  any  case  where  a  plain, 
adequate  and  complete  remedy  may  be  had  at  law." 

New  York  Guaranty  Co.  v.  Memphis  Water  Co.,  107  U.  S.  205,  1.  c. 
214,  27  L.  Ed.  484  (1883);  Buzard  v.  Houston,  119  U.  S.  347,  30  L. 
Ed.   451    (1886). 

3  R.  S.  Sec.  720.  See  also  Moore  v.  Halliday,  4  Dillon  52  (1876), 
where  an  injunction  was  allowed  against  county  officers,  but  denied 
against  the  prosecution  of  pending  suits  for  collection  of  taxes. 

4  See  infra,  Ch.  XIX. 
s  See  infra,  Ch.  XIX. 


§  617     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.       709 

It  was  said,  however,  by  Justice  Miller  with  reference  to  the 
provision  of  the  Federal  statute  concerning  proceedings  in  the 
Federal  courts  that  although  this  applied  only  to  the  taxes 
levied  by  the  United  States,  it  showed  the  appreciation  by  Con- 
gress of  the  evils  to  be  feared  if  courts  of  justice  could  inter- 
fere with  the  process  of  collecting  taxes  whereon  the  govern- 
ment depended  for  its  continual  existence. 

It  was  shown  by  the  experience  of  ages  "that  the  payment 
of  taxes  must  be  enforced  by  summary  and  stringent  means 
against  a  reluctant  and  often  adverse  sentiment,  and  to  do  this 
successfully  other  instrumentalities  and  other  modes  of  pro- 
cedure are  necessary  other  than  those  which  belong  to  a  court 
of  justice,  "i 

§  617.  Want  of  Adequate  Remedy  at  Law  Must  be  Shown. 
— ^It  is  therefore  required  that  a  party  asking  an  injunction  in 
a  Federal  court  against  a  State  must  show  by  proper  averment 
that  he  has  not  *'a  plain,  adequate  and  complete  remedy  at 
law."  The  mere  assertion  of  unconstitutionality  or  illegality  of 
a  tax  is  not  enough.  "There  must  be  an  allegation  of  fraud; 
that  it  creates  a  cloud  upon  the  title ;  that  there  is  apprehension 
of  multiplicity  of  suits,  or  some  cause  presenting  a  case  of 
equity  jurisdiction.  "2 

This  principle  has  been  applied  by  the  Supreme  Court  in 
several  tax  cases,  3  Where  the  plaintiff  alleges  that  he  is  threat- 
ened with  irreparable  injury,  the  facts  constituting  such  in- 
jury must  be  stated.  In  Shelton  v.  Piatt,  the  court  said  that, 
while  an  unconstitutional  tax  may  confer  no  right  and  support 
no  obligation,  the  trespass  resulting  from  proceedings  to  collect 
such  void  tax  cannot  be  restrained  by  injunction,  where  irre- 


1  State  Railroad  Tax  Cases,  92  U.  S.  613,  supra. 

2  Hannewinkle  v.  Georgetown,  15  Wall.  548,  21  L.  Ed.  231   (1873). 

3  Dows  r.  Chicago,  11  Wall.  108,  20  L,  Ed.  65  (1871);  Shelton  v. 
Piatt,  139  U.  S.  591,  35  L.  Ed.  273  (1891);  Allen  v.  Pullman  Car  Co., 
139  U.  S.  658,  35  L.  Ed.  303  (1891);  Arkansas  B.  &  L.  Assn.  v.  Mad- 
den, 175  U.  S.  269,  44  L.  Ed.  159  (1899);  Pittsburgh,  Etc.,  Ry.  Co.  y. 
Board  of  Public  Works,  172  U.  S.  32,  43  L.  Ed.  354   (1898). 


710  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    618 

parable  injury  or  other  ground  for  equitable  interposition  is  not 
shown  to  exist. 

It  is  not  necessary  tliat  the  objection  of  "adequate  remedy 
at  law ' '  should  be  raised  by  the  pleadings  or  suggested  by  coun- 
sel ;  but  the  Supreme  Court  will,  sua  sponte,  recognize  the  fact 
in  examining  the  proofs  and  give  it  effect.i 

There  is  no  right  to  enjoin  the  collection  of  a  tax  after  it  has 
been  paid,  though  under  protest.  The  Supreme  Court  said  that 
the  remedy  in  such  case  is  by  action  at  law,  as  the  only  equitable 
ground  of  relief  ceases  with  the  payment  of  the  tax,  whether 
voluntary  or  compulsory.? 

"Where  it  appears  that  there  is  a  plain  and  adequate  remedy 
at  law  to  recover  the  amount  of  a  tax  wrongfully  assessed,  ir- 
reparable injury  cannot  be  inferred  as  a  result  of  the  enforce- 
ment of  the  tax  where  no  facts  are  set  forth  upon  which  such 
inference  can  be  based;  and  a  Federal  court  is  not  vested  with 
jurisdiction  of  a  suit  in  equity  to  enjoin  the  collection  of  a 
State  tax  unless  there  is  apparent  some  ground  of  equitable 
jurisdiction  recognized  by  the  Federal  courts. 3 

§  618.  Injunction  Often  Only  Proper  Remedy.  —  But  the 
preventive  remedy  to  be  obtained  in  a  court  of  equity  not  only 
may  be  a  proper  remedy  in  cases  of  illegal  taxation,  but  is 


1  Allen.  T.  P.  Car  Co.,  supra.  It  should  be  observed  that  in  this  and 
other  Tennessee  cases,  the  court  commented  on  the  fact  that  the  State 
statute  gave  an  adequate  remedy  by  authorizing  payment  under  pro- 
test and  suit  to  recover,  c.  44,  p.  71,  T^ws  of  Tenn.  1873. 

2  Singer  Manufacturing  Co.  v.  Wright,  141  U.  S.  696,  35  L.  Ed.  906 
(1891),  following  Little  v.  Bowers,  134  U.  S.  547. 

s  Indiana  Mfg.  Co.  Y.  Koehne,  188  U.  S.  681,  47  L.  Ed.  651  (1903); 
C,  B.  &  Q.  R.  R.  Co.  V.  Babcock,  204  U.  S.  585,  51  L.  Ed.  636  (1907); 
Singer  Sewing  Machine  Co.  v.  Benedict,  229  U.  S.  481,  57  L.  Ed. 
1288  (1913),  affirming  179  Fed.  628;  Union  Pacific  R.  R.  v.  Board  of 
Commissioners,  217  Fed.  540  (1914) ;  Nye  Jenks  &  Co.  v.  "Washburn,  125 
Fed.  817  (1903),  Circuit  Court  of  Wisconsin;  Atchison,  Topeka  &  S.  F. 
R.  R.  Co.  v.  Board  of  Commissioners,  225  Fed.  978,  C.  C.  A.  8th  Cir- 
cuit (1915);  Western  Union  Tel.  Co.  v.  Trapp,  C.  C.  A.  8th  Circuit,  186 
Fed.  114  (1911) ;  Stonebreaker  v.  Hunter,  C.  C.  A.  8th  Circuit,  215  Fed. 
67  (1914);  Singer  Sewing  Machine  Co.  of  New  Jersey  v.  Benedict,  179 
Fed.  629  C.  C.  A.  8th  Circuit  (1910). 


§    618  FEDERAL    REMEDIAL   LAW    IN    STATE   TAXATION.  711 

often  the  only  proper  remedy.  Thus,  in  the  litigation  involv- 
ing the  taxation  of  national  bank  stockholders,  the  remedy  by 
injunction  was  held  to  be  the  proper  remedy  of  shareholders, 
or  of  the  bank  suing  in  their  behalf.i  This  was  because  the 
claim  of  deduction  for  debts  must  be  made  a  reasonable  length 
of  time  before  the  assessment  role  is  made  up,  and  a  party  there- 
fore should  proceed  promptly  if  his  claim  is  denied,  by  resort- 
ing to  a  court  of  equity  "to  enjoin  the  collection  of  the  illegal 
excess,  upon  the  payment  or  tender  of  the  amount  due  upon 
what  was  admitted  as  a  just  valuation." 

•  The  same  consideration  applies  in  cases  of  special  taxation 
for  street  improvements,  where  a  party,  who  waits  until  the  im- 
provement is  completed  before  asserting  his  objection,  may  be 
held  to  be  estopped  from  asserting  such  claim,  when  the  rights 
of  others  would  be  prejudiced  thereby. 2  This  is  under  the 
equitable  principle  that  "he  who  does  not  speak  when  he  ought 
to  speak,  will  not  be  allowed  to  speak  when  he  would  speak. ' ' 

The  threatened  destruction  or  interruption  of  business, 
through  seizure  of  property  for  failure  to  pay  a  license  claimed 
to  be  illegal,  has  been  held  "to  constitute  irreparable  injury 
warranting  an  injunction,  "3  there  being  no  adequate  remedy 
at  law. 

The  prevention  of  multiplicity  of  suits  is  a  recognized  ground 
of  equitable  interference,  though  the  jurisdiction  on  this  ground 
can  only  be  invoked  when  the  threatened  suits  are  against  the 
same  person. 4 


1  Hills  V.  Exchange  Bank,  105  U.  S.  319,  26  L.  Ed.  1052  (1882) ; 
Stanley  v.  Supervisors,  121  U.  S.  535,  30  L.  Ed.  1000  (1887);  Williams 
V.  Supervisors,  122  U.  S.  154,  30  L.  Ed.  1088  (1887),  but  see  People's 
Nat.  Bank  v.  Marye,  107  Fed.  571   (1901). 

2  Pieman  v.  Ring,  85  Mo.  App.  231  (1900). 

3  Minneapolis  Brewing  Co.  v.  McGillivray,  104  Fed.  258  (1900).  See 
also  Southern  Ry.  Co.  v.  Asheville,  69  Fed.  359  (1895);  Detroit,  Etc., 
R.  R.  Co.  V.  Fuller,  205  Fed.  86  (Mich.,  (1903). 

4  People's  Nat.  Bank  r.  Marye,  107  Fed.  571  (1901);  see  Raymond  v. 
Chicago  Union  Traction  Co.,  207  U.  S.  20,  52  L.  Ed.  78  (1907),  affirming 
114  Fed.  557;  Slinger  Mfg.  Co.  t.  Adams,  C.  C.  A.  5th  Circuit,  165  Fed 
877   (1909). 


712  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    619 

These  considerations  are  obvious  when  the  business  of  rail- 
roads and  other  public  carriers  engaged  in  interstate  commerce 
is  threatened  with  interruption  by  numerous  suits  at  law,  with 
liability  to  penalties  therein.  In  such  cases  public  policy  re- 
quires an  uninterrupted  continuance  of  business  and  a  speedy 
determination  of  the  controversy,  and  this  can  only  be  effected 
through  the  comprehensive  jurisdiction  of  a  Court  of  Equity. 
(See  Illinois  and  Kentucky  cases,  Sees.  546,  547,  supra.) 

It  is  obvious  also  that  public  policy  often  requires  a  speedy 
determination  of  the  validity  of  a  tax.  If  it  is  invalid,  other 
provisions  can  be  made  for  public  needs,  and  uncertainty  and 
delay  avoided.  In  cases  of  alleged  discrimination  in  valuation 
and  consequent  excessive  taxation,  it  is  to  the  interest  of  both 
the  taxpayer  and  the  public  that  the  controversy  should  be 
promptly  determined.  It  is  for  this  reason  that  we  frequently 
see  cases  made  up  and  advanced  by  waiver  of  customary  pro- 
cedure, for  the  express  purpose  of  avoiding  the  public  and  pri- 
vate embarrassments  arising  from  delay  and  uncertainty.! 

In  a  national  bank  case  from  Louisiana,  where  a  money  judg- 
ment was  recovered  by  the  bank  against  an  assessor  for  alleged 
discrimination,  the  Supreme  Court  reversed  the  case2  on  the 
ground  that  the  demurrer  claiming  that  relief  should  have  been 
sought  in  equity,  not  in  law,  should  have  been  sustained.  The 
court  said  that  the  legal  remedy  in  this  case  was  inadequate  and 
incongruous,  and  that  it  was  immaterial  that  the  laws  of  Louis- 
iana secured  to  taxpayers  the  right  of  testing  the  justice  of 
assessments  before  courts  of  justice  in  any  procedure  that  the 
Constitution  and  laws  permitted.  The  adoption  by  the  Federal 
courts  of  the  State  practice  must  not  be  understood  as  au- 
thorizing legal  and  equitable  claims  to  be  blended  in  one  suit. 

§  619.  Fraud  as  Warranting  Injunction  in  Taxation.  — 
Where  a  bill  alleges  not  only  that  the  assessment  is  unwarranted 
in  law,  but  that  the  manner  of  making  the  assessment  amounts 
to  fraud  upon  complainant's  constitutional  rights,  or  such  gross 


1  See  infra.  Sec.  620. 

2  Lindsay  v.  Shreveport  Bank,  156  U.  S.  485,  39  L.  Ed.  505   (1895). 


§    620  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  713 

mistake  as  amounts  to  fraud,  especially  where  it  also  appears 
that  the  tax  for  the  preceding  year  had  been  similarly  enjoined 
by  a  decree  from  which  no  appeal  had  been  taken,  the  Federal 
court  has  jurisdiction  in  equity  of  a  bill  to  enjoin  collection 
of  such  taxes.^  The  court  said  that  such  continuing  violation 
of  constitutional  rights  afforded  ground  for  equitable  relief.* 

§  620.  Procedure  in  Income  Tax  Cases. — This  view  of  pub- 
lic policy,  as  demanding  a  prompt  determination  of  the  validity 
of  a  tax,  was  forcibly  illustrated  in  the  Income  Tax  Cases  where 
the  tax  involved  was  levied  by  Congress.  The  decision  that  the 
tax  was  invalid  was  rendered  in  a  suit  brought  by  a  Massachu- 
setts stockholder  in  a  New  York  Trust  Company  to  enjoin  the 
corporation  from  paying  a  tax  alleged  to  be  illegal.  The  bill 
also  contained  allegations  of  threatened  irreparable  injury,  and 
of  ineffectual  demand  upon  the  corporation  to  refrain.3  The 
objection  of  adequate  remedy  at  law  was  not  raised,  nor  was  the 
statute  prohibiting  injunctions  against  the  collection  of  taxes 
levied  by  Congress,  supra,  Sec.  616,  invoked.*  The  Chief  Jus- 
tice in  his  opinions  said  on  this  point: 

"The  objection  of  adequate  remedy  at  law  was  not  raised 
below,  nor  is  it  now  raised  by  appellees,  if  it  could  be  enter- 
tained at  all  at  this  stage  of  the  proceedings ;  and  so  far  as  it 
was  within  the  power  of  the  government  to  do  so,  the  ques- 
tion of  jurisdiction,  for  the  purposes  of  the  case,  was  explic- 
itly waived  on  the  argument.  The  relief  sought  Avas  in  respect 
of  voluntary  action  by  the  defendant  company,  and  not  in  re- 
spect of  the  assessment  and  collection  themselves.  Under 
these  circumstances,  we  should  not  be  justified  in  declining  to 
proceed  to  judgment  upon  the  merits." 

This  ruling  was  reaffirmed  in  suits  brought  by  stockholders  to 
restrain  corporations  from  voluntarily  complying  with  the  in- 


1  Johnson  v.  Wells  Fargo  &  Co.,  239  U.  S.  234,  60  L.  Ed.  243,  affirm- 
ing 214  Fed.  180,  C.  C.  A.  8th  Circuit   (1916). 
2Pyle  V.  Brenneman,  122  Fed.  786,  C.  C.  A.  4th  Circuit  (1903). 
3  See  Hawes  v.  Oakland,  104  U.  S.  450,  26  L.  Ed.  827   (1882). 
*  See  dissenting  opinion  of  Justice  White,  157  U.  S.  608,  supra. 
6  157  U.  S.   1.  c.  554. 


714  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    621 

come  tax  provisions  of  the  Tariff  Act  of  October,  1913,  the  court 
saying  that  in  view  of  the  confusion,  wrong  and  multiplicity 
of  suits  which  would  result  when  the  corporation  paid  the  tax, 
such  a  suit  was  not  forbidden  by  the  Federal  statute. i 

§  621  Injunction  Only  Allowed  on  Payment  of  Taxes  Actu- 
ally  Due. — In  the  State  Railroad  Tax  Cases,^  the  rule  was  es- 
tablished in  the  practice  of  the  Federal  courts,  that  an  injunc- 
tion to  stay  the  collection  of  taxes  will  not  be  granted,  until  the 
plaintiff  has  first  paid  the  part  of  the  tax  conceded  to  be  due, 
or  which  can  be  seen  to  be  due  on  the  face  of  the  bill,  or  which 
can  be  shown  by  affidavits  to  be  due,  whether  conceded  to  be 
due  or  not.  The  court  said  that  the  State  is  not  to  be  tied  up, 
as  to  that  of  which  there  is  no  contest,  by  lumping  this  uncon- 
tested amount  with  that  which  is  really  contested.  If  the 
proper  officer  refuses  to  receive  a  part  of  the  tax,  it  must  be 
tendered  and  tendered  without  the  condition  annexed  of  a  re- 
ceipt in  full  for  all  the  taxes  assessed.  This  was  laid  down  as  a 
rule  to  govern  the  courts  of  the  United  States  in  such  cases, 
and  in  the  subsequent  cases  cited  this  rule  has  been  affirmed, 
and  the  failure  to  make  such  payment  or  tender  treated  as  a 
fatal  objection  to  the  bill. 3  It  was  claimed  by  counsel,  in  the 
Illinois  R.  R.  eases,  that  the  violation  of  equality  made  the 
whole  tax  void,  but  the  court  held  this  to  be  untenable,  saying: 
''Surely  they  should  pay  by  some  rule.  Should  they  pay  noth- 
ing and  escape  wholly  because  they  have  been  assessed  too 
high?     These  questions  answer  themselves. "^ 


1  Stanton  v.  Baltic  Mining  Co.,  240  U.  S.  163,  60  L.  Ed.  546  (1916); 
Brushaber  v.  Union  Pacific  Ry.  Co.,  240  U.  S.  1,  60  L.  Ed.  493   (1916). 

2  92  U.  S.  575,  supra.  Sec.  260. 

3  National  Bank  v.  Kimball,  103  U.  S.  732,  26  L.  Ed.  469  (1881); 
Northern  Pacific  R.  R.  v.  Clark,  153  U.  S.  252,  272,  28  L.  Ed.  706 
(1894);  Albuquerque  National  Bank  v.  Perea,  147  U.  S.  87,  37  L. 
Ed.  91   (1893). 

*  92  U.  S.  616,  supra,  See.  260.  See  also  People's  National  Bank 
V.  Marye,  191  U.  S.  272,  48  L.  Ed.  180  (1904),  affirming,  with 
modifications,  107  Fed.  570.  See  also  Ritterbusch  v.  A.  T.  &  S.  F. 
Co.,  198  Fed.  46,  C.  C.  A.  8th  Circuit  (1912).     This  rule  enforced  in 


§    621  FEDERAL   REMEDIAL    LAW    IN    STATE   TAXATION.  715 

This  rule  rests  on  the  cardinal  principle  of  equity,  that  one 
who  seeks  equity  must  do  equity,  and  it  is  now  firmly  estab- 
lished in  the  State  as  well  as.  Federal  courts  in  the  law  of  in- 
junctions. The  plaintiff  must  show  in  his  bill  what  portion  of 
the  tax  is  legal  and  what  is  illegal,  in  order  that  the  court  may 
be  able  to  determine  what  portion  of  the  tax  should  be  paid,  and 
what  enjoined.  Facts,  not  legal  conclusions,  should  be  stated 
in  this  regard,  and  an  averment  of  "readiness  to  pay  what  is 
due"  and  even  a  tender  in  the  bill  is  insufficient.*  The  payment 
or  offer  to  pay  must  be  actual  and  unconditional,  and  made  in 
money  to  the  tax  collector.  The  rule,  however,  obviously  does 
not  apply  where  plaintiff  complains  of  the  whole  tax  levied  and 
all  is  to  be  paid  or  nothing.2 

Xor  is  a  tender  required  of  so  much  of  the  tax,  as  would  have 
fallen  on  the  receipts  from  commerce  wholly  within  the  State 
as  a  prerequisite  to  injunctive  relief  against  the  collection  from 
a  non-resident  carrier,  whose  receipts  are  largely  derived  from 
interstate  commerce  and  from,  investments  outside  of  the  State, 
of  the  gross  revenue  tax  of  the  State  which  is  held  to  be  unlaw- 
fully imposed.3 

Moreover  should  it  appear  that  the  tender  was  made  in  good 
faith,  but  the  sum  tendered  was  in  fact  less  than  is  due,  the  bill 
is  not  dismissed  absolutely,  but  an  opportunity  is  given  the 
plaintiff  to  pay  the  excess  with  the  costs  and  penalties.4 

The  rule  that  tender  of  the  valid  portion  of  the  tax  is  a  condi- 
tion precedent  to  relief  by  injunction  against  illegal  taxation, 
cannot  be  invoked  to  defeat  such  relief  in  aid  of  a  decree  en- 
joining the  collection  of  State  taxes,  where  all  questions  con- 


an  application  for  injunction  on  ground  of  discrimination  in  taxation 
of  stock  in  a  national  bank,  Charleston  National  Bank  v.  Melton, 
C.  C.  (N.  Dist.  of  West.  Va.),  171  Fed.  743   (1909). 

1  High  on  Injunctions   (3rd  Ed.),  Sec.  497,  and  cases  cited;   Hunt- 
ington V.  Palmer,  7  Sawyer  355   (1881). 

2  Norwood  V.  Baker,  172  U.  S.  1.  c.  p.  300,  supra.  Sec.  426;   LewLston 
Water  &  Power  Co.  v.  Asotin  Co..  24  Wash.  371  (1901). 

3Moyer  v.  Wells   Fargo  Co.,  223  U.  S.  297,  56  L.  Ed.  445   (1912). 
^C.  B.  &  Q.  R.  R.  V.  Norton  Co.,  14  C.  C.  A.  458   (8th  Circuit),  67 
Fed.  413   (1895). 


716  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    623 

ceming  the  part  of  the  tax  not  covered  by  the  original  decree 
were  eliminated  from  the  controversy .* 

§  622.  Injunction  Will  Not  Lie  When  Assessment  Incom- 
plete.— ^A  suit  to  enjoin  a  tax  commission  from  certifying  to 
an  assessment  is  prematurely  brought  when  it  is  filed  prior  to 
the  final  meeting  of  a  board  of  equalization,  where  the  complain- 
ant has  the  right  to  invoke  further  action  to  correct  the  assess- 
ment if  deemed  excessive.2  The  court  said  that  in  this  case  the 
equity  powers  of  the  court  were  invoked  to  relieve  against  an- 
ticipated injury  consequent  upon  an  anticipated  fraudulent 
assessment,  before  the  assessment  is  completed,  and  the  effect  of 
an  injunction  would  be  to  take  away  from  the  taxation  commis- 
sion all  power  of  discretion  and  judgment  in  arriving  at  the 
fixed  and  proper  valuation. 

§  623.  When  Application  Must  First  be  Made  to  State 
Board. — ^When  the  question  involved  is  not  the  validity  of  the 
tax  in  toto,  but  wholly  the  amount  of  the  assessment,  alleged  to 
be  excessive,  either  on  account  of  overvaluation  absolute  or  rela- 
tive, or  failure  to  make  a  required  deduction,  application  must 
first  be  made  to  the  revising  or  equalizing  board  appointed  by 
the  State  to  hear  and  act  on  complaints  of  excessive  or  erroneous 
assessments.3  In  the  absence  of  statute,  there  is  no  jurisdiction 
in  the  courts  to  review  the  discretion  of  such  tribunals,  that  is, 
a  court  of  equity  is  not  a  court  of  errors  to  review  their  deci- 
sions. But  the  procedure  established  by  the  State  for  the  cor- 
rection of  assessments,  whatever  it  is,  must  be  followed,  if  open 
to  the  taxpayer,  before  he  will  be  allowed  to  enjoin  the  alleged 
excessive   assessment.     If  the  State  practice   allows  a  judicial 


1  See  Gunter  v.  Atlantic  Coast  Line,  200  U.  S.  273,  50  L.  Ed.  477 
(1906). 

2  Western  Union  Tel.  Co.  v.  HoM^e,  180  Fed.  44,  C.  C.  A.  8tli  Circuit 
(1910),  quoting  from  C.  B.  &  Q.  R.  Co.  v.  Babcock,  204  U.  S.  585, 
51  L.  Ed.   636    (1907). 

3  Dundee  Co.  v.  Charlton,  32  Fed.  192  (1887);  Beeson  v.  Johns,  124 
U.  S.  56,  31  L.  Ed.  360  (1888) ;  Hazzard  v.  O'Bannon,  36  Fed.  854  (1888) ; 
Hazzard  v.  O'Bannon,  38  Fed.  220  (1889).  See  also  California  &  Oregon 
Land  Co.  v.  Gowen,  48  Fed.  771  (1892). 


§  624     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION,       717 

review  of  the  findings  of  equalizing  boards  upon  writ  of  cer- 
tioi-ari,  or  other  statutory  procedure,  resort  must  be  had  to  the 
remedy  thus  provided. 

It  has  been  decided  by  the  Supreme  Court*  that,  if  for  any 
reason  the  statutory  procedure  was  not  open  to  a  stockholder, 
as  where  his  name  was  not  placed  on  the  assessment  role  until 
the  time  for  correction  had  passed,  his  remedy  then  is  in  a  court 
of  equity  to  enjoin  the  collection  of  the  alleged  illegal  excess, 
upon  payment  or  tender  of  the  amount  admitted  to  be  due  on  a 
just  valuation.  A  party  failing  to  apply  to  the  State  board 
and  not  resorting  to  injunction  cannot  maintain  an  action  at 
law  to  recover  the  excess  of  taxes  alleged  to  have  been  paid 
upon  the  excessive  valuation.  The  court  said  that  the  money 
collected  on  such  an  assessment  could  not  be  recovered  back  in 
an  action  at  law,  any  more  than  money  collected  on  an  erroneous 
judgment  of  a  court  of  competent  jurisdiction,  before  it  is  re- 
versed. 

§  624.  State  Statutory  Remedies  do  Not  Oust  Equitable 
Jurisdiction  of  Federal  Courts. — Whatever  statutory  remedies 
may  be  adopted  by  a  State  for  testing  the  validity  of  tax  assess- 
ments, they  do  not  oust  the  jurisdiction  in  equity  of  the  Federal 
courts,  when  the  established  principles  and  rules  of  equity  per- 
mit a  suitor  to  invoke  that  jurisdiction,^  The  Supreme  Court, 
in  this  ease,  where  it  was  claimed  that  the  special  jurisdiction 
vested  in  the  State  court  for  determining  the  reasonableness  of 
freight  charges  fixed  by  the  State  ousted  the  Circuit  Court  of  its 
jurisdiction,  held  that  a  suitor  entitled  to  sue  in  the  Federal 
courts  in  equity  cannot  be  deprived  of  that  right  by  reason  of 
being  allowed  to  sue  at  law  in  the  State  court  on  the  same  cause 
of  action,  saying: 


1  Stanley  v.  Supervisors,  121  U.  S.  535;  Williams  v.  Supervisors, 
122  U.  S.  154,  supra.  Sec.  314. 

2  Smyth  V.  Ames,  169  U.  S.  466,  516,  42  L.  Ed.  819  (1898).  In 
Taylor  v.  L.  &  N.  R.  R.,  31  C.  C,  A.,  p.  545,  the  court,  in  an  opinion 
by  Judge  Taft,  says  that  it  is  difficult  to  reconcile  this  opinion  on  its 
facts  with  Ewing  r.  St.  Louis,  5  Wall.  418,  18  L.  Ed.  657  (1867), 
which  is  not  in  terms  overruled.  Western  Union  Tel.  Co.  v.  Trapp, 
186  Fod.  114,  C.  C.  A.  8th  Circuit  191   (1911), 


718  FEDERxVL   REMEDIAL   LAW    IN    STATE   TAXATION,  §    624 

*'It  is  true  that  an  enlargement  of  equitable  rights  arising 
from  the  statutes  of  a  State  may  be  administered  by  the  Cir- 
cuit (District)  Courts  of  the  United  States.  But  if  the  case 
in  its  essence  be  one  cognizable  in  equity,  the  plaintiff — the 
required  value  being  in  dispute  —  may  invoke  the  equity 
powers  of  the  proper  Circuit  Court  of  the  United  States  when- 
ever jurisdiction  attaches  by  reason  of  diverse  citizenship  or 
upon  any  other  ground  of  Federal  jurisdiction." 

The  existence  of  a  statutory  procedure  for  determining  the 
validity  of  taxation  may  be  material  in  determining  the  ade- 
quacy of  a  remedy  at  law/  that  is,  whether  the  party  is  entitled 
to  appeal  to  the  equity  jurisdiction  of  the  Federal  court.  ' '  The 
legislature  of  a  State  cannot  determine  the  jurisdiction  of  the 
courts  of  the  United  States,  and  the  action  of  such  courts  in  ac- 
cording a  remedy  denied  to  the  courts  of  a  State  does  not  in- 
volve a  question  of  power.  "- 

Certiorari  is  not  an  adequate  remedy  in  the  Federal  courts, 
as  their  power  to  issue  the  writ  is  limited  to  cases  where  it  is 
necessary  to  the  exercise  of  their  jurisdiction.  Nor  is  this  remedy 
in  the  State  court  adequate  in  a  ease  of  alleged  discrimination, 
when  the  facts  relied  upon  to  prove  discrimination  must  be 
shown  de  Jiors  the  record.^ 


1  See  supra,  Sec.  531,  note  3.  See  Lander  v.  Mercantile  National 
Bank,  Cir,  Ct.  of  App.,  6th  Circuit,  118  Fed.  785  (1902),  affirming  109 
Fed.  21,  construing  Otiio  statute;  McKnight  v.  Dudley,  C.  C.  A.,  6th 
Circuit,  148  Fed.  204  (1906);  Rockefeller  v.  O'Brien,  224  Fed.  541 
(1916);  Illinois  Life  Ins.  Co.  v.  Newman,  141  Fed.  449  (1905);  Mudge 
r.  McDougal,  222  Fed.  562  (1915),  holding  that  the  statute  of  Arkansas 
did  not  provide  an  adequate  remedy  at  law;  McLaughlin  v.  St.  Louis 
Southwestern  R.  Co.,  232  Fed.  579  (1916),  C.  C.  A.,  8th  Circuit,  holding 
that  an  adequate  remedy  was  provided  by  the  laws  of  Arkansas  by  an 
appeal  from  the  assessment  for  benefits;  City  Counsellor  of  Augusta 
V.  Timmerman,  227  Fed.  171  (1915),  holding  that  an  adequate  remedy 
was  provided  by  South  Carolina  statute.  See  also  Green  v.  L.  &  N.  R. 
R.  Co.  (June,  1917),  —  U.  S.  — ,  supra,  Sec.  547,  holding  Kentucky 
statutory  remedy  inadequate  to  bar  resort  to  equity. 

2  Supreme  Court  in  In  re  Tyler,  149  U.  S.  164,  189,  37  L.  Ed.  689 
(1893). 

3  Taylor  v.  L.  &  N.  R.  R.  Co.,  31  C.  C.  A.  537,  88  Fed.  350  (1898) .  In 
New  York  the  jurisdiction  of  certiorari,  to  correct  inequalities  in  assess- 
ments, is  enlarged  by  statute. 


§    625  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  719 

In  the  Sixth  Circuit  it  was  held  by  Judge  Taft^  that,  where 
a  State  statute  gives  a  remedy  by  injunction  against  the  assess- 
ment and  collection  of  taxes  on  the  ground  of  illegality,  this 
statute  is  a  sufficient  reason  for  exercising  the  equity  jurisdic- 
tion of  the  Federal  court.  The  court  based  this  ruling  upon 
the  principle  stated  by  Justice  Miller  in  the  case  of  Cummings 
V.  Bank,  2  that  Federal  courts  of  equity  will  enforce  new  equit- 
able rights  conferred  by  State  statutes.  Judge  Taft  said,  at  p. 
504: 

*'The  main  purpose  of  See.  723  of  the  Revised  Statutes  was 
to  emphasize  the  necessity  for  preserving  to  litigants  in 
courts  of  the  United  States  the  right  to  trial  by  jury  secured 
by  the  Seventh  Amendment  in  suits  at  common  law,  and  that, 
where  a  State  statute  grants  to  litigants  in  its  courts  an  equit- 
able remedy  which  does  not  impinge  on  their  right  to  a  trial 
by  jury  at  common  law,  courts  of  the  United  States,  sitting  in 
the  State  as  courts  of  equity,  may  grant  the  same  statutory 
relief  as  that  afforded  by  the  State  tribunals." 

§  625.  Jurisdiction  and  Procedure  in  Equity. — When  the 
Federal  jurisdiction  is  invoked  upon  substantial  grounds  of 
Federal  law  in  the  District  Court,  whether  based  on  adverse  citi- 
zenship or  on  the  existence  of  a  Federal  question  in  the  cause, 
the  jurisdiction  as  already  shown,  extends  to  the  determination 
of  all  questions  involved  in  the  case,  whether  resting  upon  State 
or  Federal  law.  The  Federal  court  may  defer,  and  does  defer, 
to  the  State  court  as  to  the  construction  of  the  State  statutes 
and  will  also  defer  to  the  findings  of  quasi  judicial  bodies,  as 
State  Boards  of  Equalization,  on  questions  of  fact;  and  such 
judgments  are  quasi  judicial  in  their  character,  which  will  not 
be  set  aside  in  the  absence  of  fraud,  unless  it  appears  that  the 
Board  proceeded  upon  an  improper  principle. 

State  as  well  as  local  franchise  taxes  based  upon  an  assess- 
mfnt  of  the  intangible  property  of  public  service  corporations 
made  by  the  State  Board  of  Equalization,  may  be  enjoined  by 
the  Federal  court  for  unlawful  discrimination,  where  the  proper 


iGrether  t.  Wright,  23  C.  C.  A.  498,  73^  Fed.  742  (1896). 
a  101  U.  S.  153,  supra,  Sec.  313. 


720  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    626 

State  officers  charged  with  the  enforcement  of  the  tax  laws  of 
the  State,  are  made  parties.^ 

The  proper  parties  to  an  equitable  suit  for  determining  the 
property  of  a  railroad  company  or  other  corporation  for  taxa- 
tion, are  determined  by  the  ordered  rules  of  equity  procedure. 
Thus,  a  holder  of  mortgage  bonds  of  a  railroad  company  has 
such  an  interest  in  its  property  as  entitles  him  to  maintain  a 
suit  to  enjoin  its  illegal  taxation  where  a  proper  showing  is 
made  of  the  refusal  of  a  mortgage  trustee  to  prosecute  such 
suit;  but  a  judgment  in  such  a  suit  where  the  company  was  a 
party,  is  not  res  judicata  as  to  holders  of  mortgage  bonds  of  the 
company  previously  issued  when  no  one  representing  the  mort- 
gage interest  was  a  party.^  "Where  illegality  affects  the  amount 
of  the  tax  complained  of,  as  where  it  exceeds  a  constitutional 
or  statutory  limit  as  to  amount,  the  entire  tax  is  not  rendered 
void,  and  a  Court  of  Equity  would  enjoin  collection  only  of  the 
unauthorized  excess.^ 

A  complainant  is  not  debarred  from  maintaining  a  suit  to 
enjoin  the  enforcement  of  taxes  illegally  levied  upon  lands,  al- 
though he  was  not  the  owner  of  the  land  at  the  time  of  the  il- 
legal levy;  nor  is  the  failure  to  allege  his  ownership  material 
if  no  objection  is  taken  to  the  pleadings  and  the  proof  estab- 
lishes his  ownership.^ 

§  626.  Equity  No  Jurisdiction  to  Levy  a  Tax.  —  It  is  a 
fundamental  principle  that  the  power  of  taxation  is  legislative, 
and  cannot  be  exercised  otherwise  than  under  legislative  au- 
thority, even  when  there  has  been  an  assessment  and  levy  of 
the  tax  so  that  the  amount  due  from  each  taxpayer  is  exactly 


1  See  L.  &  N.  R.  R.  v.  Green   (1917),  supra.  Sec.  547. 

2  See  Wicomoco  County  Commissioners  et  at.  v.  Bancroft,  C.  C.  A. 
4th  Circuit,  135  Fed.  977   (1905),  affirming  121  Fed.  874. 

3Cottrell  V.  Union  Pacific  R.  R.  Co.,  C.  C.  A.  8th  Circuit,  201  Fed. 
39    (1912). 

4  Clearwater  Timber  Co.  v.  Schoshone  County,  155  Fed.  612  (1907). 
As  to  the  right  of  the  lessee  of  university  lands  to  maintain  a  suit 
to  restrain  the  State  from  levying  and  collecting  taxes,  see  University 
of  the  South  v.  Jettson,  155  Fed.  182   (1907). 


§    627  FEDERAL   REMEDIAL   LAW   IN    STAT?   TAXATION.  721 

ascertainable,  and  in  the  absence  of  legislative  authority  a 
court  has  no  power  to  collect  the  tax  and  pay  it  over  to  the 
party  entitled  thereto.^ 

In  the  case  cited  it  was  sought  to  subject  certain  real  estate 
owned  by  the  defendant  to  the  payment  of  the  judgment.  It 
seems  that  a  tax  had  been  levied  and  the  property  duly  as- 
sessed. The  taxpayers  of  the  district  had  repudiated  their  in- 
debtedness which  had  been  incurred  in  the  aid  of  the  construc- 
tion of  a  railroad ;  and  a  mob  had  prevented  a  sale  of  the  prop- 
erty by  the  sheriff  and  the  collection  of  the  tax.  The  complain- 
ant had  recovered  judgments  in  the  Federal  court  on  these 
bonds  and  then  had  brought  another  suit  in  the  court  against 
a  single  taxpayer  for  the  collection  of  a  tax  assessed  against 
him  by  enforcing  this  lien.  The  court  held  that  in  the  absence 
of  legislation  expressly  authorizing  such  proceeding,  the  court 
had  no  power  to  grant  the  relief  sought. 

It  was  held^  that  such  a  suit  was  ancillary  to  the  original  ac- 
tion and  within  the  jurisdiction  of  the  court,  irrespective  of  the 
amount  in  controversy. 

§  627.    Habeas  Corpus  as  Remedy  for  Illegal  Taxation. — 

The  collection  of  license,  privilege  and  other  occupation  taxes 
is  usually  enforced  by  criminal  prosecutions,  with  a  penalty  of 
fine  or  imprisonment  for  prosecuting  the  business  without  a 
license.  Where  the  latter  penalty  is  imposed,  the  United  States 
Circuit  (District)  Courts  have  in  a  number  of  cases  on  writ  of 
habeas  corpus  released  the  party  from  prison,  on  the  ground 
that  such  imprisonment  was  in  violation  of  the  Constitution  and 
laws  of  the  United  States,  that  being  a  ground  for  the  issue  of 
the  writ  by  the  Federal  courts  under  the  United  States  statute. s 


1  Preston  v.  Sturgis  Mills  Co.,  183  Fed.  1  (1910),  C.  C.  A.,  6th  Cir- 
cuit. 

2  Preston  v.  Calloway,  183  Fed.  19  (1910). 

3  Sec.  753,  R.  S.  U.  S.  In  Asher  v.  Texas,  128  U.  S.  129,  32  L.  Ed. 
368  (1888),  reversing  23  Tex.  App.  662,  the  plaintiff  in  a  writ  of 
habeas  corpus  was  ordered  discharged  by  the  United  States  court  on 
this  ground,  and  the  judgment  of  the  State  Supreme  Court,  denying 
the  writ,  was  reversed. 


722  FEDERAL    REMEDIAL   LAW    IN    STATE   TAXATION,  §    628 

But  the  rule  is  now  established  in  the  Federal  courts  that  this 
writ  cannot  be  used  to  perform  the  office  of  a  writ  of  error  or  of 
an  appeal.  It  is  the  settled  and  proper  procedure,  said  the 
court  in  a  recent  ease,i  that  this  writ  should  not  be  issued,  where 
the  petitioner  is  imprisoned  for  violation  of  a  State  law,  unless 
in  eases  of  peculiar  urgency;  that  instead  of  discharging  they 
will  leave  the  prisoner  to  be  dealt  with  by  the  courts  of  the 
State,  and  that,  after  a  final  determination  of  the  case  by  the 
State  court,  the  Federal  courts  will  even  then  generally  leave 
the  petitioner  to  his  remedy  by  writ  of  error  from  the  Supreme 
Court..  The  reason  for  this  rule  of  procedure  is  that  the  juris- 
diction given  to  the  Federal  courts  to  discharge,  on  writ  of 
habeas  corpus,  the  prisoner  of  the  State  is  exceedingly  delicate, 
and  it  therefore  should  not  be  exercised,  unless  the  circum- 
stances are  of  an  exceptional  nature.  It  was  said,  however,  that 
a  different  question  would  be  presented,  if  a  party  were  com- 
pelled to  submit  to  imprisonment  notwithstanding  an  appeal  or 
writ  of  en^or,  before  the  final  determination  of  the  case  upon 
the  appeal. 2 

§  628.  Allowance  of  Interest  and  Penalties  in  Tax  Proced- 
ure.— Where  a  penalty  is  claimed  on  delinquent  taxes  the  true 
amount  of  the  claim  must  be  stated  and  no  penalty  is  incurred 
by  the  demand  of  a  larger  amount.  Subject  to  the  established 
principles  and  rules  of  equity,  the  terms  on  which  a  court  of 
equity  will  grant  its  relief  such  as  the  rate  of  interest  on  taxes 
justly  owed  and  to  be  paid  by  a  complainant  as  a  condition  of 
an  injunction  against  the  collection  of  those  that  are  void  are 
discretionary  with  the  chancellor.3  It  was  held  in  this  ease 
that  a  penalty  of  18  per  cent  interest  on  delinquent  taxes  could 
not  be  collected  in  the  absence  of  a  demand  for  the  true  amount 
claimed. 


1  Baker  v.  Grice,  169  U.  S.  284,  42  L.  Ed.  748   (1898),  reversing  79 
Fed.  627.     See  also  In  re  Swan,  150  U.  S.  637,  37  L.  Ed.  1007  (1893). 

2  See   paper   by    Seymour    D.    Thompson,    Am.    Bar    Assn.,    1883,    on 
"Abuses  of  Habeas  Corpus." 

3  Ritterbush  v.  A.  T.  &  S.  F.  Ry.  Co.,  198  Fed.  46,  C.  C.  A.,  8th  Cir- 
cuit   (1912). 


§    629  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION. 


723 


Wliere  a  State  enacts  a  statute  for  the  collection  of  occupa- 
tion taxes  for  civil  suit  or  criminal  prosecution,  the  taxpayer 
can  raise  the  question  of  the  constitutional  validity  of  the 
statute  as  a  whole  or  of  any  method  prescribed  for  the  collection 
of  the  tax.  With  regard  to  the  penalties  prescribed  in  such  a 
statute,  it  was  said  by  the  Supreme  Court^  that  the  penalties 
are  not  so  necessarily  connected  with  the  other  part  of  the  stat- 
ute as  to  vitiate  the  entire  act,  even  if  that  provision  should  be 
held  to  be  void.  The  right  of  the  State  by  a  civil  suit  to  re- 
cover the  taxes  imposed  is  wholly  independent  of  its  right  to 
recover  the  prescribed  penalties. 

§  629.  Equitable  Relief  Barred  by  Collusion.— A  suit  in 
equity  by  a  stockholder  against  a  corporation,  to  restrain  it 
from  paying  an  Alaskan  license  tax,  was  held  properly  dis- 
missed where  the  corporation  made  no  serious  defense  and  there 
was  no  showing  of  irreparable  injury,  or  of  any  effort  to  secure 
action  of  the  corporation  or  its  directors  as  is  required  by 
Equity  Rule  94,  other  than  a  demand  on  the  resident  managing 
agent,  the  distance  of  such  directors  from  the  place  where 
plaintiff  resided,  and  in  which  the  court  was  held,  being  relied 
upon  as  an  excuse  for  not  making  any  further  effort.^  The 
court  said  that  the  facts  tended  to  show  that  the  suit  was  a 
collusive  one,  which  the  court  should  not  entertain.  The  court 
said  it  did  not  involve  an  attempt  to  transfer  from  a  State  to  a 
Federal  court  a  controversy  which  really  belonged  to  the  for- 
mer, as  there  were  none  other  than  Federal  courts  in  the  terri- 
tory ;  yet  the  principle  was  the  same,  for  it  was  an  effort  to  se- 
cure, for  the  benefit  of  the  corporation,  an  injunction  which  it 
could  not  itself  obtain,  and  which  no  individual  similarly  sit- 
uated could  obtain. 


1  Southwestern  Oil  Co.  v.  Texas,  217  U.  S.  114,  54  L.  Ed.  688  (1910). 
affirming  100  Texas  647.  See  also  Cottrell  v.  Union  Pack.  Co.,  supra. 
Sec.  625. 

2Corbu8  V.  Alaska  Treadwell  Gold  Mining  Co.,  187. U.  S.  455,  47  L. 
Ed.  256,  affirming  99  Fed.  334   (1903). 


724  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    630 

§  630.  State  Can  Only  be  Sued  With  Its  Consent. — A  sove- 
reign State  cannot  he  sued,  except  with  its  own  consent.  This 
immunity  is  secured  to  the  States  of  the  American  Union  by  the 
Eleventh  Amendment  to  the  Constitution  of  the  United  States, 
and  it  is  immaterial  that  the  case  arises  under  the  Constitution, 
or  laws,  or  treaties  of  the  United  States,^ 

When  it  appears  that  the  State  is  an  indispensable  party  to 
enable  the  Federal  court,  according  to  the  rules  which  govern 
its  procedure,  to  grant  the  relief  sought,  it  will  decline  to  take 
juris(^ietion.2    The  court  said,  however,  in  this  ease : 

"In  the  desire  to  do  that  justice,  which  in  many  cases  the 
courts  can  see  will  be  defeated  by  an  unwarranted  extension 
of  this  principle,  they  have  in  some  instances  gone  a  long  way 
in  holding  the  State  not  to  be  a  necessary  party,  though  some 
interest  of  hers  may  be  more  or  less  affected  by  the  decision." 

The  failure  of  several  States  of  the  Union  to  pay  debts  which 
they  contracted  to  pay,  in  connection  with  their  immunity  from 
suit,  has  led  to  numerous  efforts  to  compel  the  performance  of 
these  obligations  through  judicial  proceedings.  Thus  an  effort 
was  made  to  invoke  the  original  jurisdiction  of  the  Supreme 
Court,  which  extends  to  controversies  between  two  or  more 
States.3  This  was  sought  to  be  effected  by  citizens  of  New  York 
and  New  Hampshire,  who  transferred  certain  State  bonds  of 
Louisiana  to  their  respective  States,  so  that  suit  was  brought  in 
the  name  of  those  States  against  the  State  of  Louisiana  in  thci 
Supreme  Court.     That  tribunal,  however,  declined  to  take  jur- 


iHans  V.  Louisiana,  134  U.  S.  1,  33  L.  Ed.  842  (1900),  holding  that 
this  immunity  of  the  State  from  suits  by  citizens  of  other  States,  and 
citizens  or  subjects  of  foreign  States  extends  to  suits  by  its  own  citi- 
zens. The  court  in  its  opinion  questions  the  decision  in  Chisholm  v. 
Georgia,  2  Dallas  419,  which  occasioned  the  adoption  of  the  Eleventh 
Amendment. 

2  Cunningham  v.  Macon  &  Brunswick  R.  Co.,  109  U.  S.  446,  27  L.  Ed. 
992  (1883).  See  also  Coulter  v.  Weir,  127  Fed.  897,  C.  C.  A.,  6th  Circuit 
(1904).  See  also  Gunter  v.  Atlantic  Coast  Line,  200  U.  S.  273,  50  L.  Ed. 
477  (1905). 

8  Constitution,  Art.  Ill,  Sec.  2. 


§    631  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  725 

isdiction,^  saying  that  one  State  cannot  create  a  controversy 
with  another  State,  within  the  meaning  of  the  Constitution,  by 
assuming  the  prosecution  of  debts  owing  by  the  other  State  to 
its  citizens. 

When  the  State  gives  its  consent  to  be  sued  by  providing,  as  is 
sometimes  done,  that  claims  for  illegal  assessments  can  be  made 
through  suit  against  certain  officials  in  certain  of  its  OAvn  courts, 
this  suit  cannot  be  brought  in  the  Federal  court.  Such  a  suit, 
brought  in  the  United  States  Circuit  (District)  Court,  was  held 
properly  dismissed,  as  it  was  in  effect  one  against  the  State  it- 
self, and  the  State  had  not  consented  to  be  sued  except  in  one 
of  its  own  courts.  2 

§  631.  Suit  Against  State  and  Against  State  Officials  Dis- 
tinguished.— ^A  suit  is  in  effect  one  against  a  Sate,  within  the 
prohibition  of  the  Eleventh  Amendment,  when  the  only  remedy 
sought  is  the  performance  of  a  contract  by  the  State,  and  the 
nominal  defendants  have  no  personal  interest  in  the  subject- 
matter  of  the  suit,  but  only  as  representing  the  State.  A  dis- 
tinction is  made  between  cases,  where  affirmative  official  action 
is  sought  from  State  officials  performing  an  obligation,  which 
the  State  owes  in  its  political  capacity,  and  actions  at  law^  or 
suits  in  equity  maintained  against  those  who,  while  claiming  to 
act  as  officers  of  the  State,  violate  and  invade  personal  or  prop- 
erty rights.  In  the  latter  class  of  cases  the  officer  is  sued,  not 
as  or  because  he  is  the  officer  of  the  government,  but  as  an  indi- 
vidual, and  the  court  is  not  ousted  of  jurisdiction  because  he  as- 
serts authority  as  a  State  official.  To  make  out  his  defense  he 
must  show  that  his  authority  was  sufficient  in  law  to  protect 
him.  4 

Thus  suits  against  State  officials  to  compel  the  performance 
by  the  State  of  its  contracts,  by  seeking  to  enjoin  them  from 


1  New  Hampshire  r.  Louisiana,  New  York  v.  Louisiana,  108  U.  S. 
76,  27  L.  Ed.  656   (1883). 

2  Smith  V.  Reeves,  178  U.  S.  436,  44  L.  Ed.  1140   (1900). 

»See  Cunningham  v.  Railroad,  109  U.  S.  446,  27  L.  Ed.  992   (1884); 
United  States  v.  Lee,  106  U.  S.  196,  27  L.  Ed.  171   (1883). 
<Hagood  V.  Southern,  117  U.  S.  52,  29  L.  Ed.  805   (1886). 


726  FEDERAL   REMEDLU.   LAW    IN    STATE   TAXATION.  §    631 

bringing  suits  against  taxpayers  reported  to  be  delinquent,  but 
who  had  tendered  tax  receivable  coupons  in  payment  of  taxes/ 
to  compel  the  levy  of  taxes  authorized  by  a  former  law,  but  con- 
trary to  subsequent  legislation, 2  and  to  compel  the  State  to  per- 
form specifically  a  contract  for  the  receipt  of  the  State  scrip 
for  taxes,3  were  all  held  to  be  in  effect  suits  against  the  State 
and  within  the  inhibition  of  the  Eleventh  Amendment.  A  State 
therefore  cannot  be  compelled  by  suit  to  perform  its  contracts, 
that  is,  its  immunity  from  suit  prevents  the  judicial  power  from 
being  used  to  compel  the  performance  of  its  contracts.  In  the 
language  of  the  Supreme  Court : 

"Its  contracts  are  substantially  without  sanction  except 
that  which  arises  out  of  the  honor  and  good  faith  of  the 
State  itself,  and  these  are  not  subject  to  coercion." 

The  contract  clause  of  the  Constitution,  however,4  prohibits 
laws  impairing  the  obligation  of  contracts.  If  such  laws  are 
passed,  they  are  unconstitutional  and  void.  The  remedies  avail- 
able to  parties  who  hold  contracts  of  the  State,  as  scrip  or  notes 
receivable  for  taxes,  which  are  thus  protected  against  impair- 
ment by  subsequent  legislation,  were  discussed  in  the  Virginia 
Coupon  Cases.5 

Under  the  same  principle,  where  the  act  to  Be  done  or  omitted 
by  the  public  official  is  purely  ministerial,  in  the  performance 
or  omission  of  which  the  plaintiff  has  a  legal  interest,  that  per- 
formance or  omission  may  be  enforced  by  the  court.e  In  such 
cases,  said  the  Supreme  Court,  the  writs  of  mandamus  and  in- 
junction are  somewhat  correlative  to  each  other.  In  either  case, 
if  the  officer  pleads  the  authority  of  an  unconstitutional  law  for 


1  In  re  Ayers,  123  U.  S.  443,  31  L.  Ed.  216  (1888). 

2  Louisiana  ex  rel.  N.  Y.  Guaranty  Co.  v.  Steele,  134  U.  S.  230,  33  L. 
Ed.  891  (1900).  See  also  as  to  the  same  distinction,  Pennoyer  v.  Mc- 
Connaughy,  140  U.  S.  1,  35  L.  Ed.  363  (1891);  Reagan  v.  Farmers- 
Loan  &  Trust  Co.,  154  U.  S.  362,  38  L.  Ed.  1014  (1894). 

3  Hagood  V.  Southern,  117  U.  S.  52,  supra. 

4  See  Ch.  II,  supra. 

B  See  Virginia  Coupon  Cases,  supra.  Sec.  56. 

6  Board  of  Liquidation  v.  McComb,  92  U.  S.  531,  23  L.  Ed.  623  (1876). 


§   632  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  727 

the  non-perforaiance  of  his  duty,  it  will  not  prevent  the  issue 
of  the  writ.  An  unconstitutional  law  will  be  treated  by  the 
courts  as  null  and  void.  This  is  the  principle  applied  by  the 
court  in  enforcing  by  writ  of  mandamus  the  levy  of  a  tax  for 
the  pajTnent  of  municipal  bonds,  i 

The  distinction  was  also  made,  in  the  Virginia  Coupon  Cases,^ 
between  the  State  itself  and  the  government  of  the  State,  and  a 
statute  enacted  by  the  State  in  violation  of  the  Constitution  of 
the  United  States  was  held  in  contemplation  of  law  to  be  no  law, 
and  therefore  a  tax  official  assuming  to  act  thereunder  had  no 
official  sanction  for  his  act. 

The  immunity  of  a  State  from  suit  does  not  extend  to  the 
municipalities  created  by  the  State;  nor  does  it  prevent  the  re- 
covery of  money  collected  by  tax  officials  for  the  State  and  paid 
under  protest,  when  the  money  collected  had  not  in  effect  passed 
into  the  State  treasury,  this  of  course  being  dependent  upon  the 
laws  of  the  State,  s 

§  632.  Where  Jurisdiction  Depends  Upon  Party,  it  is  Party 
Named  in  Record. — Under  the  distinctions  stated  in  the  cases 
cited,  the  legal  immunity  of  a  State  from  suit  does  not  prevent 
the  equitable  resistance  of  the  levy  of  an  illegal  tax.  The  assess- 
ment and  collection  of  taxes  must  be  made  through  officials,  and 
they  are  subject  to  legal  process  like  other  individuals.^  It  was 
said  in  Osbom  v.  Bank  of  the  United  States,s  by  Chief  Justice 
Marshall,  in  sustaining  an  injunction  against  the  levying  of  a 
license  tax  upon  the  branch  of  the  United  States  Bank  in  Ohio, 
that,'  in  all  cases  where  jurisdiction  depends  upon  the  party,  it 
is  the  party  named  in  the  record,  not  the  party  interested  in  the 
cause.  This  broad  statement  has  been  modified  to  the  extent  of 
holding  that,  where  the  suit  is  in  effect  one  against  the  State,  as 


1  Seibert  v.  Lewis,  122  U.  S.  284,  32  L.  Ed.  1161   (1887),  and  infra. 
Sec.  640. 

2  Supra,  Sec.  58. 

3  University  of  tlie  South  v.  Jettson,  155  Fed.  182   (1907). 
*  Supra,  Sec.  600. 

«  Supra,  Sec.   8. 


728       FEDERAL  REMEDI.U.  LAW  IN  STATE  TAXATION.     §  633 

in  the  eases  cited,  and  the  State  is  the  real  defendant,  and  there- 
fore an  indispensable  party,  the  jurisdiction  must  fail  though 
the  State  is  not  a  party  to  the  record.^  It  was  said  by  the  Su- 
preme Court,^  however,  that,  while  this  ruling  in  Osborn  v. 
Bank  of  the  United  States  had  been  qualified  to  a  certain  degree 
by  some  of  the  subsequent  decisions  of  the  Supreme  Court,  yet 
the  general  doctrine  there  announced,  that  the  Circuit  Courts 
of  the  United  States  will  restrain  a  State  officer  from  executing 
the  unconstitutional  statute  of  a  State,  when  to  execute  it  would 
be  to  violate  rights  and  privileges  of  the  complainant  that  had 
been  guaranteed  by  the  Constitution  and  would  do  irreparable 
damage  and  injury  to  him,  had  never  been  departed  from.  If 
an  individual,  acting  under  the  assumed  authority  of  a  State  as 
one  of  its  officers  and  under  color  of  its  laws,  comes  into  conflict 
with  the  superior  authority  of  a  valid  law  of  the  United  States, 
he  is  stripped  of  his  authority  and  subjected  to  the  consequences 
of  his  conduct.  A  State  has  no  power  to  impart  to  him  any  im- 
munity from  responsibility  to  the  supreme  authority  of  the 
United  States. 3 

Although  the  tax  law  may  not  of  itself  be  illegal,  it  may  be 
wrongfully  administered  by  officers  of  the  State,  so  as  to  make 
the  administration  an  illegal  burden  and  exaction  upon  the  in- 
dividual and  a  violation  of  his  constitutional  rights.  In  such  a 
case  the  fact  that  the  officer  assumes  to  act  under  a  valid  law 
will  not  oust  the  courts  of  their  jurisdiction  to  restrain  his  ex- 
cessive and  illegal  acts.  4 

§  633.  Collection  of  Taxes  on  Property  in  Possession  of 
Receiver  of  Federal  Court. — When  property  is  in  the  posses- 
sion of  a  receiver  appointed  by  a  court  of  the  United  States, 
it  is  not  subject  to  seizure  for  State  taxes.  The  exclusive  rem- 
edy of  the  tax  collector  is  to  make  application  in  the  court  which 


1  In  re  Ayers,  123  U.  S.  443,  488,  supra,  Sec.  631. 

2  In  re  Tyler,  149  U.  S.  164,  191,  supra,  Sec.  631, 

3  In  re  Ayers,  123  U.  S.,  p.  507,  supra,  Sec.  631. 

4  Reagan  v.  Farmers'  Loan  &  Trust  Co.,  154  U.   S.   390. 

For    jurisdiction    of   equity    over    State    Boards    of    Equalization    in 
assessment  of  interstate  railroad  properties,  see  Sec.  546-547   (supra). 


)   633  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  729 

appointed  the  receiver,  where  the  priority  of  payment  granted 
by  the  laws  of  the  State  will  be  recognized  and  enforced.^  The 
receiver  of  the  court  in  charge  of  a  railroad  may  obtain  an  in- 
junction preventing  the  officer,  pendente  lite,  from  seizing  prop- 
erty.- 

The  Act  of  Congress^  permits  a  receiver  to  be  sued  without 
leave  of  court,  but  provides  that  such  suit  shall  be  subject  to 
the  general  equity  jurisdiction  of  the  court  in  which  the  re- 
ceiver was  appointed  and  that  the  receiver  shall  manage 
the  property  according  to  the  valid  laws  of  the  State  in 
which  such  property  shall  be  situated.  The  Supreme  Court 
said,  in  the  case  cited,  that  property  in  possession  of  the 
receiver  is  already  in  sequestration,  already  held  in  equitable 
execution,  and  that,  while  the  lien  of  the  taxes  must  be  recog- 
nized and  enforced,  the  orderly  administration  of  justice  re- 
quires this  to  be  done  by  and  under  the  sanction  of  the  court. 
The  receiver  in  that  case  had  filed  a  bill  in  equity  to  restrain 
the  collection  of  the  taxes,  on  the  ground  that  they  were  uncon- 
stitutional and  illegal  in  part,  tendering  the  amount  alleged  to 
be  due.  The  court  had  thereupon  granted  an  injunction  in 
violation  of  which  the  sheriff  levied  on  the  railroad  cars  and 
was  committed  for  contempt.  He  sued  out  a  writ  of  habeas 
corpus,  claiming  that  the  suit  was  in  effect  one  against  the 
State,  and  that  the  statutes  of  North  Carolina  provided  a  stat- 
utory remedy  for  illegal  assessment  and  taxation.  But  the  Su- 
preme Court  said  that  the  legislature  of  a  State  cannot  deter- 
mine the  jurisdiction  of  the  courts  of  the  United  States,  and 
that,  as  the  property  was  in  the  custody  of  the  Circuit  Court, 
under  possession  taken  in  a  case  confessedly  within  its  juris- 
diction, the  petitioner  was  in  contempt  and  the  court  was  pos- 
sessed of  full  power  to  vindicate  its  dignity  and  compel  respect 
of  its  mandates. 


i/n  re  Tyler,  149  U.  S.  164,  supra. 

2  Clark  V.  McGhee,  31  C.  C.  A.  321  (5th  Cir.).  87  Fed.  789  (1898). 
Central  Trust  Co.  v.  Wabash  Ry.  Co.,  26  Fed.  11,  contra,  was  decided 
before  the  Tyler  case. 

8  24  Statutes  552,  c.  373. 


730  FEDERAL    REMEDLU.    LAW   IN    STATE   TAXATION.  §    635 

§  634.    Objections  to  Jurisdiction  and  Defenses  to  Merits. 

—The  distinction  between  objections  to  the  jurisdiction  of  the 
United  States  Circuit  Court  to  try  a  suit  seeking  to  enjoin  a 
State  tax  and  defenses  which  go  to  the  merits  and  not  to  the 
jurisdiction  was  illustrated  in  a  case  from  Mississippi.^  The 
United  States  Circuit  Court  dismissed  for  want  of  jurisdiction 
a  bill  of  a  railroad  company  seeking  an  injunction  against  a  tax 
collector  on  the  ground  of  an  alleged  contract  of  exemption. 
Plaintiff  appealed.  In  the  Supreme  Court,  motion  was  made 
to  dismiss  the  bill,  because  the  assessment  had  been  completed, 
suit  brought  for  the  taxes,  and  judgment  recovered  in  the  State 
court.  The  court,  however,  denied  the  motion,  holding  that  this 
was  a  defense  to  the  merits,  not  the  jurisdiction,  and  that  it  did 
not  follow  that  the  judgment  might  not  be  reversed,  as  an  ap- 
peal to  the  State  Supreme  Court  was  pending  undetermined. 
Neither  was  a  question  of  jurisdiction  raised  by  the  fact  that 
the  plaintiff  did  not  show  its  right  to  proceed  under  the  94th 
equity  rule,  as  this  did  not  raise  a  question  of  jurisdiction,  but 
of  the  authority  of  plaintiff  to  maintain  the  bill.  The  court 
said,  p.  34 : 

**  Jurisdiction  is  the  right  to  put  the  wheels  of  justice  in 
motion  and  to  proceed  to  the  final  determination  of  the  cause 
upon  the  pleadings  and  the  evidence." 

It  was  further  said  that  motions  are  generally  appropriate 
only  in  the  absence  of  remedies  by  regular  pleadings,  and  cannot 
be  made  available  to  settle  important  questions  of  law  or  to  dis- 
pose of  the  merits  of  the  ease.  The  decrees  of  the  circuit  court 
were  therefore  reversed  and  remanded  for  hearing  upon  the 
merits. 

§  635.    Overvaluation  Not  a  Defense  in  Action  at  Law. — It 

was  held  by  the  Supreme  Court,  affirming  a  judgment  of  the 
Supreme  Court  of  Missouri  in  an  action  at  law  by  a  tax  collector 
for  the  collection  of  taxes  from  a  foreign  telegraph  company  in 

1  Illinois  Central  R.  R.  v.  Adams,  180  U.  S.  28,  45  L.  Ed.  410  (1901). 
Risley  v.  Utica.  179  Fed.  875  (N.  D.,  N.  Y.)  (1909),  where  laches  was 
held  to  mar  a  remedy. 


§    636  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  731 

Missouri,  that  discrimination  or  overvaluation  by  a  State  Board 
of  Equalization  in  assessing  the  property  for  purposes  of  taxa- 
tion was  not  a  ground  of  defense  in  such  an  action  at  law  to 
collect  taxes.^  The  court  said  that  the  action  of  the  taxing  offi- 
cers being  in  the  nature  of  a  judgment,  must  be  yielded  to  until 
set  aside ;  and  this  could  only  be  done  in  a  direct  proceeding. 
The  property  owner  was  in  effect  the  plaintiff  in  such  a  pro- 
ceeding, and  a  condition  of  relief  against  the  enforcement  of  a 
quasi  judicial  order,  which  he  attacks,  is  a  tender  of  payment 
of  the  taxes  that  he  ought  to  pay ;  and  this  condition  would  still 
be  upon  him  if  he  set  up  overvaluation  as  an  equitable  defense 
to  an  action  brought  against  him.  In  this  case  the  defendant 
made  no  tender  but  sought  to  defeat  the  whole  assessment  with- 
out paying  or  tendering  anything. 

§  636.    Effect  of  Prior  Adjudication  in  State  Court.— Where 

it  was  contended  that  the  capital  stock  of  a  bank  was  by  con- 
tract exempted  from  taxation  under  its  charter  and  it  was 
claimed  in  the  Federal  court  that  this  exemption  was  estab- 
lished by  a  prior  judgment  in  the  State  court  which  was  pleaded 
as  res  judicata,  the  courts  of  the  United  States  can  give  no 
greater  efficacy  to  such  a  prior  judgment  than  is  given  it  in  the 
State  courts,  and  as  it  appeared  that  in  the  State  court  such  a 
judgment  only  operated  as  a  bar  to  the  identical  taxes  litigated, 
that  is,  for  the  years  involved,  no  greater  effect  could  be  given 
to  the  judgment  in  the  Federal  court  where  the  taxes  of  other 
years  were  involved. 2 

In  a  suit  involving  the  validity  of  the  taxation  of  member- 
ship in  the  Chamber  of  Commerce  in  Minnesota,^  a  decision  of 
the  State  court  affirming  a  decree  below,  which  dismissed  a  suit 
to  cancel  certain  tax  assessments  and  to  enjoin  collection  of  the 
tax,  could  not  be  said  to  rely  only  upon  a  ground  independent 


1  Western  Union  Tel.  Co.  v.  Missouri,  ex  rel,  190  U.  S.  412,  47  L. 
Ed.  1116  (1903),  affirming  165  Mo.  502.  Southwestern  Oil  Co.  v.  Texas, 
217  U.  S.  114,  54  L.  Ed.  688   (1910),  affirming  100  Texas  647. 

a  Union  &  Planters  Bank  v.  Memphis,  189  U.  S.  71,  47  L.  Ed.  712 
(1903),  reversing  111  Fed.  561.  , 

3  Rogers  v.  Hennepin,  supra. 


732  FEDERAL   REMEDIAL.   LAW   IN    STATE   TAXATION.  §    638 

of  the  Federal  questions  raised  as  to  the  validity  of  the  tax, 
where  the  sole  reason  assigned  by  the  court  for  its  decision  was 
the  controlling  effect  of  its  prior  decision  in  an  action  by  the 
State  to  recover  the  tax  in  which  some,  though  not  all,  of  the 
same  objections  as  to  the  validity  of  the  tax  under  the  Federal 
Constitution  were  raised  and  overruled.  The  court  therefore 
considered  the  case  on  its  merits  and  affirmed  the  judgment  of 
the  Circuit  Court* 

§  637.  Judiciary  Concluded  by  Decision  of  Political  De- 
partment of  Government. — Our  form  of  government,  national 
aiid  State,  is  based  upon  the  distinction  between  the  great  de- 
partments of  government,  and  the  judiciary  will  follow  the  de- 
cision of  the  legislative  or  political  department,  on  a  subject 
lawfully  determined  thereby,  although  such  decision  may  inci- 
dentally affect  property  rights.  Thus  the  Supreme  Court  held^ 
that  a  taxpayer  in  Alexandria,  Virginia,  was  estopped  from  re- 
sisting the  collection  of  taxes  on  the  ground  that  the  annexation 
to  Virginia  was  illegal,  and  that  the  county  was  in  the  jurisdic- 
tion of  the  District  of  Columbia.  The  court  said, that  the  judi- 
ciary would  follow  the  action  of  the  political  department  of  the 
government,  which  had  uniformly  recognized  the  transfer  as  a 
settled  fact,  the  State  of  Virginia  having  been  in  de  facto  pos- 
session of  the  County  of  Alexandria  since  1847. 

§  638.  No  Equity  Jurisdiction  in  Federal  Courts  to  En- 
force Levy  of  Tax. — The  application  of  the  contract  clause  in 
the  Constitution  of  the  United  States  to  the  right  to  a  levy  of 
taxes  in  enforcement  of  municipal  obligations  is  established.3 
But  this  right  cannot  be  enforced  through  a  suit  in  chancery  to 
compel  the  levy  of  the  tax.  The  appropriate,  though  not  al- 
ways effective  remedy,  is  an  action  at  law,  the  establishment  by 
judgment  of  the  validity  of  the  claim  and  of  the  amount  due, 
and  then  a  mandamus,  on  the  return  of  the  execution  unsatis- 


1  Affirming  124  Minn.   139. 

2  Phillips  V.   Payne,   92   U.   S.  130,  23  L.  Ed.   649    (1876),  following 
Luther  v.  Borden,  7  How.  1,  12  L.  Ed.  581   (1849). 

«  Supra,  Sec.  73. 


§  639     FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.       733 

fied,  requiring  the  proper  municipal  authority  to  raise  by  taxes 
the  .amount  necessary  to  satisfy  the  debt.  The  right  to  this 
remedy  is  dependent  upon  the  authority  of  the  corporation  to 
levy  and  collect  taxes  for  their  pa^^nent.^ 

The  mere  fact  that  the  remedy  by  mandamus  has  proven  in- 
effectual, and  that  no  officer  can  be  found  to  perform  the  duty 
of  levying  and  collecting  the  taxes  constitutes  no  sufficient 
ground  of  equity  jurisdiction.  The  principle  is  the  same  if  no 
one  can  be  found  to  act  as  tax  collector  of  regular  taxes,  and  yet 
this  gives  no  jurisdiction  to  a  court  of  equity  to  fill  the  office 
or  appoint  a  receiver  to  perform  its  functions.  Inadequacy  of 
legal  remedy  does  not  consist  merely  in  failure  to  produce  the 
money  sought  to  be  collected,  as  that  is  a  misfortune  often  at- 
tendant upon  all  remedies.  The  remedy  must  be,  in  its  nature, 
not  fitted  or  adapted  to  the  end  in  view.^ 

§  639.  Mandamus  to  Issue  Tax. — "When  a  municipality  is 
authorized  to  issue  bonds,  this  authorization  implies  and  car- 
ries with  it,  in  the  absence  of  specific  provision,  the  power  to 
adopt  the  ordinary  means  employed  by  such  bodies  to  raise 
funds  for  the  payment  of  bonds,  and  the  ordinary  means  is 
taxation.  The  power  to  levy  a  tax  is  therefore  carried,  when 
authority  to  borrow  money  or  incur  an  obligation  is  conferred 
upon  a  municipality,  without  any  special  mention  that  such 
power  is  granted.  The  fact  that  specific  property  is  pledged 
for  the  payment  of  the  bonds,  e.  g.  the  railroad  stock  for  which 
the  bonds  were  issued,  does  not  make  them  any  the  less  the  gen- 
eral obligations  of  the  municipality,  nor  deprive  plaintiffs  of 
the  right  to  a  mandamtis,  compelling  the  levy  of  a  tax  for  their 
payment,  since  the  pledge  is  only  by  way  of  collateral  security. » 


1  Heine  v.  Levee  Commissioners,  19  Wall.  655,  22  L.  Ed.  223  (1874), 
Justices  Clifford  and  Swayne  dissenting;  Walkley  v.  Muscatine,  6 
Wall.  481,  18  L.  Ed.  930  (1868);  Rees  v.  Watertown,  19  Wall.  107,  22 
L.  Ed.  72  (1874);  Thompson  v.  Allen  County,  115  U.  S.  550,  29  L.  Ed. 
472    (1885),  Justice  Harlan  dissenting. 

'-  Thompson  v.  Allen  County,  supra. 

•■»  United  States  ex  rcl.  v.  New  Orleans,  98  U.  S.  381,  25  L.  Ed.  225 
(1879);  Ralls  County  v.  United  States,  105  U.  S.  736,  26  L.  Ed.  1220 
(1882);  Quincy  v.  Jackson,  113  U.  S.  337,  28  L.  Ed.  1001   (1885);  Scot- 


734  FEDERAL    REMEDIAL   LAW   IN    STATE    TAXATION.  §    640 

It  is  otherwise,  however,  when  the  power  to  tax  is  expressly 
limited  by  statute  at  the  time  of  the  issue  of  the  bonds,  so  that 
the  bondholder  by  the  terms  of  his  contract  is  only  entitled  to 
look  to  a  specific  tax  for  their  pa^Tnent.* 

County  auditors  and  treasurers,  who  are  the  instruments  em- 
ployed by  the  State  to  assess  and  collect  taxes,  may  be  com- 
pelled to  levy  a  tax  to  pay  a  judgment  on  township  bonds,  al- 
though the  corporate  existence  of  the  township  has  been  abol- 
ished by  the  State  Constitution  and  its  corporate  agents  re- 
inoved.2 

Any  uncertainty  or  indefiniteness  in  an  act  of  Congress,  pur- 
porting to  validate  bonds  issued  by  counties  of  the  territory  of 
New  Mexico,  could  not  be  urged  to  defeat  mandamus  to  compel 
the  levy  of  a  tax  to  pay  judgments  upon  such  bonds,  since 
whatever  defense  could  have  been  set  up  to  prevent  the  rendi- 
tion of  such  judgments  is  not  afterwards  available  to  prevent 
their  enforcement .3 

§  640.  Duty  of  Taxing  OflBcers  in  Mandamus.— The  writ 
of  mandamus  to  enforce  the  collection  of  judgments  of  the  Fed- 
eral courts  against  municipalities,  said  the  Court  of  Appeals  of 


land  County  Court  v.  Hill,  140  U.  S.  46,  35  L.  Ed.  351  (1891).  In  Find- 
lay  V.  McAllister,  113  U.  S.  104,  28  L.  Ed.  930  (1885),  it  was  held  that 
the  confederating  together  of  persons  to  prevent  the  levy  of  a  county 
tax  in  obedience  to  a  writ  of  mandamus,  and  the  prevention  of  the 
sale  of  property  seized  under  the  levy  by  threats  and  by  intimidating 
bidders,  and  the  intimidation  of  taxpayers  and  influencing  them  not 
to  pay  the  tax,  whereby  the  judgment  creditor  was  injured,  consti- 
tuted a  good  cause  of  action. 

1  United  States  v.  County  of  Macon,  99  U.  S.  582,  25  L.  Ed.  331 
(1879);  East  St.  Louis  v.  United  States  ex.  rel.  Zebley,  110  U.  S.  321, 
28  L.  Ed.  162   (1884). 

2  Graham  v.  Fulsom,  200  U.  S.  248,  50  L.  Ed.  464  (1906),  affirming 
131  Fed.  496. 

"  3  Santa  Fe  County  Commissioners  v.  New  Mexico,  ex  rel.,  215  U.  S. 
296,  54  L.  Ed.  202  (1909),  affirming  69  Pac.  252,  where  held,  also,  that 
the  levy  was  not  excessive  when  it  appeared  that  it  would  produce 
in  excess  of  little  more  than  $100,  and  that,  since  the  writ  issued, 
additional  interest  to  the  amount  of  $10,000  had  accrued. 


§    641  FEDERAL    REMEDIAL    LAW    IN    STATE   TAXATION.  735 

the  8th  Circuit/  and  the  rights  of  their  judgment  creditors 
in  their  respective  writs,  are  equally  inviolable.  No  demand 
upon  a  municipality  is  necessary  before  instituting  proceedings 
for  mandamus  where  the  statute  imposes  upon  them  the  duty 
to  levy  the  tax  or  where  it  is  manifest  that  such  a  demand  would 
be  an  idle  ceremony.  A  demand  for  the  payment  of  a  judgment 
is  a  sufficient  demand  to  levy  a  tax  to  pay  it  when  the  statute 
authorizes  such  a  tax ;  and  the  statute  authorizing  taxes  to  pay 
judgments,  become  the  measure  of  authority  of  the  officers. 

Where  district  bonds  of  a  city,  issued  to  pay  for  individual 
improvements,  contain  no  stipulation  limiting  the  recourse  of 
their  holders,  special  taxes  levied  for  the  improvements  create 
a  general  liability  on  the  city  issuing  them.  It  is  no  defense  to 
an  application  for  a  writ  of  mandamus  to  compel  the  levy  of  a 
tax  by  a  town  to  pay  a  judgment  against  it,  that  the  authority 
of  the  town  to  tax  is  limited,  unless  it  is  also  shown  that  such 
limited  authority  has  also  been  exhausted.  The  authority  is 
not  exhausted  by  an  issue  of  bonds.^  Authority  given  to  a 
town  by  a  statute  to  carry  a  contracted  debt,  carries  with  it 
authority  to  levy  a  tax  for  payment  of  the  debt,  unless  ex- 
pressly withheld. 

A  mandamus  proceeding  against  the  members  of  a  State 
board  of  equalization  and  county  officers  to  compel  them  to  per- 
form their  duty  in  levying  a  tax  as  described  by  statute,  is  not 
a  proceeding  against  the  State  in  violation  of  U.  S.  Amend- 
ment No.  11. 

§  641.  Mandamus  Must  be  Based  Upon  Statute  Authoriz- 
ing' Tax. — This  right  to  a  mandamus  must  be  based  upon  the 
statute  making  it  obligatory  upon  the  municipal  authorities  to 
levy  a  tax  in  payment  of  the  judgment.  Thus  it  was  said  by  the 
Circuit  Court  of  Appeals  for  the  Eighth  Cireuit,3  that,  where 
no  statute  expressly  made  it  obligatory  upon  the  county  to  levy 


J  U.  S.  ex  rel.  Masslich  v.  Saunders,  124  Fed.  124   (1903). 

2Ro.se  et  al.  v.  McKie,  145  Fed.  584,  C.  C.  A.,  1st  Cir.  (1906),  affirm- 
ing 140  Fed.   145. 

3  Board  of  Commissioners  v.  King,  14  C.  C.  A.  421,  8tli  Cir.,  67  Fed. 
202    (1895). 


736  FEDERAL    REMEDIAL   LAW   IN    STATE   TAXATION.  §    642 

a  tax  to  pay  a  judgment  against  it,  and  it  did  not  appear  that 
the  judgment  was  on  a  security  issued  under  a  statute  making 
it  obligatory  to  levy  a  tax  to  pay  it,  the  court  had  no  authority 
to  compel,  by  mandamus,  the  levy  of  a  tax  to  pay  such  judg- 
ment. Under  our  system  of  government,  said  the  court,  the 
power  to  tax  is  a  legitimate  function  exclusively  and  cannot  be 
exercised  except  in  pursuance  of  legislative  authority.  A  court 
has  no  taxing  powers,  and  can  impart  none  to  the  county  au- 
thorities. It  has  therefore  no  jurisdiction  to  coerce  the  levy  of 
a  tax,  except  where  the  law  has  made  it  the  clear  and  absolute 
duty  of  the  county  authorities  to  levy  such  tax.  When  the  law 
has  made  it  the  duty  of  the  levying  court  or  board  to  levy  a  tax 
to  pay  a  specified  class  of  indebtedness,  the  Federal  court  in 
which  a  judgment  has  been  rendered  in  that  class  of  indebted- 
ness may,  by  mandamus,  compel  the  assessment,  levy  and  col- 
lection of  a  tax  to  pay  such  judgment;  but  this  is  the  limit  of 
its  power.  As  there  was  nothing  shown  as  to  the  nature  of  the 
cause  of  action  which  affected  the  contract  right  to  the  levy  of 
a  tax,  it  was  treated  as  an  ordinary  case  of  county  indebtedness, 
and  the  discretion  of  the  commissioners  was  held  not  subject  to 
control  by  manda/mus. 

§  642.    Local  Tax  Law  Administered  in  Federal  Courts. — 

The  jurisdiction  of  the  Federal  court  is  frequently  invoked  on 
the  ground  of  diverse  citizenship  in  cases  involving  the  construc- 
tion and  application  of  State  tax  laws,  where  there  is  no  dis- 
tinct Federal  question  involved.  Thus  tax  deeds  may  be  offered 
in  evidence  in  the  Federal  courts  in  ejectment  suits  or  other 
actions  affecting  titles  to  real  estate.  It  is  a  general  rule  that 
the  Federal  courts  in  such  cases,  exercising  a  concurrent  juris- 
diction with  the  State  courts,  administer  the  State  laws,  as  con- 
strued by  the  State  courts.  Thus  the  Supreme  Court  said  in  a 
case  from  Mississippi,  involving  the  validity  of  a  tax  deed:^ 


1  Lewis  V.  Monson,  151  U.  S.  545,  38  L.  Ed.  267  (1894).  In  Geekie 
V.  Kirby  Carpenter  Co.,  106  U.  S.  379,  27  L.  Ed.  157  (1882),  the  court, 
construing  the  tax  law  of  Wisconsin,  held  that  a  tax  deed  was  invali- 
dated by  the  fact  that  the  sum  to  raise  which  the  land  was  sold  in- 
cluded five  cents  for  the  United  States  Revenue  stamp,  to  be  put,  and 


§    643  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  737 

**No  question  is  more  clearly  a  matter  of  local  law  than  one 
arising  under  the  tax  laws.  Tax  proceedings  are  carried  on 
by  the  State  for  the  purpose  of  collecting  its  revenue,  and  the 
various  steps  which  shall  be  taken  in  such  proceedings,  the 
force  and  effect  to  be  given  to  any  act  of  the  taxing  officers, 
the  results  to  follow  the  non-payment  of  taxes,  and  the  form 
and  efficacy  of  the  tax  deed,  are  all  subjects  which  the  State 
has  power  to  prescribe,  and  peculiarly  and  vitally  affecting  its 
well-being.  The  determination  of  any  questions  affecting  them 
is  a  matter  primarily  belonging  to  the  courts  of  the  State,  and 
the  national  tribunals  universally  follow  their  rulings  except 
in  cases  where  it  is  claimed  that  some  right  protected  by  the 
Federal  Constitution  has  been  invaded." 

§  643.  Local  Law  and  General  Law  Distinguished. — It  is 
only  on  questions  of  local  law  involving  the  construction  of  a 
State  constitution  or  statute,  or  which  have  become  rules  of 
property  in  the  State,  that  the  Federal  courts  follow  as  of 
course  the  decisions  of  the  State  courts.  Such  decisions  are  not 
"laws  of  the  State"  within  the  meaning  of  Section  721,  Re- 
vised Statutes,  which  provides  that,  in  the  absence  of  Federal 
legislation,  the  laws  of  the  several  States  shall  be  regarded  as 
rules  of  decision  in  actions  at  law  in  the  Federal  courts  in  cases 
where  they  apply.^  Rules  of  property  may  thus  be  established 
in  a  State  in  regard  to  real  estate  and  domestic  relations,  which 
the  Federal  courts  will  follow,  but  upon  questions  of  general 
jurisprudence  or  commercial  law,  the  Federal  courts  exercise 
their  own  judgment.  Thus  the  public  purpose  which  will  war- 
rant the  exercise  of  the  State  taxing  power  in  the  payment  of 
municipal  bonds  is  a  question  of  general  law.^    This  distinction 


■which  was  put,  on  the  certificate  issued  to  the  purchaser  at  the  sale. 
The  court  said  that  the  item  was  improperly  included,  but  that  the 
error  was  cured  by  the  provision  of  the  Wisconsin  statute  of  limita- 
tions affecting  tax  deeds,  as  construed  by  the  courts  of  that  State. 

1  Baltimore  &  Ohio  R.  R.  Co.  v.  Baugh,  149  U.  S.  368,  37  L.  Ed.  772 
(1893),  Justice  Field  dissenting;  Burgess  v.  Seligman,  107  U.  S.  20, 
27  L.  Ed.  359  (1883);  Warburton  v.  White,  176  U.  S.  484,  44  L.  Ed. 
555  (1900).  See  also  "The  Common  Law  in  the  Federal  Courts,"  by 
E.  C.  Eliot  of  St.  Louis,  36  Am.  Law  Review,  498. 

zOIcott  V.  Supervisors,  16  Wall.  678,  21  L.  Ed.  382  (1873),  Chief 
Justice  Chase  and  Justices  Davis  and  Miller  dissenting. 


738  FEDERAL    REMEDIAL   LAW    IN    STATE   TAXATION.  §    644 

was  the  basis  of  the  judicial  conflict  in  several  States  between 
the  State  and  Federal  courts,  as  to  the  validity  of  such  muni- 
cipal obligations.     The  court  said,  in  the  case  cited: 

"The  nature  of  taxation,  what  uses  are  public  and  what  are 
private,  and  the  extent  of  unrestricted  legislative  power,  are 
matters  which,  like  questions  of  commercial  law,  no  State 
court  can  conclusively  determine  for  us." 

The  Supreme  Court  can  exercise  this  independent  judgment 
on  questions  of  general  law,  as  distinguished  from  local  law, 
only  in  the  regular  course  of  its  jurisdiction.  Thus,  on  writ 
of  error  to  a  State  court,  it  can  only  decide  a  Federal  question, 
and  an  erroneous  decision  of  a  State  court  upon  a  question  of 
general  law  does  not  constitute  a  Federal  question.  The  Su- 
preme Court  may  dismiss  a  writ  of  error  to  review  the  decision 
of  a  State  court  in  such  a  case,  on. the  ground  that  no  Federal 
question  is  involved,  when,  if  the  case  had  come  before  it  in  its 
regular  appellate  jurisdiction  over  the  United  States  District 
Court,  it  would  have  decided  the  question  differently  from  the 
way  the  State  court  decided  it.^ 

§  644.    Suits  by  Stockholders  in  Right  of  Corporation. — 

The  Income  Tax  decision  was  rendered  in  what  is  known  as  a 
stockholder's  suit,  one  brought  by  a  stockholder  in  right  of  the 
corporation  to  restrain  the  corporate  management  from  threat- 
ened illegal  use  of  the  corporate  assets.  The  right  to  maintain 
such  a  suit  to  restrain  payment  of  an  alleged  illegal  tax  was 
sustained  by  the  Supreme  Court  in  Dodge  v.  Woolsey.^  When 
this  case  was  decided  in  1856,  there  was  no  means  by  which  the 
corporation  could  bring  a  suit  in  the  United  States  Circuit 
(District)  Court  against  a  citizen  of  the  same  State,  in  resist- 
ing a  tax  on  the  ground  of  a  Federal  right.     Subsequently,  by 


1  See  Central  Land  Co.  v.  Laidley,  159  U.  S.  103,  40  L.  Ed.  91  (1895), 
where  Justice  Gray  in  his  opinion  calls  attention  to  an  illustration 
of  this  distinction  in  two  decisions  relating  to  municipal  bonds  of 
Iowa.  Gelpke  v.  Dubuque,  1  Wall.  175,  17  L.  Ed.  520  (1864),  and 
Railroad  Co.  r.  McClure,  10  Wall.  511,  19  L.  Ed.  997   (1871). 

2  18  How.  331,  15,  L.  Ed.  401. 


§    645  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  739 

the  Act  of  1875,  tlie  law  was  amended  so  as  to  give  the  right, 
which  still  exists,  to  bring  a  suit  in  the  United  States  Circuit 
(District)  Court,  on  the  ground  that  the  case  involves  a  claim 
under  the  Constitution  or  laws  of  the  United  States,  so  that  a 
stockholder's  suit  is  no  longer  necessary  to  secure  original  Fed- 
eral jurisdiction  for  a  domestic  corporation  in  resisting  taxa- 
tion, on  the  ground  of  a  Federal  right. 

This  procedure,  however,  was  resorted  to  in  other  cases  not 
involving  Federal  questions,  where  it  was  desired  to  secure  the 
jurisdiction  of  the  United  States  District  Court  on  the  ground 
of  adverse  citizenship,  and  the  "non-resident  stockholder"  be- 
came a  frequent  litigant  in  the  Federal  courts.  This  resulted 
in  the  re-examination  of  the  whole  subject  of  stockholders* 
suits,  in  Hawes  v.  Oakland,  decided  in  1882,  wherein  an  ex- 
haustive opinion  was  rendered  by  Mr.  Justice  Miller,^  and  the 
conclusions  of  the  opinion  were  formulated  in  Equity  Rule  94, 
still  in  force.^ 

§  645.  Burden  of  Proof  in  Resisting*  Taxation. — The  bur- 
den of  proof,  which  devolves  upon  the  actor  in  all  litigation, 
is  emphasized  in  tax  litigation,  that  is,  in  litigation  involving 
the  legality  of  taxation,  in  that  the  litigant  must  overcome  the 
presumption  that  assumes  the  validity  of  the  exercise  of  legis- 
lative power,  and  the  further  presumption  when  the  acts  of  tax- 
ing officers  are  complained  of,  that  such  officers  do  not  violate 


1104  U.  S.  450,  26  L.  Ed.  827. 

2  Equity  Rule  94  (adopted  Oct.  Terra,  1881):  "Every  bill  brought 
by  one  or  more  stockholders  in  a  corporation  against  the  corporation 
and  other  parties,  founded  on  rights  which  may  properly  be  asserted 
by  the  corporation,  must  be  verified  by  oath,  and  must  contain  an 
allegation  that  the  plaintiff  was  a  shareholder  at  the  time  of  the  trans- 
action of  which  he  complains,  or  that  his  share  had  devolved  on  him 
since  by  the  operation  of  law,  and  that  the  suit  is  not  a  collusive  one 
to  confer  on  a  court  of  the  United  States  jurisdiction  of  a  case  of 
which  it  would  not  otherwise  have  cognizance.  It  must  also  set  forth 
with  particularity  the  efforts  of  the  plaintiff  to  secure  such  action  as 
he  df'Siros  on  the  part  of  the  managing  directors  or  trustees,  and,  if 
necessary,  of  the  shareholders,  and  the  causes  of  his  failure  to  obtain 
Buch  action." 


740  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    646 

their  sworn  duty.  This  principle  was  forcibly  illustrated  in  a 
case  from  New  Orleans,  where  a  State  bank  complained  of  an 
alleged  illegal  assessment,  on  the  ground  that  its  capital  was  in- 
vested in  legal  tender  notes,  which  were  then  exempt  from 
taxation.  The  bank  proved  that  it  had  some  $760,000  invested 
in  such  notes,  but  its  nominal  capital  was  a  million  dollars,  and 
it  owed  its  depositors  over  $3,000,000.  The  Supreme  Court^ 
said  that  no  proof  was  offered  to  show  that  the  cash  exclusively 
constituted  the  capital,  and  that  the  cash  on  hand  was  just  as 
applicable  to  the  depositors  as  to  the  capital.  The  burden  of 
proof  was  therefore  on  the  bank  to  show  that  it  had  been  unlaw- 
fully taxed,  and,  in  the  absence  of  such  proof,  the  decision  of 
the  assessor  must  stand. 

A  party  suing  to  recover  a  tax  paid  under  protest  has  the 
burden  of  showing  such  excess  and  is  not  entitled  to  recover 
where  the  evidence  is  uncertain,  inconclusive  and  unsatisfac- 
tory.^' 

§  646.  Remedy  Against  Tax  Officials  Individually.  —  In 
theory  the  officer  who  enforces  an  illegal  tax,  that  is,  a  tax  levied 
under  an  unconstitutional  statute,  has  no  official  sanction  for  his 
acts.  In  the  language  of  the  Supreme  Court :3  "An  unconstitu- 
tional act  is  not  a  law ;  it  confers  no  rights ;  it  imposes  no  du- 
ties ;  it  affords  no  protection ;  it  creates  no  office ;  it  is,  in  legal 
contemplation,  as  inoperative  as  though  it  had  never  been 
passed."  The  same  court  has  said  that  the  ground  of  the  jur- 
isdiction in  restraining  the  collection  of  taxes  imposed  in  the 
name  of  the  State,  but  contrary  to  the  Constitution  of  the 
United  States,  and  sought  to  be  collected  by  seizure  of  property, 
is  that  the  officers,  though  professing  to  act  as  officers  of  the 
State,  are  threatening  a  violation  of  the  property  or  personal 


1  Canal  and  Banking  Co.  v.  New  Orleans,  99  U.  S.  97,  25  L.  Ed.  409 
(1879). 

2  Great  Northern  Ry.  Co.  T.  Okanogan  County,  223  Fed.  198   (1915); 
Newbauer  v.  American  Seating  Co.,  171  Fed.  273  (1909). 

3  Norton  y.  Shelby  County,  118  U.  S.,  supra,  p.  442,  30  L.  Ed.  178 
(1886). 


§    646  PEDEKAL    REMEDIAL   LAW   JN    STATE   TAXATION.  741 

rights  of  the  complainant,  for  which  they  are  personally  and 
individually  liable  as  trespassers.^ 

The  taxing  power,  however,  may  be  unlawfully  exercised 
under  a  valid  statute.  Thus  assessors  may  err  in  not  allowing 
exemptions  or  deductions,  or  a  tax  may  be  excessive  through 
discriminating  valuation.  In  such  eases  the  taxpayer  is  sub- 
jected to  illegal  taxation  under  a  valid  law,  and  the  principle 
above  stated  has  no  application.  Furthermore  the  principle  of 
the  individual  responsibility  of  taxing  officials  is  not  of  great 
practical  importance,  even  in  cases  where  it  applies,  as  the 
remedy  at  law  for  damages  against  trespassing  officials  indi- 
vidually is  rarely  adequate  to  resist  the  unlawful  exercise  of  the 
taxing  power. 

As  tax  assessors  are  required  to  exercise  their  discretion  in 
the  valuation  of  property,  it  is  clear  that  they  cannot  be  charged 
with  personal  responsibility  for  the  erroneous  exercise  of  such 
discretion.  Thus  it  was  held  in  New  York^  that  assessors  hav- 
ing jurisdiction  of  the  person  taxed  and  the  subject-matter  are 
not  individually  liable  for  an  erroneous  assessment  made  in 
good  faith,  even  in  refusing  to  allow  deduction  for  debts  in  the 
case  of  bank  shares,  as  required  by  the  Act  of  Congress.  On 
writ  of  error  to  the  Supreme  Court,  this  decision  was  held  to 
involve,  not  any  Federal  question,^  but  one  of  general  municipal 
law,  to  be  governed  by  the  common  law  or  the  statute  law  of  the 
State.  The  fact  that  the  error  consisted  of  a  misconstruction 
of  an  Act  of  Congress  could  make  no  difference,  for  an  officer 
acting  judicially  is  no  more  liable  for  a  mistaken  construction 
of  an  Act  of  Congress  than  he  would  bo  for  mistaking  the  com- 
mon law  or  a  State  statute.  The  immunity  declared  in  this  case 
is  that  which  is  always  extended  where  public  officers  are  vested 
with  a  discretion  in  the  performance  of  their  duties. 

A  tax  collector  is  protected  in  the  collection  of  tax  bills  fair 
upon  their  face,  regularly  issued  from  the  tribunal  having  jur- 
isdiction, and  containing  nothing  by  way  of  recital  or  omission 


1  In  re  Ayers,  123  U.  S.,  p.  500. 

2  Williams  v.  Weaver,  75  N.  Y.  32  (1878). 

3  100  U.  S.  547,  25  L.  Ed.  708    (1880). 


742       FEDERAL  REMEDIAL  LAW  IN  STATE  TAXATION.     §  647 

to  apprise  him  that  they  were  issued  without  legal  authority. 
He  is  protected  in  such  action  against  all  illegalities  except  his 
own.^  This  is  the  rule  applied  by  the  United  States  courts  as  to 
the  United  States  collectors.  The  Supreme  Court  says  that  of 
such  an  officer  the  law  exacts  unhesitating  obedience  to  its  pro- 
cess.^ This  immunity  is  extended  upon  considerations  of  pub- 
lie  policy  and  requires  that  the  process  shall  be  issued  by  an 
authority  having  jurisdiction  of  the  subject-matter  and  that  it 
be  regular  upon  its  face.  It  applies  only  to  personal  liability, 
and  does  not  extend  to  the  protection  of  any  title  acquired  and 
conveyed  by  the  collector  in  enforcing  an  illegal  tax. 

An  officer  who  was  charged  with  the  specific  duty  of  levying 
taxes  to  pay  a  judgment  was  held  responsible  in  damages  to  the 
judgment  plaintiff  for  failure  to  levy  the  tax  as  directed  by  a 
writ  of  mandamus.  The  court  said,  p.  138:^  "The  rule  is  well 
settled,  that  where  a  law  requires  absolutely  a  ministerial  act 
to  be  done  by  a  public  officer,  and  he  neglects  or  refuses  to  do 
such  act,  he  may  be  compelled  to  respond  in  damages  to  the 
extent  of  the  injury  arising  from  his  conduct.  There  is  an  un- 
broken current  of  authorities  to  this  effect.  A  mistake  as  to  his 
duty  and  honest  intentions  will  not  excuse  the  offender."* 

§  647.    Importance  of  Speedy  Remedy  in  Taxation. — There 

is  an  obvious  distinction  between  the  remedies  appropriate  to 
the  construction  and  administration  of  tax  laws  and  those  re- 
quired in  the  determination  of  the  validity  of  the  taxation,  that 
is,  of  the  question  whether  the  power  of  taxation  has  been  law- 
fully exercised.  In  the  former  case  it  is  right  and  proper  that 
parties  should  be  remitted  to  the  remedy  by  legal  action,  espe- 
cially when  an  adequate  remedy  is  provided  by  payment  under 


iMechem  on  Public  Officers,  Sec.  690. 

2Haffin  V.  Mason,  15  Wall.  671,  21  L.  Ed.  196  (1873);  Hardin  r, 
Honeback,  137  U.  S.  43,  34  L.  Ed.  580   (1891). 

3  Amy  V.  Supervisors,  11  Wall.  136,  20  L.  Ed.  101   (1871). 

4  In  People  v.  Smith,  123  Cal.  70  (1898),  the  public  assessor  charged 
with  the  official  duty  of  collecting  poll  taxes  and  personal  property  taxes 
was  held,  under  the  doctrine  Of  the  Amy  case,  to  be  responsible  upon 
his  official  bond  for  failure  to  perform  this  ministerial  duty. 


§    647  FEDERAL    REMEDI.VL   LAW    IN    STATE   TAXATION.  743 

protest  and  suit  to  recover,  as  in  tlie  case  of  taxes  levied  by- 
Congress  and  in  some  of  the  States,  as  provided  by  their  stat- 
utes. While  it  is  true  that  the  government  should  not  be  em- 
barrassed by  the  interruption  of  the  collection  of  its  revenue 
at  stated  periods,  it  is  also  true  that,  when  the  validity  of  a  tax 
is  involved,  the  public,  as  well  as  the  private,  taxpayer  is  in- 
terested in  the  speedy  determination  of  the  question.  If  the 
tax  is  invalid,  the  government  should  know  it  as  soon  as  possible, 
so  that  it  may  provide  other  means  of  revenue;  and  the  tax- 
payers should  also  know  it,  so  they  can  avoid  uncertainty  and 
may  promptly  discharge  what  is  lawfully  due. 

This  consideration  of  public  policy  was  forcibly  illustrated  in 
the  Income  Tax  Cases,  where  the  public  interest  demanding  a 
speedy  determination  of  the  validity  of  the  tax  really  forced 
what  may  seem  a  practical  evasion  of  the  provision  of  the  Fed- 
eral statute  as  to  the  form  of  procedure.  The  truth  is  that,  in 
our  busy  industrial  life,  the  extension  of  preventive  remedies  is 
demanded  of  a  progressive  jurisprudence,  and  in  no  depart- 
ment of  the  law  is  this  so  clearly  to  the  interest  both  of  the  pub- 
lic and  the  private  litigant,  as  in  questions  involving  the  validity 
of  taxation.  This  is  especially  true,  because  the  increasing  ex- 
penditures of  government  are  forcing  the  trial  of  new  and  ex- 
perimental forms  of  taxation,  and  it  frequently  happens  of  re- 
cent years  that  test  cases  are  made  up  and  regular  forms  of 
procedure  waived  for  the  purpose  of  securing  speedy  judicial 
determination. 

It  is  remarked  by  Mr.  High,  in  his  work  on  injunctions,* 
that  in  no  branch  of  the  law  of  injunctions  has  there  been  mani- 
fested greater  apparent  want  of  harmony  in  the  decisions  of 
the  courts  than  in  the  exercise  of  the  restraint  on  the  power  of 
taxation,  and  that  it  is  difficult,  if  not  impossible,  to  harmonize 
completely  and  perfectly  the  principles,  which  seem  to  have  the 
weight  of  authority  in  their  support,  with  all  the  decided  cases. 
In  the  courts  of  the  United  States,  as  already  shown,  the  al- 
leged unconstitutionality  of  a  tax  is  not  sufficient  ground  for  in- 
junction, but  there  must  be  some  circumstances  bringing  the 


11  High   on   Injunctions    (?.(]   Ed.).  Sec.   484. 


744  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  §    647 

ease  within  the  recognized  scope  of  equity  jurisdiction,  such  as 
a  threatened  cloud  upon  the  title  of  real  estate  or  a  multiplicity 
of  suits. ^ 

Much  has  been  said  in  judicial  opinions  of  the  public  policy 
which  forbids  judicial  interference  with  taxation,  and  the  in- 
fluence upon  our  jurisprudence  of  the  ancient  historic  jealousy 
of  courts  of  chancery  is  illustrated  in  the  opinions  of  eminent 
judges.  Thus  in  some  States  where  license  taxes  are  enforced 
by  criminal  prosecutions  for  doing  business  without  license,  this 
mode  of  enforcement  is  held  to  bar  injunctive  relief,  on  the 
ground  that  such  relief  would  be  enjoining  criminal  prosecu- 
tions ;  and  in  such  cases  parties  are  compelled  to  submit  to  a 
criminal  conviction  in  order  to  test  the  validity  of  the  tax,  there 
being  as  a  rule  no  right  of  appeal  except  from  a  conviction.* 
But  in  a  threatened  trespass  which  may  destroy  property,  what 
matters  it  that  the  trespasser  may  be  also  guilty  of  a  crime? 
The  injunction  restrains,  not  the  crime,  but  the  irreparable  in- 
jury to  property.  So,  in  the  case  of  annoyances  to  business  by 
threatened  criminal  prosecution  enforcing  illegal  taxation,  the 
jurisdiction  of  equity  would  be  properly  invoked,  not  to  re- 
strain the  prosecutions  as  such,  but  to  prevent  the  irreparable 
injury  to  business  and  property  from  the  attempted  enforce- 
ment of  illegal  exactions. 

The  fact  that  a  State  authorizes  the  payment  of  taxes  under 
protest  with  suit  to  recover  back,  under  the  same  system  as  au- 
thorized by  Congress  in  regard  to  Federal  taxes,  has  been  held 


iDows  V.  Chicago,  11  Wallace  109,  20  L.  Ed.  65  (1871);  Union  Pa- 
cific Railway  Co.  v.  Cheyenne,  113  U.   S.  516,  28  L.  Ed.   1098    (1885). 

2  For  illustrative  cases  where  the  injunctive  remedy  was  denied  and 
the  determination  of  the  validity  of  a  tax  affecting  extensive  business 
interests  only  secured  through  criminal  prosecution,  see  State  ex  rel. 
V.  Wood,  155  Mo.  425  (1900) ;  State  v.  Bixman,  162  Mo.  1  (1901).  In  the 
case  first  cited,  an  injunction  restraining  the  enforcement  of  the  tax  was 
arrested  by  a  writ  of  prohibition,  on  the  ground  that  the  Circuit  Court 
had  no  jurisdiction,  because  the  bill  did  not  state  facts  sufficient  to 
bring  the  case  within  the  class  in  which  injunctions  may  be  granted; 
while  in  the  other  case  the  tax  itself  was  declared  valid  by  a  vote  of 
only  four  judges  against  three. 


§    647  FEDERAL   REMEDIAL   LAW   IN    STATE   TAXATION.  745 

of  itself  to  constitute  an  adequate  remedy  at  law.  E  converso, 
should  not  the  absence  of  such  a  statutory  remedy  be  of  itself 
a  basis  for  preventive  relief? 

Judge  Taft,  in  holding  that,  where  a  State  gives  a  remedy  by 
injunction  against  the  assessment  and  collection  of  taxes  on  the 
ground  of  illegality,  such  statutory  remedy  may  be  afforded  by 
the  Federal  court  sitting  in  equity,^  said: 

"No  one  can  doubt  that  the  remedy  by  enjoining  an  ille- 
gal tax  raises  in  the  most  summary  and  satisfactory  way  the 
question  of  the  illegality  of  the  tax,  and  relieves  the  taxpayer 
of  the  burden  of  paying  the  tax  or  waiting  the  slow  process  of 
a  civil  suit  by  the  State  to  recover  it  from  him."  ^ 

It  was  said  by  Chief  Justice  Marshall  in  Osborn  v.  Bank,  that 
the  single  act  of  levying  the  tax  in  the  first  instance  is  the  cause 
of  an  action  at  law,  but  this  affords  a  remedy  only  for  the 
single  act,  and  is  not  equal  to  the  remedy  in  chancery  which 
prevents  a  repetition  and  protects  the  privilege. 

The  Supreme  Court  of  Massachusetts  said:^ 

"The  power  to  raise  and  assess  taxes,  although  essential 
and  necessary  to  the  maintenance  and  support  of  civil  govern- 
ment, is  to  be  exercised  with  care,  and  to  be  kept  strictly  within 
the  limits  imposed  by  law.  It  is  the  clear  right  of  every  citi- 
zen to  insist  that  no  unlawful  or  unauthorized  exaction  shall 
be  made  upon  him  under  the  guise  of  taxation.  If  any  such 
illegal  encroachment  is  attempted,  he  can  always  invoke  the 
aid  of  the  judicial  tribunals  for  his  protection,  and  prevent 
his  money  or  other  property  from  being  taken  and  appropri- 
ated for  a  purpose  or  in  a  manner  not  authorized  by  the  Con- 
stitution and  hnrs.  The  legislature  of  this  commonwealth  have 
provided  a  speedy  and  effectual  remedy  against  the  danger 
of  illegal  assessment  by  towns  and  cities,  and  the  unauthorized 
expenditure  by  them  of  money  raised  by  taxation.  Under 
the  provisions  of  Gen.  Stats.,  c.  18,  Sec.  79,  immediate  resort 
can  be  had  by  a  suit  of  petition  to  this  court,  sitting  in  equity, 
to  hear  and  decide  concerning  the  validity  of  a  proposed  tax 
or  the  right  to  pay  money  from  the  treasury  of  a  town,  and 
any  violation  or  abuse  of  the  legal  right  and  power  of  raising 


1  See  supra.  Sec.  616. 

zPreeland  v.  Hastings,  10  Allen,  570,  575   (1865). 


746  FEDERAL   REMEDIAL   LAW    IN    STATE   TAXATION.  §    647 

taxes  and  assessing  them  on  the  inhabitants,  as  well  as  of  ex- 
pending money  belonging  to  a  city  or  town,  can  be  effectually 
restrained  and  prevented  by  injunction." 

The  principle  thus  declared  should  be  applied  to  every  form 
of  taxation,  whether  Federal,  State  or  municipal.  The  public 
as  well  as  private  interests  will  be  best  subserved  by  the  speedi- 
est possible  determination,  through  the  preventive  jurisdiction 
of  a  court  of  equity,  or  by  special  statutory  procedure,  properly 
regulated  to  protect  the  public  interests,  in  every  case  where  is 
involved  the  validity  of  an  exaction  from  persons,  property  or 
business  under  the  taxing  power. 


CHAPTER    XIX. 

ENFORCEMENT  OF  LIMITATIONS  UPON  FEDERAL 
TAXATION 

The  remedial  law  in  Federal  and  State  taxation. 

649.  Federal  taxes  cannot  be  enjoined. 

650.  Suit  against  collector  to  recover  taxes  illegally  or  erroneously 

assessed. 

651.  Involuntary  payment  of  taxes  essential  for  recovery. 

652.  Requirements  of  the  statute  must  be  complied  with. 

653.  Judgment  against  collector  carries  interest  and  costs. 

654.  Suits  against  the  United  States  under  the  Tucker  Act. 

655.  Procedure  under  the  Tucker  Act. 

656.  Where  the  judgment  of  the  Court  of  Appeals  is  not  final. 

657.  Limitations  of  actions. 

658.  Only  party  in  interest  can  bring  suit. 

659.  The  recovery  of  duties  illegally  or  erroneously  collected. 

660.  The  Federal  procedure  summarized. 

§  648.     The  Remedial  Law  in  Federal  Taxation.  —  The 

expansion  of  the  Federal  taxing  power  not  only  under  the 
Income  Tax  Amendment,  but  in  the  extension  of  Federal 
taxation  in  national  emergencies  over  the  business  and  occupa- 
tions of  the  people,  which  are  also  subject  to  State  taxes,  ren- 
ders it  proper  to  consider  separately  the  remedial  law  where- 
under  the  citizen  is  protected  against  the  illegal  or  erroneous 
exercise  of  any  form  of  Federal  taxation.  Such  questions, 
whether  concerning  the  constitutional  validity  of  the  tax,  as  in 
the  Income  Tax  Cases,^  or  the  more  frequent  cases  of  the  con- 
struction of  the  tax  laws  and  their  application  in  specific  cases, 
necessarily  involve  the  Constitution  or  statutes  of  the  United 
States  and  the  exercise  of  the  Federal  authority  thereunder, 
and  therefore  are  only  cognizable  in  the  Federal  courts  and  such 
courts,  therefore,  have  jurisdiction  irrespective  of  diverse  citi- 


\Rupra,  Sec.  620. 

(747) 


748  REMEDIAL   LAW   IN    FEDERAL   TAXATION.  §    649 

zenship.*     Such  a  suit  brought  in  the  State  court,  is  removable 
to  the  Federal  court. ^ 

The  fundamental  considerations  which  relate  to  the  position 
of  all  taxing  officials  under  our  form  of  government,  and  apply- 
ing both  to  the  State  and  Federal  government,  have  been  set 
forth  in  the  preceding  chapter  ;3  and  only  the  subjects  specially 
relating  to  the  Federal  officials  and  the  enforcement  of  the  Fed- 
eral tax  laws,  will  be  here  discussed. 

§  649.  Federal  Taxes  Cannot  be  Enjoined. — The  Federal 
statutes,  applying  only  to  taxes  levied  by  Congress,  provide  :4 

"No  suit  for  the  purpose  of  restraining  the  assessment  or 
collection  of  any  tax,  shall  be  maintained  in  any  court." 

It  was  said  by  the  Supreme  Court,^  that  Congress  had  de- 
clared by  this  section  that  its  officers  should  not  be  enjoined 
from  collecting  a  tax  claimed  to  have  been  unjiistly  assessed, 
when  those  officers  in  the  course  of  general  jurisprudence  over 
the  subject-matter  in  question  have  made  the  assessment,  and 
claimed  that  it  is  valid.  The  only  remedy  in  such  case  is  that 
provided  by  Congress  in  an  action  at  law  to  recover  money 
claimed  to  have  been  illegally  exacted. 

Neither  a  Federal  nor  a  State  court  has  authority  to  stay  the 
collection  of  a  Federal  tax.  If  an  injunction  restraining  the 
assessment  and  collection  of  a  national  tax  is  granted  by  a  State 
court  it  will  be  dissolved  on  removal  of  the  case  to  the  United 
States  court.8 

In  the  Income  Tax  eases^  the  question  of  procedure  was  waived 
and  the  collector  was  not  enjoined  from  collecting  the  tax,  but 
the  defendant  corporation  was  enjoined  from  paying  the  tax. 
The  grave  importance  of  a  speedy  determination  of  the  validity 


1  Patton  V.  Brady,  184  U.  S.  608,  46  L.  Ed.  713   (1902). 

2  City  of  Philadelphia  v.  Diehl.  5  Wallace  720,  18  L.  Ed.  614   (1867); 
Venable  v.  Richards,  105  U.  S.  636,  26  L.  Ed.  1196    (1882). 

3  Bupra,  Sec.  600. 

4R.  S.,  3224,  Compiled  Statutes,  Sec.  5947;   see  also  Sec.  616,  supra. 

5  Snyder  v.  Marks,  109  U.  S.  189,  27  L.  Ed.  901   (1884). 

6  Kissenger  v.  Bean,  7  Bissell  60  (1875). 

7  Sec.  620,  supra. 


§    650  REMEDIAL   LAW   IN   FEDERAL    TAXATION.  749 

of  the  tax  involved  was  held  to  warrant  what  might  seem  an 
evasion  of  the  statutory  prohibition.^ 

§  650.  Suit  Against  Collector  to  Recover  Taxes  Illegally 
or  Erroneously  Assessed. — The  remedy  to  recover  back  money 
paid  under  protest  on  account  of  duties  or  taxes  erroneously  or 
illegally  assessed  is  an  action  of  assumpsit  against  the  collector 
for  money  had  and  received.  Prior  to  the  Act  of  March  3,  1887, 
known  as  the  "Tucker  Act"  this  was  the  only  remedy.  Where 
the  party  voluntarily  pays  the  money  he  is  without  remedy; 
but  if  he  pays  it  by  compulsion  of  law  or  under  duress,  or  with 
notice  that  he  intends  to  bring  suit  to  contest  the  validity  of  the 
claim,  he  may  recover  it  back  if  the  assessment  was  erroneous 
or  illegal  in  an  action  of  assumpsit  for  money  had  and  re- 
ceived. 2 

This  right  of  action,  said  the  Supreme  Court,8  was  virtually 
ex  contractu  though  it  was  nominally  in  tort,  and  therefore  as 
the  case  was  from  Virginia,  the  action  survived  both  un- 
der the  common  law  and  the  Virginia  Code,  and  it  was 
rightly  revived  against  the  executrix  of  the  collector  defendant. 

This  right  of  action  against  the  collector  is  specifically  regu- 
lated by  the  statute  providing  for  the  previous  appeal  to  the 
commissioner  of  internal  revenue,  and  for  the  reimbursement 
of  the  collector  when  probable  cause  is  certified. 4 

1  Dodge  V.  Osborne,  43  App.  D.  C.  (1915);  Strauss  v.  Abrast  Realty 
Co.,  200  Fed.  327,  D.  of  N.  Y.  (1917).  In  Prayser  v.  Russell,  3  Hughes 
227  (1878),  it  was  held  that  this  statute  had  no  application  in  the  case 
where  the  collector  undertook  to  make  a  levy  for  a  tax  which  had  been 
determined  by  the  court  not  to  be  lawful,  and  an  injunction  was 
granted,  restraining  the  levy.  Dodge  v.  Brady,  240  U.  S.  122,  60  L. 
Ed.  560   (1916). 

2  City  of  Philadelphia  v.  Diehl,  supra. 

3  Fatten  v.  Brady,  supra. 

4  R.  S.  989,  Comp.  Stat,  Sec.  1635. 

"When  a  recovery  is  had  In  any  suit  or  proceeding  against  a  col- 
lector or  other  officer  of  the  revenue  for  any  act  done  by  him,  or  for 
the  recovery  of  any  money  exacted  by  or  paid  to  him,  and  by  him 
paid  into  the  treasury,  in  the  performance  of  his  official  duty,  and 
the  court  certifies  that  there  was  probable  cause  for  the  act  done  by 
the  collector  or  officer,  or  that  he  acted  under  the  directions  of  tho 


750  REMEDIAL   LAW   IN   FEDERAL   TAXATION.  §    651 

The  right  to  sue  a  collector  does  not  include  a  successor  of 
the  collector  who  had  no  connection  with  the  alleged  unlawful 
act.^  The  statutory  provision  for  the  substitution  of  a  successor 
in  office  only  applies  to  actions  commenced  against  the  officer 
in  his  official  capacity  and  there  is  no  provision  for  the  issuance 
of  a  certificate  of  probable  cause  by  the  court  in  such  a  case,  as 
he  is  sued  as  an  individual  wrongdoer. 

The  judgment  in  such  a  case  is  a  personal  judgment  against 
the  collector,  but  it  is  provided  by  statute  that  when  the  court 
certifies  that  there  was  probable  cause  for  the  act  done  by  the 
collector  or  that  he  acted  under  proper  authority  no  execution 
issues  against  him,  but  the  money  recovered  is  provided  for  out 
of  the  proper  appropriation  from  the  treasurer.  The  refusal  to 
grant  such  a  certificate  is  not  a  matter  which  can  be  reviewed 
by  writ  of  error,  nor  is  the  granting  of  the  certificate  a  final 
judgment  to  which  writ  of  error  lies.^  If  no  certificate  is 
granted  the  judgment  stands  against  the  collector  and  personal 
execution  can  be  issued  thereon. 

§  651.  Involuntary  Payment  of  Taxes  Essential  for  Re- 
covery.— A  payment  of  taxes  unlawfully  or  erroneously  as- 
sessed, which  can  be  recovered  by  action  at  law,  must  be  in- 
voluntary, that  is,  it  must  be  made  under  duress,  where  there 
is  an  immediate  and  urgent  necessity  for  the  payment  of  the 
tax,  so  that  it  is  in  effect  made  under  compulsion.  The  term 
"paid  under  protest"  is  used  in  legal  as  well  as  common  par- 
lance to  express  an  involuntary  payment.  A  protest,  however, 
though  a  formal  method  of  evidencing  an  involuntary  payment, 
does  not  of  itself  establish  that  it  is  involuntary.     It  has  been 


Secretary  of  the  Treasury,  or  other  proper  officer  of  the  government, 
no  execution  shall  issue  against  such  collector  or  officer,  but  the 
money  so  recovered  shall,  upon  final  judgment,  be  provided  for  and 
paid  out  of  the  proper  appropriations  from  the  treasury." 

1  Roberts  v.  Lowe,  236  Fed.  604  (1916),  S.  Dist.  of  N.  Y.;  P.  &  H. 
R.  R.  Co.  v.  Lederer,  239  Fed.  184  (1917),  E.  D.  of  Pa.;  contra.  Armour 
V.  Roberts,  151  Fed.  846  (1907). 

2U.  S.  V.  Frerichs,  106  U.  S.  160,  27  L.  Ed.  128   (1882). 


§    651  REMEDIAL   LAW    IN    FEDERAL   TAXATION.  751 

termed  a  solemn  declaration  of  opinion,  and  it  was  said  by  the 
Supreme  Court  that 

"it  plays  the  same  part  in  internal  revenue  taxes  Avhich  it 
does  in  customs  cases ;  and  it  gives  notice  that  the  payment  is 
not  to  be  considered  as  admitting  the  right  to  make  the  de- 
mand."! 

The  law  is  thus  summarized  by  the  court : 

"Where  the  party  voluntarily  pays  the  money  he  is  with- 
out remedy;  but  if  he  pays  by  compulsion  of  law,  or  under 
protest,  or  with  notice  that  he  intends  to  bring  suit  to  test  the 
validity  of  the  claim,  he  may  recover  it  back,  if  the  assessment 
was  erroneous  or  illegal,  in  an  action  for  money  had  and  re- 
ceived. "2 

A  payment  of  taxes  may,  therefore,  be  made  with  a  formal 
protest  and  still  be  voluntary;  and  a  payment  may  be  invol- 
untary, although  formal  written  protest  is  not  made.3  The  es- 
sential fact  is  that  the  payment  should  have  been  involuntary. 
This  does  not  mean,  however,  that  actual  physical  force  must 
be  used  in  enforcing  payment,  to  constitute  "duress,"  or  invol- 
untary payment.  It  has  been  held  that  every  demand,  clothed 
with  official  legal  authority  to  make  the  demand,  imposes  a  cer- 
tain compulsion  on  the  one  upon  whom  the  demand  is  made ;  and 
this  is  especially  so  in  regard  to  pajnnent  of  taxes,  State  and 
national. 4  A  formal  written  protest,  therefore,  is  a  convenient 
means  of  evidencing  the  involuntary  character  of  the  payment; 


1  Union  Pac.  R.  R.  Co.  v.  Dodge  County  Commissioners,  98  U.  S. 
541,  25  L.  Ed.  196  (1879).  In  this  case  tlie  payment  of  taxes  made 
with  a  written  protest  of  illegality  and  notice  that  suit  for  recovery 
would  be  brought,  was  held  to  have  been  voluntary.  See  also  Gulben- 
kain  v.  U.  S.,  175  Fed.  860  (1909),  where  the  term  "absence  of  protest" 
was  mentioned  in  the  statute.  Sec.  21  of  Act,  June  22,  1874,  U.  S.  Comp. 
Stat,  1901,  p.  1986. 

2  Philadelphia  v.  Diehl,  5  "Wallace  731,  supra. 

3  Written  protest  is  required  under  the  Customs  Administrative 
Act  on  appeal  to  Board  of  General  Appraisers,  6  Comp.  Stat.,  Sec. 
5595. 

4  Herold  v.  Kahn,  159  Fed.  608,  C.  C.  A.,  3d  Cir.  (1908),  affirming 
147  Fed.  745. 


752  REMEDIAL    LAW    IN    FEDERAL    TAXATION.  §    652 

and  it  is  therefore  important  in  all  eases,  where  the  claim  that 
the  payment  was  involuntary  is  made,  that  it  should  be  so  evi- 
denced; and  it  is  clear  that  the  absence  of  protest  may  warrant 
the  inference  that  the  payment  was  voluntary. 

In  an  action  to  recover  back  revenue  taxes,  if  plaintiff's  al- 
legation that  the  taxes  were  paid  under  protest  is  admitted  by 
the  plea,  it  is  unnecessary  to  show  the  nature  of  the  protest 
made.^  It  has  also  been  held  that  a  written  protest  is  not  neces- 
sary, and  that  a  verbal  protest  is  sufficient.^ 

Proof  of  payment  under  protest,  that  is,  of  an  involuntary 
payment,  is  not  required  where  recovery  is  sought  of  taxes  au- 
thorized to  be  refunded  by  Act  of  Congress.^ 

§  652.  Requirements  of  the  Statute  Must  be  Complied 
With. — "While  a  suit  against  a  collector  to  recover  taxes  ille- 
gally or  erroneously  assessed,  is  the  assertion  of  a  common  law 
right,  the  exercise  of  this  right  has  been  specifically  regulated 
by  Congress  ;4  and  under  the  statute,  an  appeal  must  be  made 
to  the  Commissioner  of  Internal  Revenue  analogous  to  the  ap- 


1  Wright  v.  Blakesley,  101  U.   S.  174,  25  L.  Ed.   1048    (1880). 

2  Stewart  v.  Barnes,  153  U.  S.  456,  38  L.  Ed.  781   (1894). 

3U.  S.  V.  Jones,  236,  U.  S.  106,  59  L.  Ed.  488  (1915);  McCoade  v. 
Pratt,  236  U.  S.  59,  L.  Ed.  720   (1915). 

4  R.  S.  3226,  as  amended,  Act  February  27,  1877,  Ch.  69,  Sec.  1; 
Comp.  Stat,  Sec.  5949. 

"No  suit  shall  be  maintained  in  any  court  for  the  recovery  of  any 
internal  tax  alleged  to  have  been  erroneously  or  illegally  assessed  or 
collected,  or  of  any  penalty  claimed  to  have  been  collected  without 
authority,  or  of  any  sum  alleged  to  have  been  excessive  or  in  any 
manner  wrongfully  collected,  until  appeal  shall  have  been  duly  made 
to  the  Commissioner  of  Internal  Revenue,  according  to  the  provisions 
of  law  in  that  regard,  and  the  regulations  of  the  Secretary  of  the 
Treasury  established  in  pursuance  thereof,  and  a  decision  of  the  com- 
missioner has  been  had  therein:  Provided,  That  if  such  decision  is 
delayed  more  than  six  months  from  the  date  of  such  appeal,  then  the 
said  suit  may  be  brought,  without  first  having  a  decision  of  the  com- 
missioner at  any  time  within  the  period  limited  in  the  next  section." 

R.  S.,  3227;  Comp.  Stat,  Sec.  5950. 

"No  suit  or  proceeding  for  the  recovery  of  any  internal  tax  alleged 
to  have  been  erroneously  or  illegally  assessed  or  collected,  or  of  any 
penalty  alleged   to  have  been   collected   without  authority,  or   of  any 


§    652  REMEDIAL   LAW   IN    FEDERAL   TAXATION.  753 

peal  to  the  Board  of  Appraisers  in  suits  against  the  Collector 
of  Customs.  Thus,  it  was  said  by  the  Supreme  Court,  in  a  case 
where  recovery  was  denied  because  of  failure  to  comply  with 
the  statute  in  fixing  the  time  for  bringing  the  suit,  that  the 
United  States  had  established  a  system  of  corrective  justice  as 
well  as  a  system  of  taxation  in  both  its  Customs  and  Internal 
Eevenue  branches.^ 

''In  the  Customs  Department  it  permits  appeals  from  apprais- 
ers to  other  appraisers  and,  in  proper  cases,  to  the  Secretary 
Treasurer ;  and  if  dissatisfied  with  this  highest  decision  of  the 
Executive  Department  of  the  government,  the  law  permits  the 
party,  on  paying  the  money  required,  with  a  protest  embody- 
ing the  grounds  of  his  objection  to  the  tax,  to  sue  the  govern- 
ment through  its  collector,  and  test  in  the  courts  the  validity 
of  the  tax. 

"So,  also,  in  the  Internal  Revenue  Department,  the  statute 
.  .  .  allows  appeals  from  the  assessor  to  the  Commissioner  of 
Internal  Revenue ;  and  if  dissatisfied  with  his  decision,  on  pay- 
ing the  tax  the  party  can  sue  the  collector ;  and,  if  the  money 


sum  alleged  to  have  been  excessive  or  in  any  manner  wrongfully  col- 
lected, shall  be  maintained  in  any  court,  unless  the  same  is  brought 
within  two  years  next  after  the  cause  of  action  accrued:  Provided, 
That  actions  for  such  claims  which  accrued  prior  to  June  6,  1872, 
may  be  brought  within  one  year  from  said  date;  and  that  where  any 
such  claim  was  pending  before  the  commissioner,  as  provided  in  the 
preceding  section,  an  action  thereon  may  be  brought  within  one  year 
after  such  decision  and  not  after.  But  no  right  of  action  which  was 
already  barred  by  any  statute  on  the  said  date  shall  be  revived  by 
this  section." 

R.  S.,  3228;   Comp.  Stat.,  Sec.  5951. 

"All  claims  for  the  refunding  of  any  internal  tax  alleged  to  have 
been  erroneously  or  illegally  assessed  or  collected,  or  of  any  penalty 
alleged  to  have  been  collected  without  authority,  or  of  any  sum  alleged 
to  have  been  excessive  or  in  any  manner  wrongfully  collected,  must 
be  presented  to  the  Commissioner  of  Internal  Revenue  within  two 
years  next  after  the  cause  of  action  accrued:  Provided,  That  claims 
which  accrued  prior  to  June  6,  1872,  may  be  presented  to  the  com- 
missioner at  any  time  within  one  year  from  said  date.  But  nothing 
in  this  section  shall  be  construed  to  revive  any  right  of  action  which 
was  already  barred  by  any  statute  on   that  date." 

1  Cheatham  v.  Collector,  92  U.  S.  85,  23  L.  Kd.  561  (1876),  quoting 
from  Nichols  v.  U.  S.,  7  Wallace  122,  19  L.  Ed.  125. 


754  REMEDIAL   LAW    IN    FEDERAL   TAXATION.  §    653 

was  wrongfully  exacted",  the  courts  will  give  him  relief  by  a 
judgment  which  the  United  States  pledges  herself  to  pay." 

It  has  been  uniformly  held  that  this  appeal  to  the  Commis- 
sioner with  evidence  of  the  payment  under  protest,  that  is,  of  an 
involuntary  payment,  is  essential  to  the  prosecution  of  a  suit 
against  the  collector.*  The  provision  made  for  the  payment  of 
the  judgment  against  the  collector  did  not  render  this  appeal 
to  the  Commissioner  unnecessary .^ 

A  written  application  to  the  Commissioner  of  Internal  Rev- 
enue to  refund  the  sum  expended  for  the  voluntary  purchase 
of  revenue  stamps,  to  be  affixed  to  a  conveyance,  though  it 
might  be  sufficient  to  justify  a  favorable  action  by  the  Commis- 
sioner, is  not  equivalent  to  an  appeal  from  an  adverse  decision 
by  the  Collector  which  was  essential  to  the  maintenance  of  a 
suit  for  the  recovery  of  taxes  alleged  to  have  been  illegally  as- 
sessed. The  court  said  that  this  requirement  of  a  payment 
under  protest  in  the  form  of  an  appeal  to  the  Commissioner, 
was  deemed  necessary  for  the  protection  of  the  Government,  as, 
without  it,  there  would  not  be  any  evidence  of  involuntary  pay- 
ment in  such  oases.3 

§  653.  Judgment  Against  Collector  Carries  Interest  and 
Costs. — If  the  appeal  to  the  Commissioner  of  Internal  Revenue 
is  successful  and  the  claim  is  allowed  there  is  no  occasion  for  a 
suit,  but  if  the  claim  is  allowed  by  the  Commissioner  and  re- 
ported for  an  appropriation,  or  if  a  recovery  is  had  in  the  suit 
from  the  collector  who  is  entitled,  as  provided  in  the  statute,  to 
reimbursement  by  the  Government,  this  recovery  carries  with  it 
interest  and  costs. 

It  was  said  by  the  court  in  a  suit  against  a  collector  of  cus- 
toms: 


lArnson  v.  Murphy,  115  U.  S.  585,  25  L.  Ed.  493  (1886);  Kings 
County  Savings  Institution  v.  Blair,  116  U.  S.  206,  29  L.  Ed.  659 
(1886). 

2  Christy  Street  Com.  Co.  v.  U.  S.,  136  Fed.  236,  C.  C.  A.,  8th  Cir. 
(1905);  De  Barry  v.  Dunne,  Collector,  162  Fed.  961  (1908);  Farrell  v. 
U.  S.,  167  Fed.  639  (1909). 

3Cheesborough  v.  U.  S.,  192  U.  S.  253,  48  L.  Ed.  432   (1904). 


§    654  REMEDIAL    LAW    IN    FEDERAL   TAXATION.  755 

"Where  an  illegal  tax  has  been  collected  the  citizen  who  has 
paid  it,  and  has  been  obliged  to  bring  suit  against  the  collector, 
is,  we  think,  entitled  to  interest,  in  the  event  of  recovery  from 
the  time  of  the  illegal  exaction."^ 

It  was  said  by  the  Circuit  Court  of  Appeals  of  the  First  Cir- 
cuit" that  the  judgment  was  not  one  in  form  against  the  United 
States,  though  it  was  contended  that  the  suit  was  one  in  sub- 
stance against  the  United  States,  as  the  judgment  was  ulti- 
mately paid  out  of  the  treasury  of  the  United  States.  The 
court  said  that  the  rule  seemed  to  be  established  that  interest 
was  allowed.^ 

These  rulings  relate  to  the  allowance  of  interest  upon  judg- 
ments against  the  Collector  individually.  A  different  principle 
applies  where  the  judgment  is  rendered  against,  the  United 
States,  under  the  concurrent  jurisdiction  vested  in  the  district 
courts  with  the  Court  of  Claims.  As  to  such  cases  it  is  pro- 
vided by  statute  that  no  interest  shall  be  allowed  on  any  claim 
up  to  the  time  of  the  rendition  of  judgment  thereon  by  the 
Court  of  Claims,  unless  upon  a  contract  expressly  stipulating 
for  the  payment  of  interest.  The  Circuit  Court  of  Appeals  for 
tlie  Fifth  Circuit*  ruled  that  Section  10  of  the  Act  of  March  3, 
1887,  known  as  the  ''Tucker  Act,"^  does  not  repeal  or  modify 
this  section  of  the  statute  and  does  not  allow  the  recovery  of  in- 
terest owing  to  judgments  from  the  time  of  their  rendition  until 
an  appropriation  is  made  for  their  pa3Tnent. 

§  654.  Suits  Against  the  United  States  Under  the  Tucker 
Act. — Prior  to  the  Act  of  March  3,  1887,  known  as  the  Tucker 
Act,  now  incorporated  in  the  Judicial  Code,6  the  remedy  above 


1  Erskine  v.  Van  Arsdale,  15  Wallace  75,  21  L.  Ed.  63   (1872). 

2  Kinney  v.  Conant,  166  Fed.  720  (1900),  affirming  162  Fed.  581. 
aSchell  v.  Cochran,  107  U.  S.  625,  27  L.  Ed.  543;   Tillson  v.  U.  S., 

100  U.  S.  43,  25  L.  Ed.  543   (1879). 

4U.  S.  V.  Barber,  74  Fed.  483   (1896). 

6  Infra,  Sec.  654. 

«  Sec.  991,  R.  S.;  Compiled  Stat,  Sec.  24  of  Judicial  Code,  amended 
December  21,  1911.  Sec.  24.  The  District  Courts  shall  have  original 
jurisdiction    as    follows:     .     .     .     Paragraph    20: 

"Concurrent  with  the  Court  of  Claims,  of  all  claims  not  exceedin.g 


756  REMEDIAL    LAW    IN    FEDERAL   TAXATION.  §    654 

described  of  suit  against  the  collector  was  the  only  remedy  pro- 
vided and  regulated  by  law  for  the  unlawful  enforcement  of  a 
collection  of  a  tax. 

Under  this  act,  concurrent  jurisdiction  with  the  Court  of 
Claims  was  vested  in  the  Circuit,  now  District,  Court  of  all 
claims  not  exceeding  $10,000.00,  not  sounding  in  tort,  wherein 
the  party  would  be  entitled  to  redress  against  the  United  States, 
if  the  United  States  were  suable.  In  other  words,  the  consent 
of  the  United  States  as  a  sovereign  is  thus  given  to  suits  against 
itself.i 


$10,000  founded  upon  the  Constitution  of  the  United  States  or  any 
law  of  Congress,  or  upon  any  regulation  of  an  executive  depart- 
ment, or  upon  any  contract,  express  or  implied,  with  the  gov- 
ernment of  the  United  States,  or  for  damages  liquidated  or  un- 
liquidated in  cases  not  sounding  in  tort,  in  respect  to  which  claims 
the  party  would  be  entitled  to  redress  against  the  United  States  either 
in  a  court  of  law,  equity  or  admiralty,  if  the  United  States  was  suable, 
and  of  all  setoffs,  counterclaims,  damages,  whether  liquidated  or  un- 
liquidated, or  other  demands  whatsoever  on  the  part  of  the  govern- 
ment of  the  United  States  against  any  claimant  against  the  govern- 
ment in  said  court.    .    .    . 

"And  provided  further,  that  no  suit  against  the  .government  of  the 
United  States  shall  be  allowed  under  this  paragraph  unless  the  same 
shall  have  been  brought  within  six  years  after  the  right  accrued  for 
which   the  claim  is  made.     .    .     . 

"All  suits  brought  and  tried  under  the  provisions  of  this  paragraph 
shall  be  tried  by  the  court  without  a  jury." 

1  The  provisions  of  the  Act  of  March  3,  1887,  regulating  procedure  in 
suits  against  the  United  States,  are  as  follows: 

Sec.  1574,  Comp.  Stat.:  "The  jurisdiction  of  the  respective  courts 
of  the  United  States  proceeding  under  this  act,  including  the  right  of 
exception  and  appeal,  shall  be  governed  by  the  law  now  in  force,  in 
so  far  as  the  same  is  applicable  and  not  inconsistent  with  the  provi- 
sions of  this  act;  and  the  course  of  procedure  shall  be  in  accordance 
with  the  established  rules  thereof  and  of  such  additions  and  modifica- 
tions thereof  as  said  courts  may  adopt." 

"Sec.  1575.  The  plaintiff  in  any  suit  brought  under  the  provisions 
of  the  second  section  of  this  act,  supra,  shall  file  a  petition,  duly  veri- 
fied, with  the  clerk  of  the  respective  court  having  jurisdiction  of  the 
case,  and  in  the  district  where  the  plaintiff  resides.  Such  petition 
shall  set  forth  the  full  name  and  residence  of  the  plaintiff,  the  nature 
of  his  claim,  and  a  succinct  statement  of  the  facts  upon  which   the 


§    654  REMEDIAI;    LAW   IN    FEDERAL   TAXATION.  757 

This  Act  was  not  limited  to  suits  for  taxes  illegally  collected, 
but  authorized  the  adjudication  of  several  classes  of  claims 
against  the  United  States  in  the  Court  of  Claims  and  in  the 
Circuit  and  District  Courts.  Jurisdiction  over  all  these  claims 
is  vested  in  the  Court  of  Claims,  while  the  concurrent  jurisdic- 
tion of  the  Circuit,  now  District,  with  the  Court  of  Claims  is 
limited  to  claims  not  exceeding  $10,000.00. 

Under  this  Act  the  plaintiff  files  a  petition  in  the  district 
where  he  resides,  and  service  is  made  upon  the  District  Attor- 


claim  is  based,  the  money  or  any  other  thing  claimed,  or  the  damage 
sought  to  be  recovered,  and  praying  the  court  for  a  judgment  or  de- 
cree upon  the  facts  Involved." 

"Sec.  1576.  Plaintiff  shall  cause  a  copy  of  his  petition  filed  under 
the  preceding  section  to  be  served  upon  the  District  Attorney  of  the 
United  States  in  the  district  where  suit  is  brought,  and  shall  mail  a 
copy  of  the  same,  by  registered  letter,  to  the  Attorney-General  of  the 
United  States,  and  shall  thereupon  cause  to  be  filed  with  the  clerk  of 
the  court  wherein  suit  is  instituted,  an  affidavit  of  such  service  and  the 
mailing  of  such  letter.  It  shall  be  the  duty  of  the  District  Attorney  upon 
whom  service  of  petition  is  made,  as  aforesaid,  to  appear  and  defend 
the  interests  of  the  government  in  the  suit,  and  within  sixty  days 
after  the  service  of  petition  upon  it,  unless  his  time  shall  be  extended 
by  order  of  the  court  made  in  the  case,  to  file  decree,  answer,  or 
demurrer  on  the  part  of  the  government,  and  to  file  a  notice  of  any 
counterclaim,  setoff,  claim  for  damages,  or  other  demand  or  defense 
whatsoever  of  the  government  in  the  premises:  Provided,  That  should 
the  District  Attorney  neglect  or  refuse  to  file  the  plea,  answer,  de- 
murrer, or  defense,  as  required,  the  plaintiff  may  proceed  with  the 
case  under  such  rules  as  the  court  may  adopt  in  the  premises;  but 
the  plaintiff  shall  not  have  judgment  or  decree  for  his  claim,  or  any 
part  thereof,  unless  he  shall  establish  the  same  by  proof  satisfactory 
to  the  court." 

"Sec.  1577.  It  shall  be  the  duty  of  the  court  to  cause  a  written 
opinion  to  be  filed  in  the  cause,  setting  forth  the  specific  findings  by 
the  court  of  the  facts  therein  and  the  conclusions  of  the  court  upon 
all  questions  of  law  involved  in  the  case,  and  to  render  judgment 
thereon.  If  the  suit  be  in  equity  or  admiralty,  the  court  shall  pro- 
ceed with  the  same  according  to  the  rules  of  such  courts." 

"Sec.  1578.  Where  the  findings  of  fact  and  the  law  applicable 
thereto  have  been  filed  in  any  cause  as  provided  in  Sec.  6  of  this  act, 
and  the  judgment  or  decree  is  adverse  to  the  government,  it  shall  l)e 
the  duty  of  the  District  Attorney  to  transmit  to  the  Attorney-General 


758  REMEDIAL    LAW   IN    FEDERAL   TAXATION.  §    654 

ney  in  the  district,  and  a  copy  mailed  by  registered  letter  to  the 
Attorney  General,  and  an  affidavit  of  this  service  and  mailing 
filed  with  the  clerk.  The  court  files  a  written  opinion,  making 
specific  findings  of  the  fact  and  conclusions  of  the  law;  and  if 
the  judgment  is  adverse  to  the  Government,  it  is  the  duty  of  the 
District  Attorney  to  transmit  to  the  Attorney  General  certified 
copies  of  the  papers  with  his  written  opinion.  Appeal  must  be 
taken  within  six  months  and  interest  is  allowed  at  the  rate  of 
4  per  cent  until  the  time  when  an  appropriation  is  made  for  the 
payment  of  the  judgment  or  decree.  The  jurisdiction  of  the 
District  Court  in  such  case,  under  this  act,  was  sustained  by 
the  Supreme  Court.^ 

This  was  a  case  involving  the  construction  of  the  Corporation 
Tax  Law  of  August  5,  1909,  and  this  law  provided  that  all  laws 
relating  to  the  collection,  remission,  and  refund  of  internal 
revenue  taxes,  so  far  as  applicable,  should  be  extended  to  this 
tax. 

In  reply  to  the  contention  that  the  only  remedy  was  by  suit 
against  the  collector,  the  court  said  that  as  the  United  States 
received  and  kept  the  money  and  would  indemnify  the  col- 
lector, the  least  that  can  be  said  was  that  it  would  be  adding  a 
fifth  wheel  to  the  coach  to  require  a  circuitous  process  to  satisfy 
just  claims.  The  right  to  sue  the  collector  for  an  unjustified 
collection  was  one  given  by  the  common  law.    The  court  in  this 


of  the  United  States  certified  copies  of  all  the  papers  filed  in  the  cause, 
with  a  transcript  of  the  testimony  taken,  the  written  findings  of  the 
court  and  his  written  opinion  as  to  the  same;  whereupon  the  Attor- 
ney-General shall  determine  and  direct  whether  an  appeal  or  writ  of 
error  shall  be  taken  or  not;  and  when  so  directed  the  District  Attor- 
ney shall  cause  an  appeal  or  writ  of  error  to  be  perfected  in  accord- 
ance with  the  terms  of  the  statutes  and  rules  of  practice  governing 
the  same:  Provided,  That  no  appeal  or  writ  of  error  shall  be  allowed 
after  six  months  from  the  decree  of  judgment  in  such  suit.  From 
the  date  of  final  judgment  or  decree,  interest  shall  be  computed  thereon 
at  the  rate  of  four  per  cent  per  annum,  until  the  time  when  an  appro- 
priation is  made  for  the  payment  of  the  judgment  or  decree." 

(As  to  allowance  of  interest  under  this  section,  see  Sec.  653,  supra.) 
1  U.  S.  V.  Emery,  Bird  &  Thayer  Realty  Co.,  237  U.  S.  28,  59  L.  Ed. 
825  (1915),  affirming  198  Fed.  242. 


§    655  REMEDIAL   LAW    IN    FEDERAL   TAXATION.  759 

case  cited  the  decision  of  the  Circuit  Court  of  Appeals  of  the 
Eighth  Circuit/  where  it  was  said  bj  Judge  Sanborn: 

"The  Acts  of  1855  and  1887  here  under  consideration,  mark 
a  rational  and  gratifying  advance  in  civilization  and  public  pol- 
icy, and  they  should  be  liberally  construed  to  accomplish  the 
benign  purpose  of  their  enactment.  The  theory  that  a  nation 
or  its  government  should  refuse  to  submit  its  controversies 
■with  its  citizens  to  the  adjudication  of  impartial  tribunals,  is 
but  the  fast  receding  echo  of  the  rule  that  the  King  can  do  no 
wrong.  There  are  a  few  more  grievous  wrongs  than  the  de- 
nial by  a  nation  of  a  hearing  and  trial  of  the  just  claims  which 
its  citizens  may  have  against  it.  There  is  no  reason  why  a 
government  should  not  submit  its  controversies  with  its  sub- 
jects to  adjudication,  or  why  it  should  not  itself  practice  that 
justice  whose  administration  is  the  great  purpose  of  its  exist- 
ence. Justice  demands,  and  a  wise  public  policy  requires,  that 
nations  should  submit  themselves  to  the  judgments  of  impar- 
tial tribunals,  to  the  enforcement  of  their  contracts,  and  to 
satisfaction  of  their  wrongs,  as  universally  as  individuals." 

§  655.  Procedure  Under  the  Tucker  Act. — Prior  to  the  en- 
actment of  the  Tucker  Act  of  1887  giving  the  District  and  Cir- 
cuit Courts  concurrent  jurisdiction  with  the  Court  of  Claims 
the  Supreme  Court  had  upheld  the  jurisdiction  of  the  Court 
of  Claims  under  the  Act  of  1855  over  claims  for  erroneous  or 
illegal  exactions  under  the  tax  laws.^  Since  the  enactment  of 
the  Tucker  Act,  however,  the  jurisdiction  of  suits  for  the  recov- 
ery of  taxes  erroneously  or  illegally  exacted  have  been  uni- 
formly sustained. 

In  reply  to  the  objection  that  the  claim  was  one  "sounding  in 
tort"  especially  excluded  by  that  act,  it  has  been  uniformly 
held  that  the  party  complaining  could  waive  the  tort  and  sue 
upon  the  implied  agreement  of  the  Government  to  refund  taxes 
illegally  exacted.  Furthermore,  the  claim  was  cognizable  by 
the  Circuit  (District)  Court  as  one  arising  under  both  the  Con- 
stitution and  laws  of  the  United  States.     The  acts  therefore  of 


1  Christy    Street    Commission    Co.    v.    United    States,    136    Fed.    326 
(1905),  affirming  129  Fed.  506. 

2  U.  S.  V.  Kaufmann.  96  U.  S.  567,  24  L.  Ed.  792    (1878),  qualifying- 
Nichols  V.  United  States,  7  Wallace  122,  19  L.  Ed.  125   (1868). 


760  REMEDIAL    LAW    IN    FEDERAL   TAXATION.  §    656 

1855  and  1887  vest  in  the  courts  a  complete  jurisdiction  of  a 
cause  of  action  upon  a  claim  founded  upon  a  law  of  Congress 
and  upon  and  under  the  Constitution.  The  Commissioner  of 
Internal  Revenue  was  powerless  to  make  or  modify  this  con- 
gressional grant  or  to  oust  the  jurisdiction  of  the  court  either 
by  his  inaction  or  by  his  rejection  of  the  claim,  and  plenary 
power  was  vested  in  the  Circuit  (now  District)  Court  to  hear 
and  determine  it  upon  its  merits.* 

In  one  of  the  series  of  the  insular  cases^  this  subject  was  fully 
considered  by  the  court  in  the  prevailing  opinion  in  relation 
to  the  jurisdiction  of  the  court  over  the  recovery  of  duties  un- 
lawfully exacted,  and  the  court  said  that  whether  the  exac- 
tions of  the  duties  were  tortuous  or  not  and  whether  it  was 
within  the  power  of  the  importer  to  waive  the  tort,  and  bring 
suit  in  the  Court  of  Claims  for  money  had  and  received  as 
upon  an  implied  contract  of  the  United  States  to  refund  the 
money  in  case,  the  exaction  was  illegal.  The  court  said  that  the 
case  was  one  within  the  first  class  of  cases  specified  in  the  Tucker 
Act  or  a  claim  founded  upon  a  law  of  Congress,  namely,  a 
revenue  law,  in  respect  of  which  class  of  cases  the  jurisdiction 
of  the  Court  of  Claims  under  the  Tucker  Act  had  been  re- 
peatedly sustained.  3 

As  the  jurisdiction  of  the  Circuit  (now  District)  Court  is 
concurrent  with  the  Court  of  Claims  only  in  the  case  of  claims 
not  exceeding  $10,000.00,  the  claims  which  involve  more  than 
$10,000.00  are  within  the  jurisdiction  of  the  Court  of  Claims 
alone,  and  the  procedure  therein  is  in  accordance  with  the  stat- 
ute and  rules  regulating  the  jurisdiction  pertaining  to  that 
court. 

§  656.  Where  the  Judgment  of  the  Court  of  Appeals  is  Not 
Final. — Where  a  suit  is  brought  against  the  collector  of  the 
United  States  for  the  recovery  of  taxes  unlawfully  levied,  and 
the  Constitution  and  revenue  laws  are  involved  so  that  the  Fed- 


1  Christie  Street  Com.  Co.  v.  U.  S.,  supra;   Spreckles  Sugar  Refining 
Co.  V.  McClain,  192  U.  S.  397,  48  L.  Ed.  496   (1904). 
2Dooley  v.  U.  S.,  supra. 
»U.  S.  V.  Finch,  C.  C.  A.,  7th  Cir.,  201  Fed.  905   (1912). 


§    657  REMEDIAL   LAW   IN    FEDERAL    TAXATION.  761 

eral  court  has  jurisdiction  irrespective  of  citizenship,  and  other 
questions  are  also  involved,  the  judgment  of  the  Circuit  Court 
of  Appeals  is  not  final,  but  the  case  is  properly  brought  before 
the  Supreme  Court  for  review.^  The  court  said  the  plaintiff 
was  entitled  to  bring  the  suit  directly  to  the  Supreme  Court 
from  the  trial  court  and  at  his  election  to  go  first  to  the  Circuit 
Court  of  Appeals,  but  if  he  elected  to  go  first  to  the  Circuit 
Court  of  Appeals,  he  could  not  thereafter,  if  unsuccessful, 
prosecute  a  writ  of  error  from  the  District  Court  to  the  Su- 
preme Court,  but  the  judgment  of  the  Court  of  Appeals  could 
be  reviewed  by  the  Supreme  Court.  Such  a  suit  is  not  one  aris- 
ing under  the  revenue  laws  within  the  meaning  of  the  Act  of 
March  3,  1891,  making  the  judgment  of  the  Circuit  Court  of 
Appeals  in  such  cases  final.  In  this  case  the  rights  of  the  par- 
ties depended  on  plaintiff's  showing  of  the  constitutionality  of 
the  statute  involved  and  the  Constitution  and  application  of  the 
Federal  Constitution.  The  suit  in  this  case  was  against  the 
collector  individually,  but  the  reasoning  of  the  court  would 
seem  to  apply  if  the  case  had  been  brought  directly  against  the 
United  States. 

§  657.  Limitation  of  Actions. — Sec.  1  of  the  Tucker  Act  of 
1887  provides  that  no  suit  against  the  Government  of  the  United 
States  shall  be  allowed  under  the  act  unless  the  same  shall  have 
been  brought  within  six  years  after  the  right  accrued  within 
which  the  claim  is  made.2  This  statute,  it  will  be  remembered, 
included  other  classes  of  actions.  The  statutes  concerning  the 
enforcement  of  claims  to  recover  taxes  illegally  collected,^  made 
a  limitation  of  two  years.  It  was  held  by  the  Circuit  Court  of 
Appeals.  Eighth  Circuit,4  that  this  specific  limitation  prescribed 
and  limited  the  means  by  Avhich  one  might  recover  from  the 
United  States  internal  taxes  which  had  been  illegally  exacted. 
The  adjustment  of  such  claims  was  not  the  sole  or  primary  sub- 


1  Spreckles  Sugar  Refining  Co.  v.  MoClain,  supra. 

2  Supra,  Sec.  654. 
»  Supra,  Sec.  6.52. 

■•Christy  Street,  Commission  v.  U.  S.,  supra;  Farrell  v.  U.  S.   (E.  D. 
Of  Ark.),  167  Fed.  639, 


762  REMEDIAL    LAW    IN    FEDERAL   TAXATION.  §    657 

ject  of  the  Act  of  1887,  but  it  was  a  general  law,  passed  for 
the  purpose  of  conferring  jurisdiction  of  actions  upon  certain 
courts  of  the  United  States.  If  Congress  had  declared  that  all 
actions  allowed  under  it  could  be  commenced  at  any  time  within 
six  years  after  their  respective  cases  accrued,  there  might  be 
some  basis  for  the  contention  that  this  worked  a  repeal  of  the 
two-year  statute. 

The  court  said  that  it  was  a  familar  rule  of  construction  that 
specific  legislation  upon  a  particular  subject  is  not  affected  by  a 
general  law  upon  the  same  subject,  unless  it  clearly  appears  that 
the  provisions  of  the  two  laws  are  so  repugnant  that  the  legis- 
lators must  have  intended  by  the  latter  to  modify  or  repeal  the 
earlier  act.  The  court,  therefore,  concluded  that  the  action  was 
barred  by  the  limitation  of  Sec.  3227,  as  it  was  not  commenced 
until  more  than  two  years  after  the  cause  of  action  presented 
had  accrued. 

In  the  suit  against  a  collector,  it  was  held  by  the  Circuit 
Court  of  Appeals,  Second  Circuit.^  that  the  proviso  in  Sec. 
3226,  that  if  a  decision  of  the  Commissioner  on  Internal  Revenue 
is  delayed  more  than  six  months  from  the  date  of  the  appeal, 
then  the  suit  may  be  brought  without  waiting  for  the  decision 
of  the  Commission  at  any  time  within  the  period  limited  in  the 
next  section,  was  permissive  only,  and  did  not  compel  a  claimant 
to  bring  a  suit  within  two  years  and  six  months  after  taking  an 
appeal  in  any  ease,  but  he  could,  at  his  election,  await  the  de- 
cision of  the  Commissioner,  and,  if  adverse,  bring  suit  within 
two  years  thereafter,  the  court  saying: 

"The  practice,  as  we  construe  the  statute,  is  plain  and  sim- 
ple. The  party  whose  property,  as  he  thinks,  has  been  wrongly 
taken  by  the  Collector,  appeals  to  the  Commissioner.  If  the 
latter  official  rendei^s  a  decision  against  him,  he  must  bring 
suit  within  two  years  from  the  date  of  such  decision :  but  the 
decision  may  be  unreasonably  delayed,  and  the  claimant  may 
thus  be  deprived  of  his  money  for  an  indefinite  period. '  '- 


1  Merck  v.  Treat,  174  Fed.  388   (1909). 

2  The  court  cited   Arnson  v.   Murphy,   109   U.    S.   238,  25  L.   Ed.   920 
(1883),  and  Wright  v.  Blakesley,  101  U.  S.  174,  25  L.  Ed.  1048   (1880), 


§    659  REMEDIAL   LAW   IN   f^EDERAL   TAXATION.  763 

§  658.  Only  Party  in  Interest  Can  Bring  Suit.— While  it 
is  recognized  that  the  right  of  action  against  a  collector  to  re- 
cover taxes  or  duties  illegally  collected,  was  a  common  law 
right,  yet,  in  effect,  it  was  taken  away  by  the  statute,  and  a 
statutory  remedy  given  which  was  exclusive,  that  is,  except  as 
to  the  right  to  bring  a  suit  against  the  United  States  directly 
under  the  Tucker  Act.  In  whatever  form  the  claims  against 
the  United  States  is  asserted,  that  is,  whether  in  the  form  of  an 
action  against  the  collector  or  directly  against  the  Government, 
the  action  cannot  be  maintained  by  a  stranger  suing  solely  in 
virtue  of  a  purchase  of  claims  from  those  who  did  not  see  fit 
to  prosecute  it  themselves.^  This  in  accordance  with  the  stat- 
ute making  unlawful  the  transfers  and  assignments  of  claims 
against  the  United  States,  which  was  enacted  in  view  of  the 
public  policy  which  condemned  speculative  interests  in  such 
claims.  The  rule  does  not  apply  to  devisees  or  representatives 
of  the  estates  of  deceased  persons  or  assignees  in  bankruptcy 
under  operation  of  law,  who  take  by  devolution  of  title,  suc- 
ceeding to  the  interest  of  the  original  party.^  It  does  apply, 
however,  to  a  contract  given  an  attorney  for  one-half  of  all  the 
money  received  by  him  for  prosecuting  claims.  The  court  held 
that  a  restriction  of  compensation  of  attorneys  for  the  collection 
of  claims  against  the  United  States,  also  fell  within  this  rule.^ 

This  rule  does  not,  however,  apply  to  the  purchaser  of  prop- 
erty which  is  involved  in  a  claim,  as  the  court  said  there  was  a 
clear  distinction  between  the  assignment  of  a  claim,  and  the 
assignment  of  the  thing  which  is  the  subject  of  a  claim. 

This  rof|uirement  of  a  personal  interest  includes  all  claims 
against  the  Government  in  whatever  form  asserted. 

§  659.  The  Recovery  of  Duties  Illegally  or  Erroneously 
Collected. — The  general  principle  applicable  to  internal  i-eve- 


sustaining  this  construction  of  the  statute.  See  also  Public  Service 
Ry.  Co.  v.  Herold,  219  Fed.  301  (1915),  and  also  James  v.  Hicks,  110 
U.  S.  272,  28  L.  Ed.  144   (1884). 

iHager  v.  Swain,  149  U.  S.  242,  37  L.  Ed.  719   (1893). 

2  See  Ball  v.  Halsell.  161  U.  S.  72.  40  L.   Ed.  622    (1896). 

sSeeberger  v.  Castro,  153  U.  S.  32,  38  L.  Ed.  624   (1894). 


764  REMEDIAL   LAW   IN    FEDERAL   TAXATION.  §    660 

nue  taxes,  that  is,  the  coimmon  law  right  of  action  against  the 
collector,  and  the  proceeding  under  the  Tucker  Act  directly 
against  the  United  States,  apply  to  customs  duties  illegally  or 
erroneously  collected.  The  common  law  liability  of  the  Collector 
of  Customs,  however,  and  the  right  of  recovery  against  the 
United  States  based  thereon,  are  largely  controlled  by  the  pro- 
visions of  the  Customs  Administrative  Act  in  the  establishment 
of  the  Board  of  General  Appraisers^  and  the  Court  of  Customs 
Appeals.^  No  action,  therefore,  lies  against  the  collector  or  the 
United  States  to  recover  duties  paid  where  the  matter  is  one 
within  the  purview  of  the  Administrative  Customs  Act  of  1890. 
Thus,  by  this  Act  an  appeal  is  given  from  the  decision  of  the 
collector  as  to  the  rate  and  amount  of  duties  chargeable  upon 
imported  merchandise  to  a  Board  of  Appraisers.  The  Supreme 
Court  said,  in  the  Dooley  ease,^  that  this  remedy  was  doubtless 
exclusive  as  applied  to  customs  cases,  but  has  no  application  to 
actions  against  the  collector  for  duties  exacted  upon  goods  which 
were  not  subject  to  duties  at  all,  and  the  court  said  that  such 
cases,  though  arising  under  the  revenue  laws,  are  not  within 
the  purview  of  the  Customs  Administration  Act,  and  as  for 
such  cases  there  is  still  a  common  law  right  of  action  against  the 
collector. 

In  this  case  the  court  held  that  an  action  for  duties  illegally 
exacted  upon  imports  from  Porto  Rico  to  New  York,  which 
were  held  not  subject  to  duties,  was  properly  brought  against 
the  United  States  within  the  meaning  of  the  Tucker  Act.  Such 
eases,  therefore,  not  falling  within  the  purview  of  the  Customs 
Administrative  Act,  may  be  brought  by  action  against  the  col- 
lector or  against  the  United  States,  as  in  the  ease  of  Internal 
Revenue  taxes. 

§  660.  The  Federal  Procedure  Summarized. — The  judicial 
procedure  in  the  courts  of  the  United  States  for  the  protection 


lAct  of  June  10,  1890,  amended  May  27,  1908,  and  May  5,  1909. 
Comp.  Stat.  5593,  etc. 

2  Judicial   Code,  188-199.     Amended  Act  of    August    22,    1914.     See 
supra,  651. 

3  Supra. 


5    660  REMEDIAL   LAW   IN   FEDERAL   TAXATION.  765 

of  the  taxpayer  against  illegality  or  error  in  the  administration 
of  the  Federal  tax  laws  is  applicable  to  every  form  of  such  tax- 
ation. The  provision  for  direct  suit  against  the  United  States 
in  lieu  of  a  personal  action  against  the  collector  is  based  upon 
the  same  statutes^  regulating  the  recovery  of  taxes  requiring 
payment  under  protest,  and  prior  application  to  the  Commis- 
missioner  of  Internal  Revenue  in  ease  of  internal  taxation  and 
the  suit  against  the  United  States  and  the  collector  are  subject 
to  the  same  limitation  of  time,^  and  both  forms  of  action  are 
ultimately  dependent  upon  the  appropriation  made  by  Con- 
gress for  their  satisfaction. 

In  ease  of  duties  illegally  or  erroneously  exacted  (where  not 
within  the  purview  of  the  Customs  Administrative  Act,  supra 
Sec.  659),  the  personal  action  would  be  against  the  collector 
of  customs,  while  a  direct  suit  against  the  United  States  would 
be  equally  available.  In  the  recent  cases  of  the  exercise 
of  taxing  power  it  has  been  specially  provided  by 
statute,  that  all  laws  relating  to  the  collection,  remission 
and  refund  of  internal  revenue  taxes  as  far  as  applicable  should 
l)e  extended  to  the  tax  thereby  levied.^  It  thus  appears  that 
the  special  statutory  procedure  thus  provided  by  the  laws  of 
the  United  States  is  adapted  to  protect  the  taxpayer  and  the 
public  against  the  illegal  or  erroneous  exercise  of  the  taxing 
power  so  far  as  it  can  be  protected  by  other  than  preventive 
procedure,  and  it  was  shown  in  the  Income  Tax  cases  that,  in 
the  emergencies  where  preventive  relief  is  necessary,  such  relief 
can  be  secured. 


t  Supra,  Sec.  652. 

2  Supra,  Sec.  657.    The   only   practical    difference    in    the   forms    of 
actions  seems  to  be  in  the  allowance  of  interest,  supra.  Sec.  653. 

3  See  Corporation  Tax  Law  of  August  5,  1909;   Income  Tax  Law  of 
1913  and  of  1916;  Emergency  War  Legislation  of  1917. 


APPENDIX. 


APPENDIX. 


THE  STATE  TAXATION  SYSTEMS. 

The  limitations  of  the  taxing  power  of  the  States  under  the 
Federal  Constitution  necessarily  involve  a  reference  to  the 
varying  restrictions  imposed  by  the  State  constitutions  upon 
the  legislative  power  of  taxation,  and  to  the  exercise  of  the 
taxing  power  thus  restricted  in  the  States  by  both  the  State 
and  Federal  power.  In  some  of  the  States  there  is  no  direct 
limitation  in  the  State  constitutions  on  the  legislative  power  of 
taxation,  except  in  the  guarantee  of  due  process  of  law,  while 
in  other  States,  particularly  in  the  more  recent  constitutions, 
there  is  a  detailed  and  specific  regulation  of  the  exercise  of  the 
taxing  power. 

At  no  time  in  the  history  of  the  country  has  there  been  such 
a  wide  extended  discussion  of  taxing  methods,  or  such  legisla- 
tive activity  in  the  adoption  of  new  forms  of  taxation,  as  in  the 
past  few  years.  Many  of  the  State  constitutions  contain  the 
requirement  of  equality  and  uniformity  in  taxation,  while  in 
others  this  requirement  of  uniformity  is  limited  to  the  same 
class  of  subject  within  the  territorial  limits  of  the  authority 
levying  the  tax.  In  the  growing  recognition  of  the  ineffective- 
ness of  the  ''general  property"  taxing  system  under  modem 
conditions,  which  has  found  frequent  expression  in  the  judicial 
opinions  heretofore  cited,  there  has  been  a  wide  extended  agita- 
tion, which  still  continues,  to  make  the  State  taxing  systems 
more  effective  by  qualifying  this  requirement  of  uniformity,  so 
as  to  permit  classification  of  the  different  subjects  of  taxation. 
Such  classification,  when  reasonable  and  natural,  and  not  arbi- 
trary, as  we  have  already  seen,  is  consistent  with  the  equal  pro- 
tection of  the  laws  guaranteed  by  the  Federal  Constitution.  For 
examples  of  such  classifications  under  the  State  constitutions 
permitting  the  same,  see  Michigan,  Minnesota,  Missouri,  New 
York,  North  Dakota,  and  other  states,  infra.  See  also  Ch.  15, 
svjji'a. 

(769) 


770  STATE   TAXATION — INTRODUCTION. 

This  modern  agitation  in  taxation  is  further  illustrated  in  the 
adoption  of  income  taxation  in  several  States.  It  is  notable  in 
some  States  where  this  income  taxation  has  been  adopted  as  a 
means  of  revenue,  that  double  taxation  has  been  sought  to  be 
avoided  by  the  exemption  of  the  property  from  which  the  in- 
come is  derived,  when  a  tax  is  levied  upon  such  income.  This  is 
a  recognition  of  the  principle  declared  in  the  income  tax  cases 
{supra,  Sec.  560),  that  the  taxation  of  the  use  of  the  property 
is  in  effect  a  taxation  of  the  property  itself. 

In  the  case  of  the  Federal  income  tax  no  such  question  arises 
as  to  the  tax  upon  real  property,  as  the  Federal  government 
levies  a  tax  upon  rents  but  not  upon  the  land  itself,  under  the 
authority  of  the  Sixteenth  Amendment,  and  it  cannot  levy  a 
tax  upon  the  land  except  under  the  rule  of  apportionment, 
which  it  has  not  applied. 

The  effective  exercise  of  the  Federal  taxing  power  through 
the  income  tax  has  led  many  economists  and  publicists  to  favor 
the  adoption  of  a  similar  income  tax  in  the  States,  in  lieu  of  and 
as  a  substitute  for  the  present  ineffectiveness  of  the  system  of 
taxing  intangible  personalty. 

It  will  be  seen  that  inheritance  taxation  has  been  adopted  in 
nearly  all  the  States ;  but  that  in  a  very  f cav  of  them  has  there 
been  any  effort  made  by  the  exercise  of  interstate  comity  to 
avoid  double  taxation,  when  the  ow^ner  of  property  and  the 
property  are  located  in  different  States. 

It  will  also  be  noted  that  in  nearly  all  the  States,  State  tax 
commissions  have  been  organized,  in  some  States  in  addition  to 
State  Boards  of  Equalization. 

There  is  a  material  difference  in  constitutions  of  the  different 
States  in  the  restrictions  upon  the  legislative  power  of  exemp- 
tions from  taxation.  In  some  States  legislative  exemptions  are 
prohibited  and  all  property  is  made  subject  to  taxation  except 
as  specifically  exempted  in  the  constitution,  while  in  others  the 
legislature  is  authorized  to  make  certain  exemptions,  and  in  a 
few  the  legislative  power  is  unrestricted.  The  exemptions  au- 
thorized in  the  several  States  illustrate  differing  views  of  public 
policy. 

It  will  be  observed  that  some  of  the  constitutions  are  not 


STATE    TAXATION — INTRODUCTION.       "  771 

framed  upon  the  recognized  theory  that  the  State  legislative 
power  is  supreme  in  taxation  except  as  limited  by  the  State  and 
Federal  constitutions,  as  they  contain  specific  grants  of  power 
to  levy  certain  forms  of  tax  as  poll  tax,  licenses  and  inheritance 
taxes  and  the  like,  and  in  a  few  cases,  power  to  make  special 
assessments  for  local  improvement  is  specifically  granted  in  the 
State  constitution.  These  latter  provisions,  however,  seem  to 
have  been  made  in  view  of  prior  decisions  in  such  States  hold- 
ing that  such  methods  of  taxation  were  inconsistent  with  the 
constitutional  requirement  of  equality  and  uniformity  in  tax- 
ation. 

In  some  States  there  has  been  a  separation  more  or  less  com- 
plete of  the  sources  of  State  and  municipal  revenues,  thus  allow- 
ing municipalities  and  local  taxing  districts  to  determine  for 
themselves  the  subject  of  taxation.  Such  separation,  as  also 
the  matter  of  classification  already  referred  to,  requires  the 
repeal  of  constitutional  provisions  requiring  taxation  of  all 
property  under  uniform  rules  throughout  the  State. 

It  has  been  the  aim  to  make  this  summary  of  State  systems 
of  taxation  as  accurate  as  the  investigation  of  available  sources 
permitted,  and  as  comprehensive  as  space  allows,  yet  it  is  obvi- 
ous that  in  the  nature  of  things  such  summaries  are  not  suffi- 
cient for  the  investigation  of  close  and  involved  questions  of 
statutory  construction,  and  those  interested  therein  should  seek 
official  or  professional  sources  of  local  information.  It  should 
also  be  remembered  that  constitutional  amendments  are  pend- 
ing in  some  of  the  States  and  that  agitation  for  further  legisla- 
tive changes  in  tax  laws  is  pending  in  nearly  all  of  them.  Nor 
was  it  deemed  wise  to  attempt  to  state  all  the  specific  rates  of 
taxation,  as  these  are  usually  subject  to  change  at  any  legisla- 
tive session,  but  to  give  a  fair  outline  of  the  system  of  taxation 
prevailing. 

On  this  subject  of  the  taxation  systems  of  the  different  States 
reference  .should  be  made  to  the  special  reports,  on  tlic  taxa- 
tion of  corporations  in  the  different  States  by  the  Commissioner 
of  Corporations  in  the  Department  of  Commerce,  published  at 
intervals  from  1000  to  1015,  as  to  the  different  sections  of  the 
country,  with  a  special  report  on  taxation  of  corporations  ia 


772  STATE   TAXATION    SYSTEM ALABAMA. 

1912,  and  reference  is  also  made  to  the  review  of  the  taxation 
and  revenue  systems  of  the  State  and  local  governments,  pub- 
lished by  the  Bureau  of  Census  in  the  Department  of  Com- 
merce in  1912.  Many  important  changes,  however,  have  been 
made  in  the  taxing  systems  of  some  of  the  States  since  these 
governmental  publications. 

Eeference  is  also  made  to  the  review  of  State  legislation  in 
the  proceedings  of  the  National  Tax  Association,  published  an- 
nually. 

ALABAMA 
(Constitution   went  into   effect   November   28,   1901.) 

Sec.  91.  Tlie  legislature  shall  not  tax  the  property,  real  or  per- 
sonal, of  the  State,  counties  or  other  municipal  corporations,  or  ceme- 
teries; nor  lots  in  incorporated  cities  or  towns,  or  within  one  mile  of 
any  city  or  town  to  the  extent  of  one  acre,  nor  lots  one  mile  or  more 
distant  from  such  cities  or  towns  to  the  extent  of  five  acres,  with  the 
buildings  thereon,  when  same  are  used  exclusively  for  religious  wor- 
ship, for  schools,  or  for  purposes  purely  charitable. 

Sec.  92.  The  legislature  shall  by  law  prescribe  such  rules  and  reg- 
ulations as  may  be  necessary  to  ascertain  the  value  of  real  and  per- 
sonal property  exempted  from  sale  under  legal  process  by  this  con- 
stitution, and  to  secure  the  same  to  the  claimant  thereof  as  selected. 

Art.  VIII,  Sec.  178.  (The  payment  of  a  poll  tax  is  made  a  condi- 
tion precedent  of  the  right  to  vote.  This  poll  tax,  by  Sec.  194,  is  to 
be  $1.50  upon  each  male  inhabitant  over  the  age  of  twenty-one  and 
under  the  age  of  forty-fiTe  years,  who  was  not,  when  the  constitution 
was  adopted,  exempt  by  law,  but  the  legislature  is  authorized  to  in- 
crease the  maximum  age  to  not  more  than  sixty  years.  No  legal 
process  is  allowed  for  the  collection  of  the  poll  tax,  and  any  payment 
of  the  poll  tax  by  another  or  the  advancement  of  money  for  that  pur- 
pose is  made  to  constitute  bribery.  Under  Sec.  259,  the  proceeds  of 
all  the  poll  taxes  are  applied  to  the  support  of  the  public  schools.) 

Art.  XI,  Sec.  211.  All  taxes  levied  on  property  in  this  State  shall 
be  assessed  in  exact  proportion  to  the  value  of  such  property,  but  no 
tax  shall  be  assessed  upon  any  debt  for  rent  or  hire  of  real  or  per- 
sonal property,  while  owned  by  the  landlord  or  hired  during  the  cur- 
rent year  of  such  rental  or  hire,  if  such  real  or  personal  property  be 
assessed  at  its  full  value. 

Sec.  212.  The  power  to  levy  taxes  shall  not  be  delegated  to  indi- 
viduals or  private  corporations  or  associations.  (Under  Sees.  214,  215 
and  216  the  rates  of  tax  In  the  State,  counties  and  cities  are  spe- 
cifically limited.) 

Sec.  217.  The  property  of  private  corporations,  associations  and 
individuals  of  this  State  shall  forever  be  taxed  at  the  same  rate;  pro- 
vided, this  section  shall  not  apply  to  institutions  devoted  exclusively 
to  religious,  educational  or  charitable  purposes. 


STATE   TAXATION    SYSTEM ALABAMA.  773 

Sec.  218.  The  legislature  shall  not  have  the  power  to  require  coun- 
ties or  other  municipal  corporations  to  pay  any  charges  which  are 
now  payable  out  of  the  State  treasury. 

Sec.  219.  (Authorizes  the  legislature  to  levy  a  collateral  inherit- 
ance tax  of  not  more  than  two  and  one-half  per  cent  on  all  estates, 
real  and  personal,  in  the  State,  transferred  by  will  or  the  intestate 
laws  of  the  State.) 

Art.  XIV,  Sec.  269.  (A  special  county  tax,  specifically  limited  in 
rate,  is  authorized  for  the  support  of  public  schools.) 


REVENUE  ACT  OF  1915.— Alabama  in  1915,  by  the  General  Rev- 
enue Act  approved  September  14,  1915,  and  its  General  Licensing  Act 
of  the  same  date,  codified  and  re-enacted  the  revenue  system  of  the 
State.    References  are  to  these  acts  of  1915.' 

STATE  BOARD. — A  State  Board  of  Equalization  was  established, 
composed  of  a  chairman  and  two  associate  members  appointed  by  the 
government  to  devote  their  entire  time  to  duties  of  their  office,  to 
exercise  general  and  complete  supervision  over  the  valuation,  equali- 
zation and  assessment  and  collection  of  taxes,  and  perform  all  the 
duties  theretofore  performed  by  the  State  Tax  Commission,  with  power 
to  correct  the  assessment  of  any  county.  This  board  has  complete 
supervision  over  the  local  assessments,  with  power  to  readjust  and 
equalize  the  assessments  of  any  class  of  property  in  the  county  and 
precincts  of  the  State.  It  is  also  the  duty  of  the  State  Board  to  assess 
for  taxation  public  carriers  and  public  utilities,  also  the  franchises 
and  intangible  property  and  assets  of  such  corporations,  and  these 
values  are  apportioned  to  the  counties  wherein  any  part  of  these 
properties  are  located. 

CORPORATIONS.— All  business  corporations,  whether  foreign  or 
domestic,  other  than  banks,  pay  to  the  State  an  annual  franchise  tax 
of  forty  cents  on  each  thousand  of  its  paid-up  capital.  Foreign  cor- 
porations pay  this  tax  on  the  amount  of  capital  actually  employed  in 
the  State.  In  ascertaining  this  franchise  tax  of  foreign  corporations, 
however,  deduction  is  made  from  the  capital  employed  in  the  State 
of  the  aggregate  amount  of  loans  secured  by  mortgage  on  real  estate 
wherein  the  mortgages  have  paid  the  recording  tax  provided  by  law. 
See  Revenue  Act,  Sec.  16.  (As  to  application  of  this  corporation  fran- 
chise tax  to  railroad  corporations,  see  supra.  Sec.  199.) 

Corporations,  as  individuals,  are  also  subject  to  the  general  prop- 
erty tax,  and  the  shares  of  business  corporations  are  not  separately 
taxed  unless  the  aggregate  assessment  of  their  shares  exceeds  the 
aggregate  value   of  the  real   and   personal   property   returned   by   the 


774  STATE   TAXATION    SYSTEM ALABAMA. 

corporation  for  taxation.  Revenue  Act,  Sec.  14.  Corporations  also, 
whether  foreign  or  domestic,  pay  the  special  privilege  tax,  assessed 
in  carrying  on  the  occupation  or  business  in  which  the  corporation  may 
be  engaged. 

BANKS. — Shares  of  stock  are  assessed  at  reasonable  value,  less 
assessed  value  of  real  estate. 

COUNTY  BOARDS. — There  is  a  County  Board  of  Equalization  com- 
posed of  three  freeholders,  one  of  whom  is  appointed  by  the  Court  of 
County  Commissioners,  one  by  the  State  Board  of  Equalization  and 
these  two  appoint  the  third. 

If  the  County  Board  of  Equalization  is  dissatisfied  with  the  changes 
and  corrections  ordered  by  the  State  Board  of  Equalization,  provision 
is  made  for  arbitration. 

LICENSES. — Every  person  or  corporation  engaged  in  any  business 
or  occupation  specified  in  the  statute,  and  a  great  variety  of  occupations 
are  so  sipecified,  is  made  subject  to  a  license  or  privilege  tax  specified  in 
the  statute.  See  License  Act  of  1915.  This  license  taxation  is  enforced 
by  prosecution  for  doing  business  without  a  license.  There  is  also 
levied  for  the  use  in  any  county  of  the  State  a  license  or  privilege  tax 
of  50  per  cent  of  the  State  license  except  in  the  cases  where  the  amount 
of  the  county  licenses  is  specifically  fixed  by  the  act,  or  it  is  provided 
that  no  county  license  is  paid. 

In  this  license  tax  law  is  also  provided  a  mortgage  recording  tax  of 
15  cents  on  each  $100.00  to  be  paid  by  the  lender,  of  which  tax  one-third 
is  paid  to  the  county  and  two-thirds  to  the  State.  The  payment  of  this 
tax  exempts  the  mortgage  from  further  tax  during  the  term. 

There  is  no  inheritance  tax. 

POLL  TAX. — A  poll  tax  is  levied  of  $1.50  on  every  male  inhabitant 
over  the  age  of  twenty-one  and  under  the  age  of  forty-five  years,  except 
in  persons  permanently  disabled  and  whose  taxable  property  does  not 
exceed  $500.00.  This  tax  is  applied  exclusively  in  aid  of  the  public 
school  fund  of  the  counties  in  which  the  tax  is  levied  and  collected. 

ASSESSMENT. — All  property,  whether  of  individuals  or  corpora- 
tions, is  assessed  for  taxation  at  60  per  cent  of  its  "fair  and  reasonable 
cash  value."     Revenue  Act,  Sec.  9. 

EXEMPTIONS. — There  is  a  comprehensive  system  of  exemptions, 
including  public  property,  bonds  of  the  State  and  all  county  and 
municipal  bonds  issued  in  the  State,  household  goods,  wearing  apparel, 
family  portraits  and   farm  equipment  to   a  specified  extent,  and   tho 


STATE   TAXATION    SYSTEM — ARIZONA.  775 

property  of  deaf  mutes  and  insane  and  blind  persons  of  the  value  of 
one  thousand  dollars,  agricultural  products  in  the  hands  of  the  pro- 
ducer, and  manufacturers'  products  in  the  hands  of  the  manufacturer, 
provided  the  property  is  named  upon  the  assessment  list  returned 
under  oath.  Also  all  shipbuilding  plants  in  the  erection  and  construc- 
tion and  equipment  for  which  not  less  than  one  hundred  thousand 
dollars  shall  have  been  bona  fide  expended,  together  with  all  machinery 
equipment,  etc.,  are  exempted  from  all  taxation  for  a  period  of  ten 
years. 

COLLECTION. — Taxes  are  assessed  -as  of  October  1st  of  each  year 
and  the  assessment  finished  by  February  1st,  when  the  tax  becomes 
delinquent,  5  per  cent  being  added.  The  assessment  roll  delivered  to 
the  Judge  of  Probate  by  the  first  Monday  in  May.  All  taxes  become 
due  October  1st  and  are  delinquent  January  1st  thereafter,  when  they 
draw  interest  at  8  per  cent. 

A  certificate  of  purchase  is  g'iven  when  the  land  is  sold  for  taxes, 
and  the  same  is  subject  to  redemption  in  two  years  when  deed  is  given, 
which  is  prima  facie  evidence  of  the  recitals  therein. 

ARIZONA 

(Constitution  adopted  1911.) 

Article  IX,  Sec.  1.  The  power  of  taxation  shall  never  be  surrendered, 
suspended,  or  contracted  away.  All  taxes  shall  be  uniform  upon  the 
same  class  of  property  within  the  territorial  limits  of  the  authority 
levying  the  tax,  and  shall  be  levied  and  collected  for  public  purposes 
only. 

Sec.  2.  There  shall  be  exempted  from  taxation  all  Federal,  State, 
county  and  municipal  property.  Property  of  educational,  charitable 
and  religious  associations  or  institutions  not  used  or  held  for  profit 
may  be  exempted  from  taxation  by  law.  Public  debte,  as  evidenced 
by  the  bonds  of  Arizona,  its  counties,  municipalities,  or  other  sub- 
divisions, shall  also  be  exempt  from  taxation.  There  shall  further  be 
exempt  from  taxation  the  property  of  widows,  residents  of  this  State, 
not  exceeding  the  amount  of  .$1,000,  where  the  total  assessment  of 
such  widow  does  not  exceed  $2,000.  All  property  in  the  State  not 
exempt  under  the  laws  of  the  United  States  or  under  this  Constitution, 
or  exempted  by  law  under  the  provisions  of  this  section,  shall  be  subject 
to  taxation  to  be  ascertained  as  provided  by  law. 

Sec.  12.  The  law-making  power  shall  have  authority  to  provide  for 
the  levy  and  collection  of  license,  franchise,  gross  revenue,  oxeiso,  in- 
come, collateral  and  direct  inheritance;  legacy  and  succession  tax(>9, 
also  graduated  income  taxes,  graduated  collateral  and  direct  iiiliori- 
fanco  taxes,  graduated  legacy  and  succession  taxes,  stamp,  registration, 
production,  or  other  specific  taxes. 


776  STATE   TAXATION    SYSTEM — ARIZONA, 

The  Enabling  Act  passed  Congress  (Act  of  June  20,  1910),  accepted 
by  the  State  in  its  Constitution,  provided.  Sec.  20: 

"That  the  lands  and  other  property  belonging  to  citizens  of  the  United 
States  residing  outside  said  State  shall  never  be  taxed  at  a  higher  rate 
than  property  belonging  to  the  residents  thereof;  that  no  taxes  shall 
be  imposed  by  the  State  upon  lands  or  property  therein  belonging  to, 
or  which  might  hereafter  be  acquired  by  the  United  States,  or  reserved 
for  its  use;  but  nothing  herein  or  in  the  ordinance  herein  provided  for, 
shall  preclude  the  said  State  from  taxing  as  other  lands  and  other 
property  are  taxed,  any  lands  and  other  property  outside  of  an  Indian 
reservation  owned  and  held  by  any  Indian,  save  and  except  such  lands 
as  have  been  granted  or  acquired  as  aforesaid,  or  as  may  be  granted  or 
confirmed  to  any  Indian  or  Indians  under  any  act  of  Congress,  but  said 
ordinance  shall  provide  that  all  such  lands  shall  be  exempt  from  taxa- 
tion by  such  a  State  so  long  and  to  such  extent  as  Congress  has  pre- 
scribed or  may  hereafter  prescribe." 

ADMINISTRATION. — There  is  a  State  Tax  Commission  of  three 
members,  elected  by  the  people,  who  also  constitute  a  State  Board  of 
Equalization,  with  comprehensive  powers  of  investigation  and  equaliza- 
tion of  all  the  property  in  the  State.  (See  Civil  Code,  Title  49,  ch. 
1  and  2).  The  State  Tax  Commission  also  assesses  taxable  property  of 
railroads,  excepting  real  estate  and  personal  property  not  used  in  con- 
tinuous operation  of  the  railroad;  and  also  such  property  of  express 
companies,  telegraph  and  telephone  companies,  sleeping  car  companies 
and  patented  and  unpatented  producing  mines.  Local  assessments  are 
reviewed  and  equalized  by  the  county  board  of  supervisors  acting  as  a 
Board  of  Equalization,  with  an  appeal  therefrom  to  the  court. 

RAILROADS. — The  valuation  of  railroads  is  apportioned  to  the  coun- 
ties and  taxing  units  where  the  taxes  are  collected  in  the  same  way 
and  at  the  same  rate  as  those  upon  property  in  the  hands  of  individuals. 
Street  railways  are  taxed  in  the  same  way  as  property  of  individuals. 

CORPORATIONS. — Telephone  and  telegraph  companies  are  taxed 
in  the  same  manner  as  railroads,  while  express  companies  are  taxed 
by  the  State  upon  their  gross  receipts  from  business  done  within  the 
State  at  the  rate  of  6  per  cent  in  lieu  of  all  other  taxes  upon  the  proi>- 
erty  of  such  companlies.  An  annual  registration  fee  is  imposed  upon 
railroads  and  all  corporations  for  privilege  of  doing  business  in  the 
State. 

BANKS. — Shares  of  stock  are  assessed  to  holders,  less  value  of  cor- 
porate property  directly  assessed,  and  tax  is  paid  by  bank. 

MERCHANTS. — ^^Tien  merchants  are  incorporated  they  pay  the  State 
Corporation  Tax;  and  they  also  pay,  whether  individual  or  corporate, 
the  general  property  tax  on  merchandise  assessed  according  to  in- 
ventory. 


STATE   TAXATION    SYSTEM ARIZONA.  777 

EXEMPTIONS. — By  Act  of  1917,  observatories  for  astronomical  re- 
search maintained  at  private  expense,  but  for  public  welfare,  and  not 
for  profit,  and  money  and  funds  used  for  the  same  were  exempted  from 
taxation.     See  also  exemptions  specified  in  Constitution. 

INHERITANCE  TAX. — There  is  an  inheritance  tax  on  estates  valued 
at  not  less  than  $10,000.00;  and  inheritances  of  $5,000.00  or  less  are 
exempted.  The  tax  rate  is  1  per  cent  to  lineals,  2  per  cent  to  collaterals, 
and  in  other  cases  it  varies  from  3  per  cent  to  6  per  cent,  according  to 
amount.  It  applies  all  to  property  within  the  jurisdiction  of  the  State, 
whether  belonging  to  inhabitants  of  the  State  or  not. 

PROCEDURE. — Property  is  assessed  at  full  cash  value,  which  is  de- 
fined as  the  price  at  which  property  would  sell  by  voluntary  offer  for 
sale  by  the  owner  thereof,  upon  such  terms  as  such  property  is  usually 
sold,  and  not  the  price  which  might  be  realized  if  such  property  were 
sold  at  a  forced  sale. 

LIVE  STOCK. — ProTision  was  made  by  Act  of  1917  for  the  collection 
of  taxes  upon  transient  herds  of  live  stock  coming  in  from  neighboring 
States  to  graze  temporarily  within  Arizona. 

POLL  TAX. — There  is  no  State  poll  tax,  neither  is  there  any  county 
nor  city  poll  labor  tax.  There  is  a  school  tax  of  $2.50  annually  on  each 
male  inhabitant  of  the  State  over  twenty-one  and  under  sixty  years 
of  age,  excepting  members  of  volunteer  fire  departments  and  National 
Guard,  paupers,  and  persons  of  disability.  There  is  also  a  road  tax 
of  two  dollars  annually  on  male  inhabitants  between  the  same  ages; 
and  in  incorporated  cities  and  towns  a  tax  for  street  purposes  of  the 
same  amount  on  male  inhabitants  between  the  same  ages. 

MINES. — Mines  and  mining  claims  are  taxed  in  the  same  manner  as 
other  real  estate. 

STOCK  AND  BONDS.— Shares  of  Stock  in  domestic  companies  are 
not  taxable;   but  bonds  both  domestic  and  foreign  are. 

ASSESSMENTS.— The  taxpayer  is  allowed  to  deduct  his  liabilities 
from  the  assessment  of  his  solvent  debts.  By  act  of  1917,  the  offices  of 
city  assessor  and  tax  collector  were  abolished,  and  provision  made  that 
assessments  for  cities  should  be  made  by  the  county  assessor  and  the 
taxes  collected  by  the  county  tax  collector.  There  is  one  assessment  of 
State,  county,  city  and  incorporated  town  taxes  by  county  assessors 
and  for  the  equalization  thereof  by  the  County  Board  of  Assessors. 

COLLECTION. — Taxes  upon  land  and  personal  property  become  a 
lien  on  the  first  Monday  in  January.     Taxes  are  payable  one-half  the 


778  STATE   TAXATION    SYSTEM — ARKANSAS. 

first  Monday  in  October,  becoming  delinquent  the  second  Monday  in 
December;  and  the  other  half,  the  second  Monday  in  March,  becoming 
delinquent  the  first  Monday  in  June,  with  addition  of  4  per  cent  penalty 
after  taxes  are  delinquent. 

Taxes  on  real  estate,  including  mining  property,  are  collectable  by 
suit,  the  procedure  being  adopted  from  that  of  Missouri.  See  Missouri, 
infra.  (Also  see  case  of  Arizona  ex  rel.  v.  Copper  Queen  Consolidated 
Mining  Company,  supra,  Sec.  374.) 

ARKANSAS 

Art.  XVI,  Sec.  5.  All  property  subject  to  taxation  shall  be  taxed  ac- 
cording to  its  value,  that  value  to  be  ascertained  in  such  manner  as  the 
General  Assembly  shall  direct,  making  the  same  equal  and  uniform 
throughout  the  State.  No  one  species  of  property  from  which  a  tax  may 
be  collected  shall  be  taxed  higher  than  another  species  of  property  of 
equal  value,  provided  the  General  Assembly  shall  have  power  from  time 
to  time  to  tax  hawkers,  peddlers,  ferries,  exhibitions  and  privileges  in 
such  manner  as  may  be  deemed  proper.  Provided,  further,  that  the 
following  property  shall  be  exempt  from  taxation:  Public  property 
used  exclusively  for  public  purposes;  churches  as  such;  cemeteries  used 
exclusively  as  such;  school  buildings  and  apparatus,  libraries  and 
grounds  used  exclusively  for  school  purposes  and  buildings  and  grounds 
and  material  used  exclusively  for  public  charity. 

Sec.  6.  All  laws  exempting  property  from  taxation  other  than  as 
provided  in  this  constitution  shall  be  void. 

Sec.  7.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  any  contract  or  grant  to  which  the 
State  may  be  a  party. 

Sec.  8.  The  General  Assembly  shall  not  hare  power  to  levy  State 
taxes  for  any  one  year  to  exceed  in  the  aggregate  1  per  cent  of  the 
assessed  valuation. 

Sec.  11.  No  tax  shall  be  levied  except  in  pursuance  of  law,  and  every 
law  imposing  a  tax  shall  state  distinctly  the  object  of  the  same;  and  no 
moneys  arising  from  a  tax  levied  for  one  purpose  shall  be  used  for  any 
other  purpose. 

See.  13.  Any  citizen  of  any  county,  city  or  town  may  institute  suit  in 
behalf  of  himself  and  all  others  interested,  to  protect  the  inhabitants 
thereof  against  the  enforcement  of  any  illegal  exactions  whatever. 

There  is  a  tax  limitation  of  one  per  cent  for  the  State,  one-half  per 
cent  for  general  county  purposes,  and  seven  per  cent  for  schools. 

TAX  COMMISSION.— A  State  Tax  Commission,  consisting  of  three 
members  appointed  by  the  Governor,  created  in  1909,  assesses  railroads 
and  other  public  utilities  upon  other  than  their  tang'ible  property,  not 
part  of  right  of  way  or  operating  property  which  is  subject  to  local 


STATE   TAXATION    SYSTEM — ARKANSAS.  779 

assessment;  and  the  Tax  Commission  also  is  charged  with  the  duty  of 
equalizing  the  property  "of  the  State.  By  Act  of  March  17,  1917,  the  Com- 
mission was  given  the  power  to  raise  or  lower  the  values  in  any  county 
or  any  subdivision  of  any  county,  or  the  values  of  any  individual  taxpayer 
in  any  county,  so  as  to  make  the  assessment  uniform  throughout  the 
State.  A  penalty  of  $500.00  for  each  offense  is  prescribed  for  assessors 
who  omit  taxable  property  from  their  lists,  or  who  fall  below  the  stan- 
dard of  value  certified  to  them  by  the  Commission, 

(It  was  held  in  State  ex  rel.  v.  Meek,  192  S.  W.  Rep.  202,  1917,  that 
the  words  "according  to  value"  in  the  Constitution  did  not  mean  full 
valuation,  and  that  mandamus  would  not  lie  at  instance  of  a  creditor 
to  compel  an  officer  to  make  tax  assessments  disturbing  the  equaliza- 
tion fixed  by  the  State  Board,  the  State  Supreme  Court  declining  to 
follow  the  contrary  ruling  of  C.  C.  A.,  Eighth  Circuit,  222  Fed.  497, 
1915,  a  case  in  the  same  State.     See  Sec.  552,  supra.) 

RAILROADS. — Railroads  and  carriers,  including  express,  sleeping 
car,  telegraph,  telephone  and  pipe  line  companies,  assessed  as  above, 
pay  the  general  property  tax,  and  in  addition  they  pay  the  State,  for 
State  purposes,  the  capital  stock  tax,  infra.  The  assessment  by  the 
State  Board  includes  the  franchise  value. 

FREIGHT  CAR  COMPANIES.— These  companies  pay  a  tax  of  five 
cents  upon  gross  receipts  for  business  done  in  the  State  as  found  by  the 
State  Commission,  and  in  addition  pay  the  capital  stock  tax, 

FOREIGN  CORPORATIONS  are  taxed  on  property  in  the  State,  and 
pay  the  capital  stock  tax  as  domestic  corporations  of  same  class. 

INHERITANCE  TAX.— The  Inheritance  Tax  is  imposed,  to  which  all 
property  within  the  State  is  subject,  including  the  estates  of  non- 
residents in  shares  of  stocks  and  bonds  of  domestic  corporations,  and 
on  that  proportion  of  the  value  of  such  property  held  in  foreign  cor- 
porations, which  the  physical  property  located  in  the  State  bears  to  the 
total  physical  property  wherever  located.  Estates  not  exceeding 
$1,000.00  are  not  subject  to  the  tax.  There  is  an  exemption  of  $5,000.00 
when  the  property  passes  to  husband  or  wife,  or  lineal  ancestor  or 
descendant.  Rates  are  graded  according  to  relationship  of  inheritor  and 
amount  of  inheritance. 

(Attorney-General  of  State  should  bo  consulted  as  to  amount  of  as- 
sessment.) 

CORPORATION  TAXES— A  franchise  fax  of  one-tenth  of  one  per 
cent  is  assessed  upon  tlie  paid-up  and  outstanding  capital  stock  of  all 
corporations  which  is  employed  in  Arkansas.     The  franchise  tax  on 


780  STATE   TAXATION    SYSTEM ARKANSAS. 

insurance  companies  doing  business  in  the  State  is  $50.00  on  all  mutual 
companies  having  no  capital  stock,  and  on  stock  companies  $100.00 
where  the  capital  stock  is  less  than  $500,000.00,  and  $200.00  on  those 
having  a  greater  capital  stock  than  $500,000.00.  These  franchise  taxes 
are  paid  directly  to  the  State  Treasurer.  The  intangible  property  of 
corporations  is  taxed  at  the  general  property  rate  at  a  fifty-cent  valu- 
ation. This  capital  stock  tax  is  supplemental  to  the  general  property 
tax  levied  on  property  of  corporations  and  individuals. 

There  is  also  a  tax  of  2i/^  per  cent  on  the  net  premiums  paid  by 
insurance  companies  for  doing  business  in  the  State. 

BANKS — Banks  are  taxed  upon  the  value  of  the  shares,  less  the  value 
of  tang'ible  property  assessed  in  the  State,  not  including  exempt  prop- 
erty. (See  First  National  Bank  v.  Board  of  Equalization,  92  Ark.  335.) 
Business  corporations  other  than  banks  are  assessed  on  the  value  of  the 
capital  stock,  less  the  amount  of  tangible  property  in  the  State  which 
is  actually  assessed,  no  deduction  being  made  for  property  located 
outside  of  the  State  and  assessed  in  such  other  jurisdiction.  See  State 
V.  Bodcaw  Lumber  Co.,  194  S.  W.  692.  Stockholders  are  not  required  to 
return  for  assessment  their  portion  of  capital  stock  of  company  which 
is  assessed  for  taxation  in  the  State. 

EXEMPTIONS. — Exemptions  are  declared  in  the  Constitution.    (Art. 
XVI,   Sec.   5,  supra.)    (For   a  list  of  privilege   and   license   taxes,   see. 
statute.) 

COLLECTIONS. — Taxes  are  payable  between  the  first  Monday  in 
January  and  the  10th  of  April  of  the  year  succeeding  the  assessment, 
subject  to  a  penalty  of  25  per  cent  if  not  paiid  within  the  time  required. 
Lands  returned  as  delinquent  are  sold  by  the  collector  on  the  second 
Monday  in  June,  and  are  bid  in  by  the  State  if  no  one  pays  the  amount 
of  the  taxes,  penalties  and  costs.  Lands  so  sold  may  be  redeemed 
within  two  years,  provided  that  minors,  insane  persons  and  persons  in 
confinement  have  the  same  time  for  redemption  after  removal  of  their 
disability.  Between  grantee  and  grantor  the  lien  attaches  from  the 
first  Monday  'in  December.  Assessments  are  made  by  the  State  Tax 
Commission  on  the  first  Monday  in  June  and  reports  must  be  filed 
during  May.  Pullman  car,  express,  private  car  lines  and  telegraph  lines 
are  assessed  the  first  Monday  in  July  and  required  to  report  every  two 
years. 

The  statute  author'izing  suit  for  recovery  of  back  taxes  from  cor- 
porations, held  valid  in  State  ex  rel.  v.  Railroad  Co.,  117  Ark.  606. 

A  constitutional  convention  is  called  to  meet  in  November,  1917. 


STATE   TAXATION    SYSTEM — CALIFORNIA.  781 

CALIFORNIA 

Revenue  and  Taxation. 

Article  XIII,  Sec.  1.  All  property  in  the  State  except  as  otherwise  in 
this  Constitution  provided,  not  exempt  under  the  laws  of  the  United 
States,  shall  be  taxed  in  proportion  to  its  value,  to  be  ascertained  as 
provided  by  law,  or  as  hereinafter  provided.  The  word  "property,"  as 
used  in  this  article  and  section,  is  hereby  declared  to  include  moneys, 
credits,  bonds,  stocks,  dues,  franchises,  and  all  other  matters  and  things, 
real,  personal,  and  mixed,  capable  of  private  ownership;  provided,  that 
a  mortgage,  deed  of  trust,  contract,  or  other  obligation  by  which  a  debt 
is  secured  when  land  is  pledged  as  security  for  the  payment  thereof, 
together  with  the  money  represented  by  such  debt,  shall  not  be  con- 
sidered property  subject  to  taxation;  and  further  provided,  that  prop- 
erty used  for  free  public  libraries  and  free  museums,  growing  crops, 
property  used  exclusively  for  public  schools,  and  such  as  may  belong 
to  the  United  States,  this  State,  or  to  any  county,  city  and  county,  or 
municipal  corporation  within  this  State  shall  be  exempt  from  taxation, 
except  such  lands  and  the  improvements  thereon  located  outside  of  the 
county,  city  and  county,  or  municipal  corporation  owning  the  same  as 
were  subject  to  taxation  at  the  time  of  the  acquisition  of  the  same  by 
said  county,  city  and  county,  or  municipal  corporation;  provided,  that 
no  improvements  of  any  character  whatever  constructed  by  any  county, 
city  and  county  or  municipal  corporation  shall  be  subject  to  taxation. 
All  lands  or  improvements  thereon,  belonging  to  any  county,  city  and 
county,  or  municipal  corporation,  not  exempt  from  taxation,  shall  be 
assessed  by  the  assessor  of  the  county,  city  and  county,  or  municipal 
corporation  in  which  said  lands  or  improvements  are  located,  and  said 
assessment  shall  be  subject  to  review,  equalization  and  adjustment  by 
the  State  Board  of  Equalization.  The  Legislature  may  provide,  except 
in  the  case  of  credits  secured  by  mortgage  or  trust  deed,  for  a  deduction 
from  credits  of  debts  due  to  bona  fide  residents  of  this  State.  (Amend- 
ment adopted  November  3,  1914.) 

Exemption  on  Account  of  Military  Service. 

Sec.  114.  The  property  to  the  amount  of  one  thousand  dollars  of 
every  resident  in  this  State  who  has  served  in  the  army,  navy,  marine 
corps,  or  revenue  marine  service  of  the  United  States  in  time  of  war, 
and  received  an  honorable  discharge  therefrom;  or  lacking  such  amount 
of  property  in  his  own  name,  so  much  of  the  property  of  the  wife  of  any 
such  person  as  shall  be  necessary  to  equal  said  amount;  and  property 
to  the  amount  of  one  thousand  dollars  of  the  widow  resident  in  this 
State,  or  if  there  be  no  such  widow,  of  the  widowed  mother  resident  in 
this  State,  of  every  person  who  has  so  served  and  has  died  either  during 
his  term  of  service  or  after  receiving  honorable  discharge  from  said 
service;  and  the  property  to  the  amount  of  one  thousand  dollars  of 
pensioned  widows,  fathers,  and  mothers,  resident  in  this  State,  of  sol- 
diers, sailors,  and  marines  who  served  in  the  army,  navy,  or  marine 
corps,  or  revenue  marine  service  of  the  United  States,  shall  be  exempt 
from  taxation;  provided,  that  this  exemption  shall  not  apply  to  any 
person  named  herein  owning  property  of  the  value  of  five  thousand  dol- 


782  STATE   TAXATION    SYSTEM CALIFORNIA. 

lars  or  more,  or  where  the  wife  of  such  soldier  or  sailor  owns  property 
of  the  value  of  five  thousand  dollars  or  more.  No  exemption  shall  be 
made  under  the  provisions  of  this  act  of  the  property  of  a  person  who 
is  not  a  legal  resident  of  this  State.  (New  section  adopted  October  10, 
1911.) 

Exemption  of  Church  Property. 

Sec.  1%.  All  buildings,  and  so  much  of  the  real  property  on  which 
they  are  situated  as  may  be  required  for  the  convenient  use  and  occu- 
pation of  said  buildings,  when  the  same  are  used  solely  and  exclusively 
for  religious  worship  shall  be  free  from  taxation;  provided,  that  no 
building  so  used  which  may  be  rented  for  religious  purposes  and  rent 
received  by  the  owner  therefor,  shall  be  exempt  from  taxation.  (New 
section  adopted  November  6,  1900.) 

Exemption  of  State  and  Municipal  Bonds. 

Sec.  1%.  All  bonds  herea"fter  issued  by  the  State  of  California,  or 
by  any  county,  city  and  county,  municipal  corporation,  or  district  (in- 
cluding school,  reclamation,  and  irrigation  districts)  within  said  State, 
shall  be  free  and  exempt  from  taxation.  (New  section  adopted  Novem- 
ber 4,  1902.) 

Exemption  of  College  Property. 

Sec.  la.  Any  educational  institution  of  collegiate  grade,  within  the 
State  of  California,  not  conducted  for  profit,  shall  hold  exempt  from 
taxation  its  buildings  and  equipment,  its  grounds  within  which  its 
buildings  are  located,  not  exceeding  one  hundred  acres  in  area,  its 
securities  and  income  used  exclusively  for  the  purposes  of  education. 
(New  section  adopted  November  3,  1914.) 

Land  and  Improvements  Separately  Assessed. 

Sec.  2.  Land,  and  the  improvements  thereon,  shall  be  separately 
assessed.  Cultivated  and  uncultivated  land,  of  the  same  quality  and 
similarly  situated,  shall  be  assessed  at  the  same  value. 

Method  of  Assessment  of  Land  Sectionized  and  Not  Sectionized. 

Sec.  3.  Every  tract  of  land  containing  more  than  six  hundred  and 
forty  acres,  and  which  has  been  sectionized  by  the  United  States  Gov- 
ernment, shall  be  assessed,  for  the  purposes  of  taxation,  by  section  or 
fractions  of  sections.  The  Legislature  shall  provide  by  law  for  the 
assessment  in  small  tracts  of  all  lands  not  sectionized  by  the  United 
States  Government. 

Exemption  pf  Vessels. 

Sec.  4.  All  vessels  of  more  than  fifty  tons  burden  registered  at  any 
port  in  this  State  and  engaged  in  the  transportation  of  freight  or  pas- 
sengers, shall  be  exempt  from  taxation  except  for  State  purposes,  until 
and  including  the  first  day  of  January,  nineteen  hundred  thirty-five. 
(New  section  adopted  November  3,  1914.) 


STATE   TAXATION    SYSTEM — CALIF0RNL4..  783 

Contract  Impairing  Power  of  Taxation  Forbidden. 

Sec.  6.  The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  shall  be  a  party. 

Payment  of  Real  Property  Taxes  hy  Installments. 

Sec.  7.  The  Legislature  shall  have  the  power  to  provide  by  law  for 
the  payment  of  all  taxes  on  real  property  by  installments. 

Taxpayer's  Annual  Property  Statement. 

Sec.  8.  The  Legislature  shall  by  law  require  each  taxpayer  in  this 
State  to  make  and  deliver  to  the  county  assessor,  annually,  a  statement, 
under  oath,  setting  forth  specifically  all  the  real  and  personal  property 
owned  by  such  taxpayer,  or  in  his  possession,  or  under  his  control,  at 
twelve  o'clock  meridian  on  the  first  Monday  of  March. 

State  and  County  Boards  of  Equalization. 

Sec.  9.    A  State  Board  of  Equalization,  consisting  of  one  member  from 
each  congressional  district  in  this  State,  as  the  same  existed  in  eighteen 
hundred  and  seventy-nine,  shall  be  elected  by  the  qualified  electors  of 
their  respective  districts,  at  the  general  election  to  be  held  in  the  year 
one  thousand  eight  hundred  and  eighty-six,  and  at  each  gubernatorial 
election  thereafter,  whose  term  of  office  shall  be  for  four  years;  whose 
duty  it  shall  be  to  equalize  the  valuation  of  the  taxable  property  in  the 
several  counties  of  the  State  for  the  purposes  of  taxation.     The  Con- 
troller of  State  shall  be  ex  officio  a  member  of  the  board.    The  boards 
of  supervisors   of  the   several   counties   of   the   State   shall   constitute 
boards  of  equalization  for  their  respective  counties,  whose  duty  it  shall 
be  to  equalize  the  valuation  of  the  taxable  property  in  the  county  for 
the  purpose  of  taxation;   provided,  such   State  and   county  boards  of 
equalization  are  hereby  authorized  and  empowered,  under  such  rules  of 
notice  as  the  county  boards  may  prescribe  as  to  county  assessments,  and 
under  such  rules  of  notice  as  the  State  board  may  prescribe  as  to  the 
action  of  the  State  board,  to  increase  or  lower  the  entire  assessment 
roll,  or  any  assessment  conta:ined  therein,  so  as  to  equalize  the  assess- 
ment of  the  property  contained  in  said  assessment  roll,  and  make  the 
assessment  conform  to  the  true  value  in  money  of  the  property  con- 
tained in  said  roll;  provided,  that  no  board  of  equalization  shall  raise 
any  mortgage,  deed  of  trust,  contract  or  other  obligation  by  which  a 
debt  is  secured,  money,  or  solvent  credits,  above  its  face  value.     The 
present  State  Board  of  Equalization  shall  continue  in  office  until  their 
successors,  as  herein  provided  for,  shall  be  elected  and  shall  qualify. 
The  Legislature  shall  have  power  to  redistrict  the  State  into  four  dis- 
tricts, as  nearly  equal  in  population  as  practical,  and  to  provide  for  the 
elections  of  members  of  said  Board  of  Equalization. 

Property,  Where  Assessed. 

Sec.  10.  All  property,  except  as  otherwise  in  this  Constitution  pro- 
vided, shall  be  assessed  in  the  county,  city,  city  and  county,  town  or 
township,  or  district  in  which  it  is  situated,  in  the  manner  prescribed 
by  law.     (Amendment  adopted  November  8,  1910.) 


784  STATE   TAXATION    SYSTEM CALIFORNIA. 

Exemption  of  Personal  Property. 

Sec.  10y2.  The  personal  property  of  every  householder  to  the  amount 
of  one  hundred  dollars,  the  articles  to  be  selected  by  each  householder, 
shall  be  exempt  from  taxation.  (New  section  adopted  November  8, 
1904.) 

Income  Tax  May  be  Levied. 

Sec.  11.  Income  taxes  may  be  assessed  to  and  collected  from  persons, 
corporations,  joint-stock  associations,  or  companies  resident  or  doing 
business  in  this  State,  or  any  one  or  more  of  them,  in  such  cases  and 
amounts,  and  in  such  manner,  as  shall  be  prescribed  by  law. 

No  Poll  Tax  to  he  Levied. 

Sec.  12.  No  poll  tax  or  head  tax  for  any  purpose  whatsoever  shall  be 
levied  or  collected  in  the  State  of  California.  (New  section  adopted 
November  3,  1914.) 

Exemption  of  Certain  Trees  and  Vines. 

Sec.  12%.  Fruit  and  nut-bearing  trees  under  the  age  of  four  years 
from  the  time  of  planting  in  orchard  form,  and  grapevines  under  the 
age  of  three  years  from  the  time  of  planting  in  vineyard  form,  shall  be 
exempt  from  taxation,  and  nothing  in  this  article  shall  be  construed 
as  subjecting  such  trees  and  grapevines  to  taxation.  (New  section 
adopted  November  6,  1894.) 
137  Cal.  524. 

Legislature  to  Provide  for  Enforcement. 

Sec.  13.  The  Legislature  shall  pass  all  laws  necessary  to  carry  out 
the  provisions  of  this  article. 

Basis  of  Taxation  for  State  Purposes. 

Sec.  14.  Taxes  levied,  assessed  and  collected  as  hereinafter  provided 
upon  railroads,  including  street  railways,  whether  operated  in  one  or 
more  counties;  sleeping  car,  dining  car,  drawingroom  car  and  palace 
car  companies,  refrigerator,  oil,  stock,  fruit,  and  other  car-loaning  and 
other  car  companies  operating  upon  railroads  in  this  State;  companies 
doing  express  business  on  any  railroad,  steamboat,  vessel  or  stage  line 
in  this  State;  telegraph  companies;  telephone  companies;  companies 
engaged  in  the  transmission  or  sale  of  gas  or  electricity;  insurance 
companies;  banks,  banking  associations,  savings  and  loan  societies,  and 
trust  companies;  and  taxes  upon  all  franchises  of  every  kind  and 
nature,  shall  be  entirely  and  exclusively  for  State  purposes,  and  shall 
be  levied,  assessed  and  collected  in  the  manner  hereinafter  provided. 
The  word  "companies"  as  used  in  this  section  shall  include  persons, 
partnerships,  joint  stock  associations,  companies,  and  corporations. 

(a)  All  railroad  companies,  including  street  railways,  whether  oper- 
ated in  one  or  more  counties;  all  sleeping  car,  dining  car,  drawingroom 
car,  and  palace  car  companies,  all  refrigerator,  oil,  stock,  fruit  and  other 
car-loaning  and  other  car  companies,  operating  upon  the  railroads  in 
this  State;  all  companies  doing  express  business  on  any  railroad,  steam- 
boat, vessel  or  stage  line  in  this  State;  all  telegraph  and  telephone  com- 


STATE   TAXATION    SYSTEM CALIFORNIA.  785 

parties;  and  all  companies  engaged  in  the  transmission  or  sale  of  gas  or 
electricity  shall  annually  pay  to  the  State  a  tax  upon  their  franchises, 
roadways,  roadbeds,  rails,  rolling  stock,  poles,  wires,  pipes,  canals,  con- 
duits, right  of  way,  and  other  property,  or  any  part  thereof  used  ex- 
clusively in  the  operation  of  their  business  in  this  State,  computed  as 
follows:  Said  tax  shall  be  equal  to  the  percentages  hereinafter  fixed 
upon  the  gross  receipts  from  operation  of  such  companies,  and  each 
thereof  within  this  State.  When  such  companies  are  operating  partly 
within  and  partly  without  this  State,  the  gross  receipts  within  this 
State  shall  be  deemed  to  be  all  receipts  on  business  beginning  and  end- 
ing within  this  State,  and  a  proportion,  based  upon  the  proportion  of 
the  mileage  within  this  State  to  the  entire  mileage  over  which  such 
business  is  done,  of  receipts  on  all  business  passing  through,  into,  or 
out  of  this  State. 

The  percentages  above  mentioned  shall  be  as  follows:  On  all  rail- 
road companies,  including  street  railways,  four  per  cent;  on  all  sleep- 
ing car,  dining  car,  drawingroom  car,  palace  car  companies,  refriger- 
ator, oil,  stock,  fruit,  and  other  car-loading  and  other  car  companies, 
three  per  cent;  on  all  companies  doing  express  business  on  any  railroad, 
steamboat,  vessel  or  stage  line,  two  per  cent;  on  all  telegraph  and  tele- 
phone companies,  three  and  one-half  per  cent;  on  all  companies  engaged 
in  the  transmission  or  sale  of  .gas  or  electricity,  four  per  cent.  Such 
taxes  shall  be  in  lieu  of  all  other  taxes  and  licenses,  State,  county  and 
municipal,  upon  the  property  above  enumerated  of  such  companies 
except  as  otherwise  in  this  section  provided;  provided,  that  nothing 
herein  shall  be  construed  to  release  any  such  company  from  the  pay- 
ment of  any  amount  agreed  to  be  paid  or  required  by  law  to  be  paid 
for  any  special  privilege  or  franchise  granted  by  any  of  the  municipal 
authorities  of  this  State. 

(&)   Every  insurance  company  or  association  doing  business  in  this 
State  shall  annually  pay  to  the  State  a  tax  of  one  and  one-half  per  cent 
upon  the  amount  of  the  gross  premiums  received   upon   its  business 
done  in  this  State,  less  return  premiums  and  reinsurance  in  companies 
or  associations  authorized  to  do  business  in  this  State;  provided,  that 
there  shall  be  deducted  from  said  one  and  one-half  per  cent  upon  the 
gross  premiums  the  amount  of  any  county  and  municipal  taxes  paid 
by  such  companies  on  real  estate  owned  by  them  in  this  State.     This 
tax  shall  be  in  lieu  of  all  other  taxes  and  licenses,  State,  county  and 
municipal,  upon   the  property  of  such   companies,   except  county   and 
municipal  taxes  on  real  estate,  and  except  as  otherwise  in  this  section 
provided;  provided,  that  when  by  the  laws  of  any  other  State  or  county, 
any   taxes,    fines,    penalties,   licenses,    fees,    deposits    of   money,    or   of 
securities,  or  other  obligations  or  prohibitions,  are  imposed  on  insur- 
ance companies  of  this  State,  doing  business  in  such  other  State  or 
country,  or  upon  their  agents  therein,  in  excess  of  such  taxes,  fines, 
penalties,  licenses,  fees,  deposits  of  money,  or  of  securities,  or'  other 
obligation  or  prohibitions,  imposed  upon  insurance  companies  of  such 
other  State  or  country,  so  long  as  such  laws  continue  in  force,  the  same 
obligations  and  prohibitions  of  whatsoever  kind  may  be  imposed  by  the 
Legislature  upon  insurance  companies  of  such  other  State  or  country 
doing  business  in  this  State. 


786  STATE   TAXATION    SYSTEM — CALIFORNIA. 

(c)  The  shares  of  capital  stock  of  all  banks,  organized  under  the 
laws  of  this  State,  or  of  the  United  States,  or  of  any  other  State  and 
located  in  this  State,  shall  be  assessed  and  taxed  to  the  owners  or 
holders  thereof  by  the  State  Board  of  Equalization,  in  the  manner  to 
be  prescribed  by  law,  in  the  city  or  town  where  the  bank  is  located 
and  not  elsewhere.  There  shall  be  levied  and  assessed  upon  such  shares 
of  capital  stock  an  annual  tax,  payable  to  the  State,  of  one  per  centum 
upon  the  value  thereof.  The  value  of  each  share  of  stock  in  each  bank, 
except  such  as  are  in  liquidation,  shall  be  taken  to  be  the  amount  paid 
in  thereon,  together  with  its  pro  rata  of  the  accumulated  surplus  and 
undivided  profits.  The  value  of  each  share  of  stock  in  each  bank  which 
is  in  liquidation  shall  be  taken  to  be  its  pro  rata  of  the  actual  assets 
of  such  bank.  This  tax  shall  be  in  lieu  of  all  other  taxes  and  licenses, 
State,  county  and  municipal,  upon  such  shares  of  stock  and  upon  the 
property  of  such  banks,  except  county  and  municipal  taxes  on  real 
estate  and  except  as  otherwise  in  this  section  provided.  In  determining 
the  value  of  the  capital  stock  of  any  bank  there  shall  be  deducted  from 
the  value,  as  defined  above,  the  value,  as  assessed  for  county  taxes, 
of  any  real  estate,  other  than  mortgage  interests  therein,  owned  by  such 
bank  and  taxed  for  county  purposes.  The  banks  shall  be  liable  to  the 
State  for  this  tax  and  the  same  shall  be  paid  to  the  State  by  them  on 
behalf  of  the  stockholders  in  the  manner  and  at  the  time  prescribed 
by  law,  and  they  shall  have  a  lien  upon  the  shares  of  stock  and  upon 
any  dividends  declared  thereon  to  secure  the  amount  so  paid. 

The  moneyed  capital,  reserve,  surplus,  undivided  profits  and  all  other 
property  belonging  to  unincorporated  banks  or  bankers  of  this  State, 
or  held  by  any  bank  located  in  this  State  which  has  no  shares  of  capital 
stock,  or  employed  in  this  State  by  any  branches,  agencies,  or  other 
representatives  of  any  banks  doing  business  outside  of  the  State  of  Cali- 
fornia, shall  be  likewise  assessed  and  taxed  to  such  banks  or  bankers 
by  the  said  Board  of  Equalization,  in  the  manner  to  be  provided  by  law 
and  taxed  at  the  same  rate  that  is  levied  upon  the  shares  of  capital  stock 
of  incorporated  banks,  as  provided  in  the  first  paragraph  of  this  sub- 
division.   The  value  of  said  property  shall  be  determined  by  taking  the 
entire  property  invested  in  such  business,  together  with  all  the  reserve, 
surplus,  and  undivided  profits,  at  their  full  cash  value,  and  deducting 
therefrom  the  value  as  assessed  for  county  taxes  of  any  real  estate, 
other  than  mortgage  interests  therein,  owned  by  such  bank  and  taxed 
for  county  purposes.    Such  taxes  shall  be  in  lieu  of  all  other  taxes  and 
licenses.  State,  county  and  municipal,  upon  the  property  of  the  banks 
and  bankers,  mentioned  in  this  paragraph,  except  county  and  municipal 
taxes  on  real  estate  and  except  as  otherwise  in  this  section  provided. 
It  is  the  intention  of  this  paragraph  that  all  moneyed  capital  and  prop- 
erty of  the  banks  and  bankers  mentioned  in  this  paragraph  shall  be 
assessed  and  taxed  at  the  same  rate  as  an  incorporated  bank,  provided 
for  m  the  first  paragraph  of  this  subdivision.    In  determining  the  value 
of  the  moneyed  capital  and  property  of  the  banks  and  bankers  men- 
tioned in  this  subdivision,  the  said  State  Board  of  Equalization  shall 
include  and  assess  to  such  banks  all  property  and  everything  of  value 
owned  or  held  by  them,  which  go  to  make  up  the  value  of  the  capital 


STATE   TAXATION    SYSTEM — CALIFORNIA.  787 

Stock  of  such  banks  and  bankers,  if  the  same  were  incorporated  and 
had  shares  of  capital  stock. 

The  word  "banks"  as  used  in  this  subdivision  shall  include  banking 
association,  savings  and  loan  societies  and  trust  companies,  but  shall 
not  include  building  and  loan  associations. 

(d)  All  franchises,  other  than  those  expressly  provided  for  in  this 
section,  shall  be  assessed  at  their  actual  cash  value,  in  the  manner  to  be 
provided  by  law,  and  shall  be  taxed  at  the  rate  of  one  per  centum  each 
year,  and  the  taxes  collected  thereon  shall  be  exclusively  for  the  benefit 
of  the  State. 

(e)  Out  of  the  revenues  from  the  taxes  provided  for  in  this  section, 
together  with  all  other  State  revenues,  there  shall  be  first  set  apart  the 
moneys  to  be  applied  by  the  State  to  the  support  of  the  public  school 
system  and  the  State  University.  In  the  event  that  the  above  named 
revenues  are  at  any  time  deemed  insufficient  to  meet  the  annual  expendi- 
tures of  the  State,  including  the  above  named  expenditures  for  educa- 
tional purposes,  there  may  be  levied,  in  the  manner  to  be  provided  by 
law,  a  tax,  for  State  purposes,  on  all  the  property  in  the  State  includ- 
ing the  classes  of  property  enumerated  in  this  section,  sufficient  to  meet 
the  deficiency.  All  property  enumerated  in  subdivisions  a,  b,  and  d  of 
this  section  shall  be  subject  to  taxation,  in  the  manner  provided  by  law, 
to  pay  the  principal  and  interest  of  any  bonded  indebtedness  created 
and  outstanding  by  any  city,  city  and  county,  county,  town,  township 
or  district,  before  the  adoption  of  this  section.  The  taxes  so  paid  for 
principal  and  interest  on  such  bonded  indebtedness  shall  be  deducted 
from  the  total  amount  paid  in  taxes  for  State  purposes. 

(/)  All  the  provisions  of  this  section  shall  be  self-executing,  and  the 
Legislature  shall  pass  all  laws  necessary  to  carry  this  section  into 
effect,  and  shall  provide  for  a  valuation  and  assessment  of  the  property 
enumerated  in  this  section,  and  shall  prescribe  the  duties  of  the  State 
Board  of  Equalization  and  any  other  officers  in  connection  with  the  ad- 
ministration thereof.  The  rates  of  taxation  fixed  in  this  section  shall 
remain  in  force  until  changed  by  the  Legislature,  two-thirds  of  all  the 
members  elected  to  each  of  the  two  houses  voting  in  favor  thereof.  The 
taxes  herein  provided  for  shall  become  a  lien  on  the  first  Monday  in 
March  of  each  year  after  the  adoption  of  this  section  and  shall  become 
due  and  payable  on  the  first  Monday  in  July  thereafter.  The  gross 
receipts  and  gross  premiums  herein  mentioned  shall  be  computed  for 
the  year  ending  the  thirty-first  day  of  December  prior  to  the  levy  of 
such  taxes  and  the  value  of  any  property  mentioned  herein  shall  be 
fixed  as  of  the  first  Monday  in  March.  Nothing  herein  contained  shall 
affect  any  tax  levied  or  assessed  prior  to  the  adoption  of  this  section; 
and  all  laws  in  relation  to  such  taxes  in  force  at  the  time  of  the  adop- 
tion of  this  section  shall  remain  in  force  until  changed  by  the  Legis- 
lature. Until  the  year  1918  the  State  shall  reimburse  any  and  all  coun- 
ties which  sustain  loss  of  revenue  by  the  withdrawal  of  railroad  prop- 
erty from  county  taxation  for  the  net  loss  in  county  revenue  occasioned 
by  the  withdrawal  of  railroad  property  from  county  taxation.  The 
Legislature  shall  provide  for  roimburscnient  from  the  general  funds 
of  any  county  to  districts  therein  where  loss  is  occasioned  in  such  dis- 


788  STATE   TAXATION    SYSTEM — CALIFORNIA. 

tricts  by  the  withdrawal  from  local  taxation  of  property  taxed  for  State 
purposes  only. 

(g)  No  injunction  shall  ever  issue  in  any  suit,  action  or  proceeding 
in  any  court  against  this  State  or  against  any  officer  thereof  to  prevent 
or  enjoin  the  collection  of  any  tax  levied  under  the  provisions  of  this 
section;  but  after  payment  action  may  be  maintained  to  recover  any 
tax  illegally  collected  in  such  manner  and  at  such  time  as  may  now  or 
hereafter  be  provided  by  law.     (New  section  adopted  November  8,  1910.) 


The  system  of  taxation  is  set  forth  in  the  Constitution,  including  the 
organization  of  the  State  Board  of  Equalization  and  its  powers  of  as- 
sessment and  equalization,  the  exemptions  and  the  scheme  of  separation 
of  the  sources  of  State  and  local  taxation  and  the  taxation  of  public  and 
other  franchises  fully  detailed  therein. 

PUBIvIC  UTILITIES.— The  Act  of  1917  amending  the  Political  Code 
Sees.  3664,  etc.,  was  enacted  to  carry  into  effect  the  provisions  of  the 
Constitution  for  the  separation  of  State  and  local  taxation.  Public  car- 
riers are  assessed  by  the  State  Board  upon  their  operating  properties, 
which  are  specifically  defined  in  the  statute,  and  the  tax  is  levied  upon 
the  gross  receipts  and  operation  of  such  companies  in  the  State.  The 
rates  fixed  by  the  Act  of  1917  are  as  follows:  Upon  railroads  including 
street  railways,  5.25  per  cent;  on  sleeping  car,  dining  car,  drawing- 
room  and  palace  car  companies  3.95  per  cent;  on  express  companies 
9  per  cent;  telegraph  and  telephone  companies  4.2  per  cent;  gas  and 
electric  companies  5.6  per  cent,  and  all  other  franchises  1.2  per  cent. 
These  taxes  are  all  paid  into  the  State  and  are  in  lieu  of  all  other  taxes 
and  licenses  State  and  local  except  as  provided  in  the  Constitution, 
Sec.  14,  Art.  XIII. 

INSURANCE  CO.'S. — Insurance  companies  pay  an  annual  tax  of 
2  per  cent  upon  the  amount  of  gross  premiums  for  business  done  in 
the  State  less  return  premiums  and  reinsurance  in  companies  in  the 
State,  but  the  amount  of  any  county  or  municipal  taxes  paid  upon 
companies  of  real  estate  in  the  State  is  deducted. 

BANKS. — ^The  rate  of  assessment  upon  bank  stocks  is  1.16  per  cent, 
which  is  paid  to  the  State  and  is  in  lieu  of  all  other  taxes  and  licenses, 
county  and  municipal,  except  upon  real  estate,  and  the  assessed  value 
of  real  estate  assessed  for  county  taxes  is  deducted. 

In  the  enforcement  of  these  State  taxes  reports  are  required  to  be 
filed  with  the  State  Board,  and  in  case  of  insurance  companies  with  the 
Insurance  Commission. 


STATE   T.VXATION   SYSTEM — CALIFORNIA.  789 

CORPORATlbN  LICENSES.— Under  the  Act  of  May  10,  1915,  amended 
in  1917,  a  license  tax  is  fixed  upon  corporations  engaged  in  business  in 
the  State  whether  domestic  and  foreign  (other  than  the  public  utilities, 
insurance  companies  and  banks),  and  are  taxed  upon  their  authorized 
capital  stock  $10  where  it  does  not  exceed  $10,000;  $15  where  the  cap- 
ital exceeds  $10,000  and  does  not  exceed  $20,000;  $20  when  it  does  not 
exceed  $50,000;  $25  when  it  does  not  exceed  $100,000;  $50  where  it  does 
not  exceed  $250,000;  $75  when  it  does  not  exceed  $500,000;  $100  where 
it  does  not  exceed  $1,000,000;  $200  where  it  does  not  exceed  $3,000,000; 
$350  where  it  does  not  exceed  $5,000,000;  $550  where  it  does  not  exceed 
$7,500,000;  $800  where  it  does  not  exceed  $10,000,000  and  when  it  exceeds 
$10,000,000,  $1,000.  When  the  capital  stock  of  any  corporation  has  no 
par  value  the  tax  is  $100.  When  part  of  the  stock  has  a  par  value 
and  part  has  no  par  value,  the  tax  is  computed  upon  such  par  value 
stock  in  accordance  with  the  admeasurement  schedule  sum  to  which  is 
attached  the  sum  of  $50.  Building  loan  companies  and  associations 
pay  an  annual  license  tax  of  $10.  These  taxes  become  due  and  payable 
to  the  Secretary  of  State  on  the  first  day  of  January  and  become  de- 
linquent on  the  first  Monday  of  February.  Foreign  and  domestic  com- 
panies pay  the  same  tax. 

The  Secretary  of  State,  State  Comptroller  and  members  of  State 
Board  of  Control  constitute  a  corporation  license  tax  exemption  board 
and  hear  and  determine  claims  of  exemption  from  this  tax.  Corpora- 
tions are  subject  to  be  suspended  from  doing  business  in  the  State  for 
non-payment  of  this  tax,  and  the  license  tax  is  a  lien  upon  the  real  prop- 
erty of  the  corporation  from  the  first  day  of  January  until  paid. 

ASSESSMENT. — Under  provisions  of  the  Constitution  amendment  of 
1910,  a  deduction  of  debts  due  to  bona  fide  residents  is  made  in  the 
a|sessment  of  solvent  creditors,  and  mortgages  on  property  in  the  State 
are  exempt. 

Water  ditches  constructed  for  mining,  manufactur'ing  or  irrigating 
purposes  and  wagon  or  turnpike  toll  roads  privately  owned  are  assessed 
the  same  as  real  estate.  Taxable  property  is  subject  to  county  and  city 
taxation  at  its  true  cash  value  annually  and  the  assessment  refers  to 
noon  of  the  first  Monday  in  March.  Certain  cities  and  towns  may  have 
a  separate  valuation  as  a  basis  for  municipal  taxes. 

INHERITANCE  TAX.— The  inheritance  tax  is  levied  upon  all  prop- 
erty in  the  State  passing  under  will  or  intestacy,  including  personal 
property  situated  outside  of  the  State  passing  from  any  resident  by  will, 
and  upon  all  property  within  the  State  including  stock  in  corporations 


790  STATE   TAXATION    SYSTEM — CALIFORNIA. 

passing  from  any  non-resident.  The  collection  of  the  tax  is  under  the 
superintendence  of  the  State  Comptroller.  The  rate  of  the  tax  depends 
upon  the  relation  of  the  beneficiary  and  upon  the  amount  received  vary- 
ing from  1  per  cent  up  to  $25,000  on  the  first  class  consisting  of  hus- 
band, wife,  lineal  issue,  lineal  ancestor  or  adopted  child  to  5  per  cent  on 
the  fourth  class  consisting  of  remote  relatives  and  strangers  in  blood, 
etc.,  above  $1,000,000,  For  details  of  the  rate  in  these  classes,  see 
Political  Code.  Bequests  in  trust  for  charitable  or  benevolent  pur- 
poses are  exempt  from  any  succession  tax.  The  widow  or  minor  child 
has  an  exemption  of  $24,000,  and  those  in  the  first  class  of  relatives 
$10,000,  second  class  $2,000,  third  class  $4,000  and  the  fourth  class  $500. 

STATE  ASSESSMENTS. — These  assessments  by  the  State  board  are 
due  and  payable  on  the  first  Monday  of  July  in  each  year,  and  one-half 
becomes  delinquent  on  the  sixth  Monday  after  the  first  Monday  in  July 
and  15  per  cent  is  added  to  the  amount  thereof,  and  one-half  is  paid  prior 
to  the  first  Monday  in  February  and  an  additional  5  per  cent  is  added. 

The  statute  declares  that  shares  of  stock  possess  no  intrinsic  value 
over  and  above  the  actual  value  of  the  property  of  the  corporation,  and 
that  the  assessment  of  the  shares  and  the  corporate  t)roperty  would  be 
double  taxation. 

GENERAL  SYSTEM.— Under  the  separation  of  State  from  local  tax- 
ation the  public  utilities,  except  the  water  companies,  and  also  banks, 
have  been  segregated  for  the  State,  while  all  other  property  is  taxed 
locally,  and  for  seven  years  there  has  been  no  State  ad  valorem  tax  on 
property  in  general,  the  revenues  from  the  segregated  sources  being 
sufficient  for  the  support  of  the  State.  (For  discussion  of  the  California" 
system,  see  report  of  special  tax  commissioner  of  1916  and  a  review  of 
same  by  Prof.  Carl  C.  Plehn,  Professor  of  Finances,  University  of  Cali- 
fornia, 2nd  Bulletin,  National  Tax  x\ss'n.,  p.  248.) 

COLLECTION. — Taxes  upon  personal  property  are  a  lien  upon  any 
real  estate  of  the  same  owner.  General  taxes  are  payable  on  the  first 
Monday  in  October  and  become  delinquent  on  the  first  Monday  in  De- 
cember, but  the  taxpayer  may  pay  one-half  of  his  taxes  on  or  secured 
by  real  estate  on  the  third  Monday  in  October  and  the  remaining  one- 
half  on  the  third  Monday  in  January.  The  property  is  returned  de- 
linquent in  June  and  sale  is  made  to  the  State  on  not  less  than  twenty- 
one  or  more  than  twenty-eight  days'  notice.  A  redemption  may  be 
made  by  the  owner  or  any  party  in  interest  within  five  years  after  the 
date  of  the  sale  on  payment  of  taxes  with  7  per  cent  interest  and  costs. 


STATE  TAXATION   SYSTEM — COLORADO.  791 

COLORADO 

(Constitution  as  amended  in  1912.  Article  X.) 
Art.  X,  Sec.  3.  All  taxes  shall  be  uniform  upon  the  same  class  Of  sub- 
jects within  the  territorial  limits  of  the  authority  levying  the  tax. 
Mines  and  mining  claims  bearing  gold,  silver,  and  other  precious  metals 
(except  the  net  proceeds  and  surface  improvements  thereof)  shall  be 
exempt  from  taxation  for  the  period  of  ten  years  from  the  date  of  the 
adoption  of  this  Constitution,  and  thereafter  may  be  taxed  as  provided 
by  law.  Ditches,  canals,  and  flumes  owned  and  used  by  individuals  or 
corporations  for  irrigating  lands  owned  by  such  individuals  or  corpora- 
tions, or  the  individual  members  thereof,  shall  not  be  separately  taxed, 
so  long  as  they  shall  be  owned  and  used  exclusively  for  such  purpose. 
Sec.  4.  The  property,  real  or  personal  of  the  State,  counties,  cities, 
towns  and  other  municipal  corporations,  and  public  libraries,  shall  be 
exempt  from  taxation. 

Sec.  5.  Lots,  with  buildings  thereon,  if  said  buildings  are  used  solely 
and  exclusively  for  religious  worship,  for  schools,  or  for  strictly 
charitable  purposes,  also  cemeteries  not  used  or  held  for  private  or  cor- 
porate profit,  shall  be  exempt  from  taxation,  unless  otherwise  provided 
by  general  law. 

Sec.  6.  All  laws  exempting  from  taxation  property  other  than  here- 
inbefore mentioned,  shall  be  void. 

(Sections  7  to  14  are  the  general  provisions  concerning  the  relations 
of  the  municipalities  to  the  State  in  the  exercise  of  the  taxing  power, 
and  limit  the  right  of  taxation  to  four  mills  on  each  dollar  of  valuation.) 

15.  (Constitutes  the  Governor,  State  Auditor,  State  Treasurer,  Secre- 
tary of  State,  and  Attorney-General,  a  State  Board  of  Equalization; 
and  the  Board  of  County  Commissioners,  the  County  Board  of  Equaliza- 
tion in  each  county.) 

"The  duty  of  the  State  Board  of  Equalization  shall  be  to  adjust  and 
equalize  the  valuation  of  real  estate  and  personal  property  among  the 
several  counties,  and  the  duty  of  the  County  Board  of  Equalization  shall 
be  to  adjust  and  equalize  the  valuation  of  real  and  personal  property 
within  their  respective  counties.  Each  board  shall  perform  such  other 
duties  as  may  be  required  by  law." 

Amendment  of  1912.  "There  shall  be  a  State  Tax  Commission  con- 
sisting of  three  members  to  be  appointed  by  the  governor  by  and  with 
the  consent  of  the  Senate.  The  duty  of  said  commission  shall  be  to 
adjust,  equalize,  raise  or  lower  the  valuation  of  real  and  personal 
property  among  the  several  counties  of  the  State.  There  shall  be  in 
each  county  in  the  State  a  County  Board  of  Equalization  consisting  of 
the  Board  of  County  Commissioners  of  such  county.  The  duties  of  the 
County  Board  of  Equalization  shall  be  to  adjust,  equalize,  raise  or  lower 
the  valuation  of  real  and  personal  property  within  their  respective 
counties,  subject  to  revision,  change,  and  amendment  by  the  State  Tax 
Commi.ssion.  The  State  Tax  Commission  and  County  Boards  of  Equali- 
zation shall  also  perform  other  duties  as  may  be  prescribed  by  law." 

(The  repeal  of  Amendment  12,  concerning  State  Tax  Commission, 
was  defeated  at  election  of  1916.) 


792  STATE   TAXATION    SYSTEM — COLORADO. 

16.   (Provides   that   appropriations   by    the   General    Assembly   shall 
not  exceed  the  tax  provided  by  law  to  pay  the  same.) 


STATE  BOARD. — The  State  Board  of  Equalization,  and  Board  of 
County  Commissioners,  and  the  State  Tax  Commission,  as  provided  in 
the  Constitution,  are  established  with  powers  detailed  by  statute.  The 
Tax  Commission  assesses  the  operating  property  of  railroads,  cars  and 
public  utilities,  and  also  of  other  classes  of  business  continuing  in  two 
or  more  counties.  The  Tax  Commission  makes  an  annual  report  to  the 
Governor.  It  has  extensive  powers  in  the  investigation,  supervision 
and  equalization  of  the  county  assessments.  (See  People  ex  rel.  v. 
Pitcher,  156  Pac.  Rep.  812.) 

RAILROADS. — Railroads  are  subject  to  the  general  property  tax, 
being  assessed  as  to  operating  property  by  the  Tax  Commission,  and  by 
local  assessors  as  to  other  property.  They  are  also  subject  to  the 
State  corporation  tax.  The  value  assessed  by  State  Commission  is  ap- 
portioned to  the  counties  according  to  mileage.  The  value  of  railroad 
property  is  determined  as  an  entirety,  and  apportioned  to  the  mileage 
located  in  the  State. 

PUBLIC  UTILITIES. — The  same  method  is  applied  to  the  taxation  of 
car  companies,  express,  telegraph,  telephone  and  other  companies  as- 
sessed by  the  State  Board.  The  assessment  is  apportioned  to  the  coun- 
ties where  located,  and  the  companies  are  also  subject  to  State  corpora- 
tion tax. 

CORPORATION  LICENSE  TAX.— The  annual  corporation  license  tax, 
levied  solely  for  State  purposes,  is  at  the  rate  of  two  cents  per  each  $1,000 
of  capital  stock  j  same  tax  of  four  cents  as  to  entire  capital  stock  of 
foreign  corporations  was  adjudged  invalid  by  Supreme  Court  {Supra, 
Sec.  182)  as  a  violation  of  contract  as  to  corporations  theretofore  ad- 
mitted. The  statute  has  been  since  amended  so  that  a  tax  of  two  cents 
is  made  to  apply  to  foreign  corporations  only  as  to  property  located  and 
employed  in  the  State.  Corporations  both  foreign  and  domestic  are 
also  subject  to  the  general  property  tax  on  their  property. 

BUSINESS  COMPANIES. — The  same  rule  applies  to  assessment  of 
business  companies.  The  average  value  of  money  invested  in  mer- 
chandise and  manufactures  and  also  as  to  moneys  and  credits  during 
each  calendar  month  is  used  as  a  basis  of  assessment  of  merchants 
and  manufacturers.     (See  R.  S.  5579-5580.) 

BANKS. — Shares  of  stock  are  assessed  at  location  of  bank,  value  of 
real  estate  is  deducted.  Tax  is  paid  by  bank.  Residents  must  list 
average  amount  of  deposits  in  and  out  of  State. 


STATE   TAXATION    SYSTEM — COLORADO.  793 

INHERITANCE  TAX.— The  graduated  inheritance  tax  and  the 
amount  exempted  are  regulated  by  the  degree  of  relationship  of  the 
inheritor  to  the  decedent.  A  life  estate,  or  an  interest  for  a  term  of 
years  in  an  estate,  pays  an  inheritance  tax.  Taxes  are  levied  for  the 
fiscal  year  ending  November  30th. 

The  inheritance  tax  law  applies  to  all  property  belonging  to  a 
resident  of  the  State  and  all  property  located  in  the  State  belonging 
to  a  non-resident  at  the  time  of  his  death  which  passes  by  will  or  in- 
testate laws  as  above.  It  also  applies  to  such  transfer  of  securities-  of 
Colorado  corporations  owned  by  non-residents. 

MINES. — Mine  owners  must  make  an  annual  return  'showing  the 
acreage,  the  number  of  tons  and  the  value  of  ore  extracted,  the  cost 
of  extraction,  transportation  and  treatment  and  the  net  proceeds 
after  deducting  expenses.  Mills,  machinery  and  superstructures  on 
the  surface  of  the  mines  are  separately  taxed.  The  value  of  mines  is 
assessed  on  one-fourth  of  its  gross  proceeds  after  the  assessor  has 
made  the  statutory  deductions.  The  above  mining  assessment  method 
applies  only  to  mines  producing  gold,  silver,  lead,  copper  or  other 
precious  metals.  Iron  mines,  coal  mines,  mines  producing  asphaltum 
and  idle  mines  are  assessed  in  the  same  manner  as  other  property. 

EXEMPTIONS. — Exemptions  are  declared  in  the  Constitution.  Bona 
fide  debts  (with  specified  exceptions,  R.  S.  Sec.  5584),  may  be  deducted 
from  credits. 

STOCKS  AND  BONDS.— Shares  of  domestic  corporations  are  not 
taxable,  but  shares  of  foreign  corporations  are  taxable.  Bonds  of 
both   domestic  and  foreign  companies  are  taxable. 

DITCHES  AND  CANALS.— Ditches  and  canals  used  only  by  their 

owners   are   exempted    from    taxation,   but   those  ditches   and    canals 

from  which  water  is  sold  are  not  so  exempted.  (See  also  Sec.  5  of 
Art,  X  of  Cons.,  supra.) 

ASSESSMENTS.— Property  is  assessed  annually.  Land  and  im- 
provements are  separately  assessed.  Money  of  non-residents  if  kept 
within  State  for  profit  or  investment,  is  subject  to  same  taxes,  as 
property  of  residents. 

Every  person  is  required  to  make  a  return  to  the  assessor  of  tax- 
able property  owned  or  controlled  by  him,  between  the  first  of  April 
and  the  20th  of  May  of  each  year.  Co-partnerships  are  treated  as  in- 
dividuals, but  each  partner  is  liable  for  the  entire  taxes  assessable. 
One-half  of  the  assessed  taxes  are  payable  on  the  last  day  of  Feb- 


794  STATE   TAXATION    SYSTEM — CONNECTICUT 

ruary  and  one-half  on  the  last  day  of  July  in  the  year  following  the 
assessment.  Interest  at  the  rate  of  1  per  cent  per  month  is  charged 
on  the  amount  of  the  assessment  from  March  1st  until  the  first  day  of 
August,  at  which  time  all  taxes  become  delinquent,  and  interest  is 
charged  thereafter  at  the  rate  of  15  per  cent  per  annum. 

COLLECTIONS.— Between  the  first  day  of  August  and  the  first  day 
of  September  of  each  year  the  county  treasurer  is  required  to  make  a 
list  of  all  lands  and  town  lots  which  are  subject  to  sale  for  the  non- 
payment of  taxes.  Taxes  are  assessed  as  of  Oct.  1,  and  are  payable  on 
call  of  collector  in  April  to  July  following. 

Taxes  are  a  perpetual  lien  on  real  estate,  and  land  may  be  sold  for 
taxes  but  is  redeemable  within  three  years  upon  payment  of  the  pur- 
chase money  with  interest  at  the  rate  of  24  per  cent  per  annum  for 
the  first  six  months,  18  per  cent  for  the  second  six  months,  and  12 
per  cent  thereafter,  and  the  additional  amount  of  taxes  which  have 
been  paid  by  the  purchaser  together  with  12  per  cent  thereon. 

There  is  a  statute  which  allows  to  minors  and  insane  persons,  one 
year  after  their  minority  or  disability  has  been  removed,  for  the  re- 
demption of  property. 

CONNECTICUT 

(In  Connecticut  the  constitution  contains  no  restraint  upon  the 
taxing  power  of  the  State  Legislature  other  than  the  guaranty  of 
"due  course  of  law.") 


APPORTIONMENT. — As  there  are  no  constitutional  limitations  in 
Connecticut,  all  the  provisions  relative  to  taxation  are  statutory;  and 
after  thorough  investigation  of  the  subject  by  special  commission 
(see  address  of  ex-Governor  Baldwin  before  New  England  Tax  Offi- 
cials' Association,  December  7,  1916,  reported  in  Vol.  2,  Bulletin  of 
National  Tax  Association,  p.  61)  important  tax  measures  were  adopted 
in  1915.  The  State  tax  in  the  amount  fixed  by  the  legislature  is  ap- 
portioned to  towns  of  the  State  in  proportion  to  the  total  revenue 
collected  in  the  towns,  on  the  theory  that  the  actual  amount  of  taxes 
collected  bears  a  comparative  relation  to  the  actual  worth  of  prop- 
erty in  the  towns. 

ADMINISTRATION.— The  State  Board  of  Equalization,  consisting 
of  the  Treasurer,  Comptroller  and  the  Tax  Commissioner  ex  officio, 
has  jurisdiction  over  the  local  assessments  and  equalizes  and  adjusts 
the  same.  The  State  Tax  Commissioner  is  charged  with  certain  ad- 
ministrative duties  and  has  many  of  the  functions  of  State  tax  com- 


STATE   TAXATION    SYSTEM — CONNECTICUT  795 

missions  in  other  States.     The  same  officials  form  a  part  of  a  Board 
of  Finance  whose  main  duties  are  to  frame  a  budget  for  legislation. 

CORPORATIONS. — Foreign  and  domestic  corporations  pay  a  tax 
upon  their  property  in  the  State,  and,  in  addition  thereto,  pay  an  in- 
come tax  of  2  per  cent  on  net  income,  which  is  based  upon  the  in- 
formation required  to  be  furnished  by  such  corporations  to  the  fed- 
eral government  for  the  payment  of  the  Federal  Income  Tax,  a  dupli- 
cate copy  of  this  report  being  furnished,  the  State  having  the  right 
to  investigate  and  examine  the  books  of  the  corporation  when  neces- 
sary to  confirm  the  report. 

RAILROADS. — The  gross  earnings  tax  on  railroads  of  3  per  cent  on 
their  earnings  in  the  State  is  substituted  for  the  former  method  of  taxa- 
tion on  valuation  of  their  property.  Street  railway  companies  pay  414 
per  cent  of  their  gross  earnings.  The  securities  of  any  railroad  company 
whose  property  is  taxed  in  the  State  are  exempt  from  taxation. 

PUBLIC  UTILITIES. — Gas,  electric,  water  and  power  companies 
pay  a  tax  to  the  State  of  2  per  cent  on  net  income,  with  a  propor- 
tionate reduction  if  part  of  the  income  is  received  from  earnings  out 
of  the  State. 

Loans  secured  by  mortgage  on  real  estate  in  the  State  are  exempt 
from  taxation  to  an  amount  equal  to  the  assessed  valuation  of  the 
real  estate.  For  any  excess  of  the  loan  over  that  value,  the  lender 
is  taxed  in  the  town  where  the  land  lies. 

BANKS.— National  banks  pay  a  tax  on  individual  deposits  at  a 
rate  of  one-fourth  of  1  per  cent  in  lieu  of  a  tax  upon  such  property 
by  the  individual  depositors  at  the  regular  State  and  local  rate.  (As 
to  such  tax,  see  Vermont,  infra.)  The  stock  of  banks  is  taxed  1  per 
cent  on  market  value  of  shares,  less  amount  of  taxes  paid  upon  real 
estate  in  the  State. 

INHERITANCE  TAX.— There  is  a  new  inheritance  tax  (1917), 
with  graded  rates  and  exemptions  varying  from  1  per  cent  for  lineal 
heirs  to  8  per  cent  for  strangers  in  excess  of  one  million  dollars. 

Connecticut  taxes  all  property  within  the  jurisdiction  of  the  State 
which  has  been  held  to  include  that  residuum  of  the  decedent's  prop- 
erty remaining  after  the  claims  of  creditors  and  charges  of  adminis- 
trator have  been  satisfied.  The  words  include  land  within  the  State 
belonging  to  any  decedent  with  all  of  the  property  of  a  decedent 
domiciled  here  but  can  not  include  personal  property  in  this  State 
which  belongs  to  a  non-resident  decedent  (Appeal  of  Gallup,  76  Conn. 
617).     Property  to  the  ralue  of  $10,000  is  exempt. 


796  STATE   TAXATION    SYSTEM DELAWARE. 

EXEMPTIONS. — Exemptions  include  wearing  apparel,  with  watches 
and  jewelry  not  exceeding  $25.00;  household  furnishings  up  to 
$500.00;  cash  up  to  $100.00;  private  libraries  up  to  $200.00;  musical 
instruments  up  to  $25.00. 

POST  MORTEM  TAX. — The  former  tax  rate  of  four  mills  per  an- 
num on  choses  of  action  and  securities,  is  supplemented  by  what  is 
termed  a  post  mortem  law,  whereby  estates  of  decedents  are  made 
liable  for  the  taxes  of  five  years  preceding  if  not  paid,  or  for  such 
portion  of  said  time  as  the  securities  have  been  in  the  possession  of 
the  deceased,  the  burden  being  upon  the  estate  to  show  that  the  prop- 
erty had  been  taxed  or  recently  acquired.  The  proceeds  of  this  tax 
are  paid  one-half  to  the  State  and  one-half  to  the  town  where  the  de- 
ceased resided. 

COLLECTION. — The  time  of  assessment  varies  in  different  towns 
and  cities.  With  the  exception  of  a  few  towns,  returns  are  made  by 
taxpayers  during  the  month  of  October.  There  is  a  right  to  appeal 
by  taxpayers  to  the  Board  of  Relief  and  to  the  courts,  if  the  justice 
of  the  assessment  is  in  question.  Taxes  are  paid  in  the  following' 
April  or  July  when  called  by  the  collector.  Interest  at  9  per  cent  is 
added.  The  lien  for  unpaid  taxes  is  foreclosed  as  in  the  case  of  a 
mortgage. 

(For  recommendations  for  further  legislation  made  by  Special  Tax 
Commission,  see  report  of  same  for  1917.) 

DELAWARE 

Art.  VIII,  Sec.  1.  All  taxes  shall  be  uniform  upon  the  same  class  of 
subjects  within  the  territorial  limits  of  the  authority  levying  the 
tax,  and  shall  be  levied  and  collected  under  general  laws,  but  the  gen- 
eral assembly  may  by  general  laws  exempt  from  taxation  such  prop- 
erty as  in  the  opinion  of  the  general  assembly  will  best  promote  the 
general  welfare. 

Sec.  5.  The  general  assembly  shall  provide  for  levying  and  col- 
lecting a  capitation  tax  from  every  male  citizen  of  the  State  of  the 
age  of  twenty-one  years  or  upward;  but  such  tax,  to  be  collected  in 
any  county,  shall  be  uniform  throughout  that  county,  and  such  capir 
tation  tax  shall  be  used  exclusively  in  the  county  in  which  it  is  col- 
lected. 

Sec.  7.  In  all  assessments  of  the  value  of  real  estate  for  taxation, 
the  value  of  the  land  and  the  value  of  the  buildings  and  improve- 
ments thereon  shall  be  included.  And  in  all  assessments  of  the 
rental  value  of  real  estate  for  taxation,  the  rental  value  of  the  land 
and  the  rental  value  of  the  buildings  and  the  improvements  thereon 
shall  be  included.  The  foregoing  provisions  of  this  section  shall  ap- 
ply to  all  assessments  of  the  value  of  real  estate  or  of  the  rental  value 


STATE   TAXATION    SYSTEM DELAWARE.  797 

thereof  for  taxation  for  State,  county,  hundred,  school,  municipal  or 
other  public  purposes. 

Art  IX,  Sec.  6.  Shares  of  the  capital  stock  of  corporations  created 
under  the  laws  of  this  State,  when  owned  by  persons  or  corporations 
without  this  State,  shall  not  be  subject  to  taxation  under  any  law  now 
existing  or  hereafter  to  be  made. 

Art.  X,  Sec.  3.  Provided  ...  all  real  and  personal  property 
used  for  school  purposes,  where  the  tuition  is  free,  shall  be  exempt 
from  taxation  and  assessment  for  public  purposes. 


ADMINISTRATION.— The  tax  system  of  Delaware  is  one  of  com- 
plete separation  of  the  sources  of  revenue,  the  State  deriving  its 
revenue  from  corporation,  income  and  inheritance  taxes,  fees  and 
licenses  on  various  occupations,  there  being  no  State  levy  on  prop- 
erty. The  counties,  cities  and  hundreds  depend  on  the  general  prop- 
erty tax  and  on  poll  taxes. 

"While  there  was  a  Special  Revenue  and  State  Taxation  Commis- 
sion appointed  in  1909,  which  made  reports  in  1909  and  1910,  the 
permanent  tax  administrative  machinery  of  the  State  consists  of  a 
Collector  of  State  Revenue  appointed  by  the  Governor,  a  Levy  Board 
composed  of  commissioners  in  varying  number  in  each  of  the  three 
counties,  a  Board  of  Revision  and  Assessment  in  each  District,  and 
the  Collectors  in  each  hundred. 

RAILROADS. — The  railroad  taxation  is  unique,  in  that  the  State 
revenues  are  derived,  not  from  the  taxes  imposed,  but  from  the  com- 
mutation in  amounts  fixed  by  the  statute,  which  the  railroads  accept 
in  lieu  of  the  taxes.  The  taxes  thus  superseded  consist  of  a  passen- 
ger tax  of  ten  cents  for  each  passenger,  which  was  adjudged  invalid 
as  to  interstate  business  (State  v.  P.  W.  &  B.  R.  Co.,  4  Houston  158), 
a  tax  on  net  earnings,  on  rolling  stock  and  also  on  capital  stock. 
These  taxes  are,  however,  superseded  by  the  commutation  referred 
to.  For  history  and  explanation  of  this  commutation  system,  see 
Report  of  State  Revenue  and  Taxation  Commission  in  1909. 

PUBLIC  UTILITY  CORPORATIONS.— Telegraph,  telephone,  cable 
and  express  companies  pay  an  annual  tax  of  one  per  cent  on  gross  re- 
ceipts from  business  done  in  Delaware.  Gas  and  electric  companies, 
or  companies  distributing  heat  or  power,  pay  an  annual  tax  of  two- 
fifths  of  one  per  cent  on  their  gross  receipts  in  the  State  and  four  per 
cent  on  dividends  in  excess  of  four  per  cent  declared  and  paid  during 
the  preceding  year.  Oil  and  pipe  line  companies  pay  an  annual  tax 
of  three-fifths  of  one  per  cent  on  gross  receipts  from  transportation 
Of  oil  in   the  State  during  the  preceding  year.     Parlor,   palace  and 


798  STATE   TAXATION    SYSTEM DELAWARE. 

sleeping  car  corporations  pay  an  annual  tax  of  one  and  one-half  per 
cent  on  the  gross  amount  of  receipts  in  Delaware  during  the  year 
preceding.     See  Tax  Laws,  Sec.  68. 

BANKS  are  taxed  upon  capital  stock  and  surplus  in  valuation  of 
shares  less  real  estate. 

INSURANCE  COMPANIES. — Insurance  companies  other  than  life 
pay  an  annual  tax  of  three-fourths  of  one  per  cent  on  gross  receipts 
from  premiums  of  insurance  collected  in  Delaware  during  the  preced- 
ing year.  Life  insurance  companies  pay  an  annual  tax  of  two  per 
cent  on  gross  premiums  received  from  premiums  in  Delaware. 

BUSINESS  CORPORATIONS.— Corporations  other  than  those 
named,  that  is,  business  corporations,  pay  an  annual  license  fee 
based  on  the  authorized  capital  stock  of  $5.00  when  the  stock  does 
not  exceed  $25,000.00;  $10.00  when  it  does  not  exceed  $100,000.00; 
$20.00  when  it  does  not  exceed  $300,000.00;  $25.00  when  it  does  not  ex- 
ceed $500,000.00,  and  $50.00  when  not  exceeding  $1,000,000.00,  and  a 
further  sum  of  $25.00  for  each  additional  million  or  part  thereof. 
Stocks  without  par  value  are  regarded  as  $100.00  par  value  for  taxa- 
tion purposes.  Inactive  companies  not  engaged  in  any  business  are 
required  to  pay  one-half  of  the  usual  tax,  but  not  less  than  $5.00  per 
year. 

MANUFACTURING  AND  MERCANTILE  COMPANIES.— Manu- 
facturing and  mercantile  companies  whose  capital  is  invested  in  busi- 
ness carried  on  in  Delaware  and  subject  to  a  license  tax  for  carrying 
on  such  business,  are  exempt  from  the  franchise  tax,  and  any  cor- 
poration with  fifty  per  cent  of  its  capital  invested  in  business  carried 
on  in  the  State  is  exempt.  Corporations  having  less  than  fifty  per 
cent  of  their  capital  invested  in  business  in  the  State  are  entitled  to 
a  deduction  of  the  invested  capital  from  the  amount  of  capital  issued 
and  outstanding.  By  act  of  1911  a  tax  of  one-twentieth  of  one  per 
cent  is  assessed  upon  manufacturing  companies  upon  the  aggregate 
value  of  the  property  thereof  within  the  State  used  for  production 
and  manufacture.  The  corporate  taxes  above  stated  are  collected  by- 
suit  or  by  forfeiture  of  charter,  and  by  fine  or  imprisonment  of  per- 
sons attempting  to  act  under  forfeited  charters.  The  Governor  may 
correct  errors  made  in  the  tax  charges.  The  corporation  taxes  named 
do  not  apply  to  corporations  organized  before  March  1,  1899. 

INCOME  TAX.— An  income  tax  was  adopted  in  1917,  whereunder 
a  tax  of  one  per  cent  of  the  net  income  over  $1,000.00,  other  than  on 
life  insurance  policies,  interest  upon  obligations  of  the  State  or  any 
political  subdivision  thereof,  or  of  the  United  States,   or  rentals  or 


STATE   TAXATION    SYSTEM — DELAWARE.  799 

grains  or  profits  derived  from  agricultural  operations.  In  the  com- 
putation of  the  income  tax,  the  following  items  are  deducted:  The 
necessary  expenses  of  carrying  on  the  business,  interest,  taxes,  losses 
not  compensated  by  insurance,  debts  charged  off  as  worthless,  and 
allowances  for  exhaustion  or  wear  and  tear  of  property. 

Return  for  the  income  tax  is  made  on  or  before  the  first  day  of 
March,  1918,  and  each  year  thereafter.  Taxes  are  to  be  paid  to  the 
State  Treasurer  on  or  before  the  first  day  of  June  following.  A  party 
not  making  the  return  is  subject  to  a  penalty  and  fine  and  imprison- 
ment, and  the  State  Treasurer  enforces  the  payment  of  the  taxes  by 
suit. 

INHERITANCE  TAX. — An  inheritance  tax  was  also  adopted  in  1917, 
applying  to  all  property  in  the  State  whether  belonging  to  a  resident 
or  a  non-resident,  except  shares  of  the  capital  stock  of  a  corporation 
created  under  the  laws  of  the  State  when  owned  by  persons  without 
the  State.  The  rate  is  fixed  according  to  the  degree  of  the  relation- 
ship and  the  amount  of  the  inheritance,  varying  from  one  per  cent 
to  four  per  cent  in  the  case  of  parents,  children,  husband  or  wife,  ac- 
cording to  the  amount  of  inheritance,  the  latter  part  applying  to  the 
amount  in  excess  of  $200,000.00,  $3,000.00  being  exempt;  and  in  the 
case  of  brother  or  sister  and  their  descendants  $1,000  being  exempt; 
the  rate  varies  from  two  per  cent  to  eight  per  cent,  the  latter  rate 
applying  to  the  amount  in  excess  of  $200,000.00.  Devises  to  charitable, 
educational,  agricultural  and  religious  societies  or  for  public  use,  are 
exempt  from  this  tax.  It  also  applies  to  transfers  made  in  contem- 
plation of  death  within  two  years. 

STATE  AND  LOCAL  TAXATION.— It  is  made  the  duty  of  the  admin- 
istrator of  the  laws  to  collect  these  taxes,  and  to  make  a  return  thereof 
to  the  State  Treasurer.  The  taxes  above  named  are  paid  over  to  the 
State.  The  general  property  tax  is  levied  for  the  benefit  of  the  counties, 
cities  and  hundreds.  The  corporations  are  also  subject  to  license  taxes 
imposed  by  the  cities  under  the  authority  of  the  statute.  A  poll  or 
capitation  tax  is  imposed  upon  the  citizens  of  the  county  who  are 
twenty-one  years  old  and  over,  of  not  more  than  one  dollar  and  twenty- 
five  cents  nor  less  than  twenty-five  cents.  There  is  also  a  per  capita  tax 
in  some  of  the  cities  levied  upon  horses  and  mules. 

EXEMPTIONS.— Exemptions  include  the  provisions  necessary  for 
the  use  and  consumption  of  the  family  not  including  livestock,  farm- 
ing utensils,  working  tools  of  mechanics,  professional  and  trade  im- 
plements, stock  on  hand  of  a  manufacturer  or  tradesman,  household 
furniture  other  than  plate,   wearing  apparel,  grain  and   the  produce 


800  STATE  TAXATION  SYSTEM — FLORIDA. 

of  land,  vessels  trading  from  any  part  of  the  State,  charitable  homes 
for  reformed  women  to  the  value  of  $25,000,  homes  for  incurables  to 
the  value  of  $15,000,  soldiers'  rest  rooms,  lands  and  buildings  of  in- 
corporated college  fraternities  to  the  value  of  $10,000,  lands  and  tene- 
ments of  Young  Women's  Christian  Association  homes  to  the  value 
of  $25,000.  Railroad  property  within  the  right  of  way  is  exempt  as 
the  railroads  are  otherwise  taxed  for  State  purposes.  Shares  of  stock 
in  domestic  corporations  which  are  owned  by  persons  or  corporations 
without  the  State  are  exempt. 

ASSESSMENT.— Lands  and  buildings  are  assessed  jointly  every 
four  years.  Homes  and  lots  in  cities  are  assessed  on  the  basis  of  an- 
nual rental  at  $100  for  every  $12.00  rental  plus  any  excess  of  true 
value  thereover.  Rents  are  assessed  by  the  assessor  in  each  hundred 
at  the  rate  of  $100  for  each  $8.00  received  and  are  assessed  to  the 
persons  receiving  the  same.  Tenants  pay  the  taxes  on  the  rents  and 
deduct  the  same  from  rents  due.  Personal  property  is  assessed  once 
every  four  years  but  corrected  annually  for  new  acquisitions  and 
changes. 

COLLECTION. — Taxes  are  collected  by  the  collectors  in  each  hun- 
dred under  warrant  of  the  levy  court.  They  are  payable  on  demand 
after  the  second  Tuesday  in  October,  and  if  not  paid  within  ten  days 
after  demand,  may  be  collected  by  distress  and  sale  of  personal  prop- 
erty. If  the  amount  of  personal  property  is  not  sufficient  they  revert 
to  real  estate  and  tenement  and  if  they  fail,  the  individual  may  be 
imprisoned.  The  Collector  may  recover  taxes  in  an  action  of  debt. 
On  all  taxes  paid  before  the  first  day  of  October  there  is  an  abate- 
ment of  5  per  cent;  before  December  1,  3  per  cent;  on  all  taxes  un- 
paid on  the  first  day  of  January  5  per  cent  penalty  is  added. 

FLORIDA 

Art.  IX,  Sec.  1.  The  legislature  shall  provide  for  a  uniform  and 
equal  rate  of  taxation  and  shall  provide  such  regulations  as  will  se- 
cure a  just  valuation  of  all  property  both  real  and  personal,  excepting 
such  property  as  may  be  exempted  by  law  for  municipal,  educational, 
library,   scientific,   religious   or   charitable   purposes. 

Sec.  5.  The  legislature  may  provide  for  levying  a  special  capita- 
tion tax,  and  a  tax  on  licenses.  But  the  capitation  tax  shall  not  ex- 
ceed one  dollar  a  year,  and  shall  be  applied  exclusively  to  common 
school  purposes. 

Sec.  8,  No  person  or  corporation  shall  be  relieved  by  any  court 
from  the  payment  of  any  tax  that  may  be  illegal,  or  illegally  or  ir- 
regularly assessed,  until  he  or  it  shall  have  paid  such  portion  of  his 
or  its  taxes  as  may  be  legal,  and  legally  and  regularly  assessed. 


STATE   TAXATION    SYSTEM FLORIDA.  801 

Sec.  9,  Art.  IX  amended  to  read  as  follows: 

There  shall  be  exempt  from  taxation  property  to  the  value  of  five 
hundred  dollars  to  every  widow  that  has  a  family  dependent  on  her 
for  support,  and  to  every  person  who  is  a  bona  fide  resident  of  the 
State  and  has  lost  a  limb  or  been  disabled  in  war  or  by  misfortune. 


ADMINISTRATION.— A  tax  commission  composed  of  three  mem- 
bers appointed  by  the  Governor  was  establisb'^^d  in  1913,  the  com- 
missioners giving  their  entire  time  to  the  duties  of  their  office.  It 
has  no  assessing  power  but  exercises  general  supervision  over  the  ad- 
ministration of  the  tax  laws,  may  conduct  investigations  and  make 
recommendations.  There  is  no  power  to  equalize  taxes  between  the 
counties. 

A  "State  board"  composed  of  the  State  Comptroller,  Attorney  Gen- 
eral and  State  Treasurer  assesses  steam  and  street  railroad,  passen- 
ger car  and  telegraph  companies. 

County  commissioners  constitute  the  county  Board  of  Equalization 
with  power  to  equalize  property  within  their  respective  counties.  The 
taxpayers  may  appeal  to  the  county  commissioners  from  assessment 
made  by  county  assessors. 

RAILROADS,  ETC. — ^Railroad,  express  companies,  telephone  and 
telegraph  companies  are  also  subject  to  the  general  property  tax,  and 
in  addition  are  subject  to  State  license  taxes;  in  the  case  of  railroads 
$10.00  for  every  mile  of  track,  express  companies  to  a  State  license 
tax  of  $7,500.00  and  a  municipal  license  tax  based  upon  population, 
telephone  companies  to  a  State  license  tax  based  upon  number  of  in- 
struments, and  telegraph  companies  to  a  State  license  tax  based  upon 
mileage. 

CORPORATIONS. — Other  public  utility  companies  pay  the  general 
property  tax  for  State  and  local  purposes  and  in  addition  pay  the  State  for 
State  purposes  annual  license  taxes  fixed  in  the  statute.  See  Laws  of 
1913.  Car  companies  pay  the  general  property  tax  and  in  addition  the 
State  license  tax  to  the  State  based  upon  gross  receipts.  Laws  of 
1913.  Sees.  44,  45.  Manufacturing,  mercantile  and  other  business 
corporations  .pay  the  general  property  tax  assessed  and  collected  lo- 
cally for  State  and  local  purposes  and  in  addition  they  pay  annual 
license  taxes  to  the  State  for  conducting  certain  kinds  of  business 
specified  in  the  statute.  Laws  of  1913,  Act  No.  1,  and  counties  and 
cities,  unless  specially  prohibited,  may  impose  a  license  tax  not  ex- 
ceeding 50  per  cent  of  the  license  charged  for  State  purposes. 


•   802  STATE   TAXATION    SYSTEM — FLORIDA. 

Insurance  companies  pay  a  tax  of  2  per  cent  upon  the  gross  amount 
receipts  of  premiums  from  policy  holders  in  the  State  and  each  com- 
j)any  is  required  to  pay  $200  license  tax  except  plate  glass  insurance 
companies  which  pay  only  $50.00. 

Holders  of  stock  in  any  incorporated  company  are  not  taxed  if  the 
stock  is  returned  for  taxation  by  the  corporation,  or  if  the  property 
of  the  company  is  assessed  where  located  taxes  are  then  paid  on 
such  property.    Laws  of  1907,  Act  No.  1,  Sec.  1. 

LICENSE  TAXATION. — Florida  supplements  the  general  property 
tax  with  a  long  series  of  special  or  privilege  or  occupation  taxes 
which  are  charged  for  the  conduct  of  business  and  are  in  addition  to 
the  general  property  tax  paid  by  both  individuals  and  corporations. 

BANKS. — Banks  are  assessed  upon  their  shares,  the  real  estate 
being  taxed  as  other  real  estate,  and  deducted  from  assessment  of 
the  shares,  the  bank  being  made  the  agent  of  the  stockholders  for  the 
payment  of  the  tax. 

POLL  TAX. — Any  male  over  21  and  under  50  years  of  age  except 
those  who  have  lost  a  limb  in  battle,  is  liable  to  a  poll  tax  of  $1.00 
which  is  collected  for  school  purposes.  There  is  also  a  road  poll  tax 
in  each  county  on  all  able-bodied  persons  over  21  and  under  45  resi- 
dent in  the  county  over  30  days,  except  ministers  of  the  gospel  in 
charge  of  congregations.  This  tax  is  payable  in  labor.  Persons  re- 
siding in  incorporated  municipalities  are  not  subject  to  such  tax. 

Cities  make  their  own  assessment  of  property  for  taxation  but  the 
valuation  must  not  exceed  the  last  valuation  thereof  for  State  taxa- 
tion. 

COLLECTION. — Assessments  are  made  as  of  the  first  of  January. 
Taxes  are  due  on  the  first  Monday  in  November,  and  become  delin- 
quent on  the  first  Monday  in  April. 

When  a  purchaser  at  a  tax  sale  goes  into  actual  possession  of  land, 
no  suit  can  be  brought  by  the  former  owner,  or  its  representative  for 
recovery  unless  within  four  years  from  the  beginning  of  such  pos- 
session. 

When  land  is  in  actual  adverse  possession  of  any  person  other  than 
tax  purchaser,  the  purchaser  must  bring  suit  for  possession  within 
one  year  after  acquiring  the  right  for  tax  title,  else  he  is  barred,  pro- 
vided that  infants,  persons  of  unsound  mind  or  under  guardianship 
or  in  prison  may  commence  suit  within  three  years  after  disability 
Is  removed. 


STATE   TAXATION    SYSTEM — GEORGIA  803 

GEORGIA 

Art.  IV,  Sec.  1,  Par.  1.  The  right  of  taxation  is  a  sovereign  right, 
inalienable,  indestructible,  is  the  life  of  the  State,  and  rightfully  be- 
longs to  the  people  in  all  republican  governments,  and  neither  the 
General  Assembly,  nor  any  nor  all  other  departments  of  the  govern- 
ment established  by  this  Constitution,  shall  ever  have  the  authority 
to  irrevocably  give,  grant,  limit,  or  restrain  this  right;  and  all  laws, 
grants,  contracts,  and  all  other  acts  whatsoever  by  said  government, 
or  any  department  thereof,  to  effect  any  of  these  purposes,  shall  be, 
and  are  hereby,  declared  to  be  null  and  void  for  every  purpose  what- 
soever, and  said  right  of  taxation  shall  always  be  under  the  complete 
control  of,  and  revocable  by,  the  State,  notwithstanding  any  gift, 
grant,  or  contract  whatsoever  by  the  General  Assembly. 

Art.  VII,  Sec.  2,  Par.  1.  All  taxation  shall  be  uniform  upon  the 
same  class  of  subjects,  and  ad  valorem  on  all  property  subject  to  be 
taxed  within  the  territorial  limits  of  the  authority  levying  the  tax, 
and  shall  be  levied  and  collected  under  general  laws.  The  General 
Assembly,  may,  however,  impose  a  tax  upon  such  domestic  animals  as, 
from  their  nature  and  habits,  are  destructive  of  property. 

Par,  2.  The  General  Assembly  may  by  law  exempt  from  taxation 
all  public  property;  all  places  of  religious  worship  or  burial;  all  in- 
stitutions of  purely  public  charity;  all  buildings  erected  for  and 
used  as  a  college,  incorporated  academy,  or  other  seminary  of  learn- 
ing; the  real  and  personal  estate  of  any  public  library,  and  that  of 
any  other  literary  association  used  by  or  connected  with  such  library; 
all  books  and  philosophical  apparatus;  and  all  paintings  and  statuary 
of  any  company  or  association  kept  in  a  public  hall  and  not  held  as 
merchandise  or  for  purposes  of  sale  or  gain:  Provided,  That  the 
property  so  exempted  be  not  used  for  purposes  of  private  or  corporate 
profit  or  income. 

Art.  VII,  Sec.  1.  (Contains  a  specific  designation  of  the  purposes 
for  which  taxes  may  be  levied:  for  the  support  of  the  government, 
public  institutions,  educational  purposes,  the  public  debt,  the  sup- 
pression of  insurrection  and  invasion  and  defending  the  State  in  time 
of  war,  and  also  for  the  assistance  of  disabled  Confederate  soldiers 
and  for  their  widows  and  orphans.) 

Par.  3.  No  poll  tax  shall  be  levied  except  for  educational  purposes, 
and  such  tax  shall  not  exceed  one  dollar  annually  upon  each  poll. 

Par.  4.  All  laws  exempting  property  from  taxation  other  than  the 
property  herein  enumerated,  shall  be  void. 

Par.  5.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  any  contract  or  grant  to  which 
the  State  shall  be  a  party. 

Sec.  6,  Par.  2.  (The  right  of  local  taxation  limited  to  elementary  edu- 
cational purposes,  building  and  repairing  bridges,  enforcement  of  crim- 
inal law,  support  of  quarantine,  paupers,  sanitation  and  payment  of 
existing  debts.) 

Art.  VIII,  Sec.  4,  Par.  1.  (The  General  Assembly  may  authorize  a 
county  school  tax.) 


804  STATE   TAXxVTION    SYSTEM GEORGIA 

ADMINISTRATION.— (References  are  to  Code  of  1910  unless  other- 
wise indicated.) 

A  Tax  Commissioner  was  authorized  (Acts  of  1913,  p.  123),  ap- 
pointed for  six  years.  He  has  no  original  assessing  power,  but 
equalizes  assessments  between  the  counties  and  has  powers  of  in- 
vestigation and  recommendation.  The  Comptroller-General,  elected 
every  two  years,  assesses  the  property,  including  franchise  value  of 
public  carriers,  and  has  power  to  make  regulations  therefor,  and  to 
recommend  improvements.  Disputes  with  respect  to  assessment  of 
taxes,  arising  between  corporations  and  the  Comptroller-General,  or 
between  taxpayers  and  county  boards  of  tax  assessors,  are  subject  to 
arbitration.     (See  Code  1045,  1046,  Laws  of  1913,  p.  123.) 

Boards  of  County  Assessors  are  appointed  by  County  Comtois- 
sioners. 

CORPORATIONS. — All  corporations,  domestic  and  foreign,  are  sub- 
ject to  the  General  Property  Tax  for  State  and  local  purposes.  The 
tax  collected  from  public  service  corporations,  under  the  General 
Property  Tax,  for  State  purposes,  is  paid  to  the  State.  Corporations 
pay,  in  addition  to  the  General  Property  Tax,  an  annual  license  or 
occupation  tax  known  as  the  Capital  Stock  Tax.  Foreign  corporations; 
which  have  a  place  of  business  in  the  State,  except  insurance  and 
sewing  machine  companies,  which  are  otherwise  taxed,  pay  this  tax 
for  State  purposes  to  the  Comptroller-General.  Mercantile,  manu- 
facturing, and  other  business  corporations  pay  also  for  State  pur- 
poses an  annual  license  tax  levied  for  conducting  the  specific  class  of 
business.     (See  Code,  Sees.  922-984.) 

RAILROADS. — Railroads  of  all  kinds  and  also  express  companies 
are  assessed  by  the  Comptroller-General  in  practically  the  same  man- 
ner. What  is  known  as  located  property  is  deducted  from  the  entire 
value  of  the  system  as  a  unit  apportioned  to  the  State  by  capitaliza- 
tion of  net  earnings  of  6  per  cent,  consideration  also  being  given  to  the 
value  of  securities,  and  the  remainder  is  taken  as  the  value  of  the 
franchise.  The  value  ascertained  is  apportioned  to  the  counties, 
cities,  or  towns  on  the  basis  of  the  value  of  the  tract  or  other  located 
property  in  each. 

Car  companies  pay  the  State  for  State  purposes  a  General  Property 
Tax  in  addition  to  the  capital  stock  tax. 

Telephone,  telegraph,  electric  light  and  power,  gas  and  water  com- 
panies, all  pay  the  General  Property  Tax  and  also  the  Capital  Stock 
Tax;   and  they  are  assessed  by  the  Comptroller-General. 


STATE  TAXATION  SYSTEM GEORGIA  805 

Business  corporations  pay  locally  the  General  Property  Tax  and 
also  the  capital  stock  tax,  and  also  whatever  license  taxes  are  im- 
posed under  the  General  License  Tax  or  that  of  the  county,  city,  and 
town  where  the  company  is  operated.  Foreign  corporations  are 
taxed  in  a  similar  manner  as  domestic  corporations. 

BANKS. — Shares  of  stock  in  banks  are  assessed  to  owners— less  value 
of  real  estate. 

COUNTY  TAXATION.— Counties  and  municipalities  do  not  share 
in  corporation  tax  except  that  the  cities  may  collect  a  tax  on  insur- 
ance companies  at  a  certain  percentage  of  gross  premium  receipts. 

INHERITANCE  TAX.— The  inheritance  tax  enacted  in  1913  pro- 
vides a  tax  of  one  dollar  on  any  amount  in  excess  of  $5000.00  passing 
to  the  parent,  husband,  or  wife,  child,  brother  or  sister,  or  wife,  or 
widow  of  a  son  or  any  adopted  child,  or  child  born  in  lawful  wedlock, 
at  the  rate  of  one  per  cent  on  any  amount  in  excess  of  $5000.00;  and 
where  the  property  passes  to  any  other  person,  the  rate  of  5  per  cent. 
(See  Act  of  1913.) 

This  tax  is  assessed  upon  all  property,  real  and  personal,  and  upon 
every  estate  or  interest  therein  within  the  jurisdiction  of  the  State, 
whether  belonging  to  residents  or  non-residents,  which  passes  as 
above  stated. 

POLL  TAX. — There  is  an  annual  poll  tax  of  one  dollar  on  every 
male  person  between  the  ages  of  21  and  60  years,  except  blind  persons 
and  those  who  have  lost  a  limb  or  the  use  of  the  same  while  actually 
engaged  in  the  military  service  of  the  Confederacy,  the  proceeds  be- 
ing used  for  educational  purposes  only.  The  constitutional  limit  of 
poll  tax,  it  has  been  held,  does  not  prevent  the  requirement  of  males 
to  work  on  the  roads  with  a  right  of  commutation  amounting  to  not 
more  than  fifty  cents  per  diem  for  the  number  of  days'  works  re- 
quired. 

For  an  extended  list  of  business  taxes,  licenses,  and  fees,  see  Code, 
Sees.   922-984. 

Mortgages  are  taxed  as  personal  property. 

Exempted  property  is  as  stated  in   the  Constitution. 

WILD  LANDS. — Owners  of  wild  and  unimproved  lands  are  re- 
quired to  make  return  to  the  Comptroller-General,  or  to  the  tax  re- 
ceiver of  the  county  where  the  lands  lie.  If  the  tax  on  such  lands  is 
not  paid,  the  Comptroller-General,  after  giving  60  days'  notice  by 
newspaper  publication,  is  required  to  issue  execution  for  such  taxes 
under  which  the  Sheriff  of  the  county  where  the  land  lies  is  required 


806  STATE   TAXATION    SYSTEM IDAHO. 

to  sell  the  same;  in  other  cases  the  tax  sale  must  be  advertised  30 
days;  and  in  all  cases  whether  for  State  or  county  taxes,  or  municipal 
taxes,  or  local  public  improvements,  one  year  is  allowed  the  owner 
to  redeem  the  land  sold  by  paying  the  purchaser  the  purchase  money 
and  10  per  cent  premium  and  costs. 

COLLECTION. — The  collection  of  taxes,  with  the  exception  of  cer- 
tain corporate  taxes  which  are  paid  to  the  Comptroller-General,  is 
made  by  the  County  Tax  Collector.  Returns  are  made  after  the  first 
day  of  April  of  each  year,  and  taxes  are  due  on  the  20th  day  of  April 
of  each  succeeding  year.  Delinquent  taxes,  all  of  which  bear  interest 
at  7  per  cent,  may  be  collected  by  execution.  Those  who  fail  to  make 
a  list  to  the  assessor,  are  penalized  by  double  taxation,  and  defaulting 
corporations  are  subject  to  heavy  fines. 

IDAHO 

Art.  VII,  Sec.  2.  The  legislature  shall  provide  such  revenue  as  may 
be  needful,  by  levying  a  tax  by  valuation,  so  that  every  person  or  cor- 
poration shall  pay  a  tax  in  proportion  to  the  value  of  his,  her  or  its 
property,  except  as  in  this  article  otherwise  provided.  (License  taxes 
and  poll  taxes  are  specifically  authorized.)  The  legislature  may  exempt 
from  taxation  a  limited  amount  of  improvements  upon  lands. 

Sec.  5.  All  taxes  shall  be  uniform  upon  the  same  class  of  subjects 
within  the  territorial  limits  of  the  authority  levying  the  tax,  and  shall 
be  levied  and  collected  under  general  laws,  which  shall  prescribe  such 
regulations  as  shall  secure  a  just  valuation  for  taxation  of  all  the  prop- 
erty, real  and  personal;  Provided,  that  the  legislature  may  allow  such 
exemption  from  the  tax  from  time  to  time  as  shall  seem  necessary  and 
just;  Provided,  further,  that  duplicate  taxation  of  property  for  the  same 
purpose  for  the  same  year  is  hereby  prohibited. 

Sec.  8.  The  power  to  tax  corporations  or  corporate  property,  both 
real  and  personal,  shall  never  be  relinquished  or  suspended,  and  all  cor- 
porations in  this  State,  or  doing  business  therein,  shall  be  subject  to 
taxation  on  real  and  personal  property  owned  or  used  by  them,  and  not 
by  the  Constitution  exempted  from  taxation,  within  the  territorial 
limits  of  the  authority  levying  the  tax. 


ADMINISTRATION.— The  Tax  Commission  created  in  1913,  having 
been  abolished  in  1916,  the  State  Board  of  Equalization  consisting  of 
the  Governor  and  other  State  officials  equalize  the  value  of  property  as 
between  the  counties  and  assesses  the  public  service  corporations.  The 
County  Board  of  Equalization  equalizes  between  individuals.  There  is 
no  State  rate  of  taxation,  as  the  law  requires  the  amount  to  be  assessed 
by  ad  valorem  taxes  for  State  purpose  to  be  apportioned  to  counties  by 
the  State  Board  of  Equalization  on  the  basis  of  assessed  valuation. 


STATE   TAXATION    SYSTEM IDAHO.  807 

RAILROADS. — Railroad  properties  are  assessed  by  the  State  Board 
of  Equalization,  this  assessment  covering  all  property  necessary  for  the 
operaiion  of  the  railroad  and  the  assessment  so  made  is  apportioned 
among  the  counties  on  the  basis  of  mileage.  Other  property  is  assessed 
by  the  local  assessors.  The  general  property  tax  is  supplemented  by 
State  license  upon  the  authorized  amount  of  capital  stock  varying  from 
$10.00  to  $250.00,  according  to  the  amount  of  stock. 

PUBLIC  UTILITIES. — Express  companies,  telegraph  and  telephone 
companies  and  other  public  service  corporations  are  assessed  in  the 
same  manner  by  the  State  Board,  and  the  general  property  tax  being 
supplemented  by  State  license  taxes,  in  the  case  of  express  companies 
by  tax  upon  gross  receipts,  and  in  case  of  telegraph  and  telephone  com- 
panies by  a  tax  on  the  capital  stock. 

INSURANCE  COMPANIES. — ^Insurance  companies,  except  mutual 
companies,  pay  a  tax  of  2%  upon  their  gross  premiums  received  in  the 
State. 

ASSESSMENTS. — Property  is  listed  for  taxation  at  its  full  cash 
value.  Improvements  are  assessed  separately  from  the  land.  Lands 
are  classified  as  timber,  agricultural,  cut  over  and  burnt,  grazing,  waste 
land  and  town  and  city  lots.  In  the  assessment  of  credits  reduction  or 
cancellation  may  be  made  by  debts  due  residents  of  the  State. 

IRRIGATION. — Irrigation  districts  may  be  formed  under  the  statute 
and  the  land  therein  taxed  for  the  purpose  of  supporting  irrigation 
works.  This  tax  is  due  in  November  and  becomes  delinquent  first  Mon- 
day in  January,  and  a  lien  on  the  property  on  the  first  Monday  in 
March. 

POLL  TAX. — ^A  county  poll  tax  of  $2.00  annually  is  levied  on  males 
over  21  and  under  50.  Each  city  and  village  has  authority  to  require 
every  able-bodied  male  to  work  two  days  on  streets  and  highways.  The 
delinquent  forfeits  the  sum  of  $1.00  a  day.  A  road  poll  tax  not  ex- 
ceeding $4.00  on  each  adult  person  may  be  levied  by  county  commis- 
sioners. 

BANK  SHARES. — Bank  shares  in  State  and  national  banks,  in  build- 
ing and  loan  associations,  trust  and  fidelity  companies  organized  under 
the  laws  of  the  State,  are  assessed  to  the  owners  but  are  paid  by  the 
institutions.  Foreign  banks  and  private  bankers  with  no  fixed  capital 
are  assessed  where  located  on  an  amount  equal  to  the  general  average 
of  money  used  during  the  preceding  year. 


808  STATE   TAXATION    SYSTEM IDAHO. 

INHERITANCE  TAX. — The  inheritance  tax  is  paid  for  the  benefit 
of  the  general  fund  of  the  State,  and  applies  to  all  property  of  deceased 
residents  and  all  property  in  the  State  of  deceased  non-residents,  and 
also  to  transfers  of  property  made  in  contemplation  of  death.  Shares 
of  stock  of  a  non-resident  decedent  in  an  Idaho  corporation  are  subject 
to  the  tax. 

Transfers  to  institutions  exempt  from  taxation  or  devoted  to  charit- 
able, benevolent  or  educational  purposes  are  exempt;  $10,000  is  exempt 
in  case  of  widow  or  minor  child;  $4,000  in  case  of  transfer  to  husband 
or  wife,  ancestors,  descendants,  the  rates  varying  according  to  amount 
from  1%  to  3%,  and  in  case  of  other  relatives  and  to  strangers  from 
iy2%  to  15%,  according  to  amount.  The  tax  is  paid  within  six  months 
after  the  death  of  the  donor;  5%  discount  is  allowed,  and  if  not  paid 
within  one  year  interest  at  the  rate  of  6%  is  added. 

EXEMPTIONS. — ^Exemptions  include  in  addition  to  public  property 
all  schools,  churches,  hospitals,  cemeteries,  buildings  owned  by  Masons, 
Odd  Fellows  and  other  benevolent  and  charitable  societies;  property  of 
resident  widows  and  orphans  and  union  soldiers  and  sailors  to  the 
amount  of  $1,000  when  total  assessment  does  not  exceed  $5,000;  grow- 
ing crops,  public  and  private  libraries,  tools  and  farming  implements 
and  machinery  to  the  amount  of  $400,00;  possessory  right  to  public 
lands,  mortgages,  mining  claims  not  patented;  irrigation  canals  and 
ditches  when  used  by  the  owner  on  his  land;  improvements  on  lands 
not  exceeding  $200.00. 

COLLECTION  OF  TAXES.— The  Board  of  County  Commissioners  at 
its  annual  meeting  may  order  cancellation  of  any  manifestly  errone- 
ous tax  bills  and  the  refunding  of  any  money  erroneously  collected. 

Real  and  personal  property  is  assessed  between  the  second  Monday 
in  January  and  the  fourth  Monday  in  June.  Refusal  to  make  a  state- 
ment deprives  the  taxpayer  of  all  rights  before  the  Board  of  Equali- 
zation. In  assessing  solvent  credits,  debts  due  bona  fide  residents  of 
the  State  may  be  deducted. 

Taxes  become  delinquent  on  the  first  Monday  in  January  following 
the  levy,  10%  penalty  being  added.  If  one-half  of  the  taxes  have  been 
paid  prior  to  the  time  the  whole  became  delinquent,  then  4%  penalty  is 
added.  All  taxes  become  a  lien  on  the  property  on  the  second  Monday 
in  January,  and  are  due  ten  days  after  the  second  Monday  in  September. 
The  County  Treasurer  is  collector  of  personal  property  taxes. 


STATE  TAXATION   SYSTEM — ILLINOIS.  809 

ILLINOIS 

Constitution,  Art.  IX,  Sec.  1.  The  General  Assembly  shall  provide 
such  revenue  as  may  be  needful  by  levying  a  tax  on  valuation,  so  that 
every  person  and  corporation  shall  pay  a  tax  in  proportion  to  the 
value  of  his,  her,  or  its  property,  such  value  to  be  ascertained  by 
some  person  or  persons  to  be  elected  or  appointed  in  such  manner  as 
the  General  Assembly  may  direct,  and  not  otherwise  (specially  au- 
thorizing the  levying  of  license  taxes  "by  general  law  uniform  as  to 
the   class  upon   which   it   operates"). 

Sec.  2.  (The  specification  of  certain  objects  for  taxation  not  to  de- 
prive the  General  Assembly  of  the  power  to  require  other  subjects 
and  objects  of  taxation  consistent  with  the  principles  of  taxation 
fixed  in  the  Constitution.) 

Sec.  3.  The  property,  cities,  counties  and  other  municipal  corpora- 
tions, both  real  and  personal,  and  such  other  property  as  may  be 
used  exclusively  for  agricultural  and  horticultural  societies,  for  school, 
religious,  cemetery  and  charitable  purposes,  may  be  exempted  from 
taxation  by  general  laws.  (This  language  construed  as  limitation 
upon  legislative  power  to  exempt  other  property  either  by  general  or 
special  law.)     Coal  Co.  v.  Mitler,  236  111.  149  (1908). 

In  the  assessment  of  real  estate  incumbered  by  a  public  easement, 
any  depreciation  occasioned  by  such  easement  may  be  deducted  from 
the  valuation  of  such  property. 

Sec.  4.  No  sale  of  property  for  taxes  or  assessment  without  a  re- 
turn of  such  unpaid  taxes  or  assessments  to  some  general  officer  hav- 
ing authority  to  receive  the  same,  and  only  by  an  officer  upon  the 
order  or  judgment  of  some  court  of  record. 

Sec.  5.  (No  power  in  general  assembly  to  release  or  discharge  any 
county,  city,  township  or  district,  or  the  inhabitants  or  the  property 
therein  of  its  proportionate  share  of  taxes,  nor  shall  any  commutation 
of  taxes  be  allowed.) 

Sec.  7.  All  taxes  levied  for  State  purposes  shall  be  paid  into  the 
State  treasury. 

Sec.  8.  (Counties  not  to  assess  taxes  to  aggregate  exceeding  75c 
upon  the  $100  valuation,  except  for  payment  of  indebtedness  existing 
at  the  time  of  the  adoption  of  the  Constitution,  unless  authorized  by 
a  vote  of  the  people  of  the  county.) 

Sec.  9.  (Express  authorization  given  to  general  assembly  to  au- 
thorize the  local  authorities  to  make  local  improvements  by  special 
assessments  and  to  assess  and  collect  taxes  for  other  corporate  pur- 
poses, to  be  uniform  with  respect  to  property  within  the  jurisdiction 
of  the  body  imposing  the  same.)  (Prior  to  the  adoption  of  this  Con- 
stitution in  1870,  assessment  on  the  frontage  rule  had  been  held  un- 
constitutional, Chicago  V.  Larned,  34  111.  203.  But  under  the  present 
constitution,  such  assessments  are  enforced.) 

Sec.  10.  The  General  Assembly  shall  not  impose  taxes  upon  muni- 
cipal corporations  or  the  inhabitants  or  property  therein  for  corporate 


810  STATE   TAXxVTION    SYSTEM ILLINOIS. 

purposes,  but  shall  require  that  all  taxation  of  property  within  the 
limits  of  the  corporation  shall  be  taxed  for  the  payment  of  debts  con- 
tracted under  the  authority  of  law,  such  tax  to  be  uniform  with  re- 
spect to  persons  and  property  within  the  jurisdiction  of  the  body  im- 
posing the  same.  Private  property  shall  not  be  liable  to  be  taken 
and  sold  for  the  payment  of  municipal  debts  of  municipal  corpora- 
tions. 

Art.  XIV.  (The  sections  deal  with  the  settlement  of  the  State's 
claim  on  the  Illinois  Central  Railroad  under  the  provisions  of  its 
charter  of  February  10,  1851.) 

Amendment  to  Constitution  reported  as  adopted  in  1916,  Art.  IX, 
Sec.   14: 

"From  and  after  the  date  when  this  section  shall  be  in  force,  the 
powers  of  the  General  Assembly  over  the  subject-matter  of  the  assess- 
ment of  personal  property  shall  be  as  complete  and  unrestricted  as  it 
would  be  as  if  sections  one  (1),  three  (3),  nine  (9),  and  ten  (10), 
of  this  article  of  the  Constitution  did  not  exist;  provided,  however, 
that  any  tax  levied  upon  personal  property  must  be  uniform  as  to 
persons  or  property  of  the  same  class  within  the  jurisdiction  of  the 
body  imposing  the  same,  and  all  exemptions  from  taxation  shall  be 
by  general  law,  and  shall  be  revocable  by  the  General  Assembly  at 
any  time." 


ADMINISTRATION.— The  State  Board  of  Equalization,  one  elected 
from  each  of  the  twenty-five  Congressional  districts  of  the  State  with 
the  State  Auditor,  not  only  equalizes  between  the  several  counties, 
but  also  assesses  the  operating  property  of  the  railroads  and  public 
utilities,  the  local  property  being  assessed  by  the  local  assessors. 
There  is  an  exception  in  the  case  of  the  Illinois  Central  Railroad, 
which,  under  its  original  charter  pays  7  per  cent  of  its  gross  earnings. 
In  its  equalization  between  the  counties  the  Board  is  subject  to  the 
restriction  that  the  total  of  such  increase  or  decrease  in  any  county 
may  not  exceed  10  per  cent  of  the  assessed  value  of  all  the  property 
in  the  State. 

(For  construction  of  the  powers  of  the  Board,  see  Chicago  Union 
Traction  Co.  r.  State  Board  of  Equalization,  114  Fed.  557,  207  U. 
S.  20,  supra,  Sec,  546.) 

In  the  counties  not  under  the  township  organization,  equalization 
between  the  taxpayers  of  counties  and  districts  is  made  by  the  Board 
of  County  Commissioners;  while  in  counties  under  the  township  or- 
ganization, other  than  Cook  County,  the  same  powers  vest  in  the 
Board  of  Review;  and  in  Cook  County,  including  Chicago,  there  is  a 
specially  constituted  Board  of  Review.  The  County  Treasurer  super- 
vises the  local  assessors. 


STATE   TAXATION    SYSTEM ILLINOIS.  811 

The  Governor,  Treasurer  and  Auditor  on  the  equalization  and  as- 
sessment of  property  ascertain  the  rate  of  tax  necessary  to  meet  the 
amount  of  taxes  levied  by  the  General  Assembly. 

RAILROADS. — Railroads,  except  the  Illinois  Central  Railroad,  are 
assessed  by  the  State  Board  of  Equalization  and  the  local  assessors, 
the  latter  assessing  all  real  estate  not  included  in  the  right  of  way 
of  railroad  track  and  all  personalty  except  rolling  stock.  The  State 
Board  assesses  the  railroad  track,  the  right  of  way  and  the  rolling 
stock,  apportioning  the  value  by  unit  rule  among  the  counties  where 
it  is  reapportioned  by  the  County  Clerk  among  the  townships,  etc.; 
but  the  "side  track"  is  assessed  where  it  is  located  by  the  State  Board 
and  is  not  so  apportioned.  (See  People  v.  Illinois  Northern  R.  R.  Co., 
248  111.  539    (1911.) 

The  State  Board  also  assesses  the  excess  value  of  capital  stock 
over  the  value  of  the  tangible  property,  if  there  be  any  such  excess. 

PUBLIC  UTILITIES. — Telegraph  and  telephone  companies  are  as- 
sessed in  the  same  manner  as  railroads. 

CORPORATIONS. — All  corporations,  including  public  utility  cor- 
porations, are  subject  to  the  General  Property  Tax,  and  business  cor- 
porations make  returns  in  the  same  manner  as  individuals.  The 
value  of  capital  stock,  if  any,  over  corporate  property,  is  assessed  by 
local  assessors.     People  v.  Federal  Securities  Co.,  255  111.  561. 

Shares  of  stock  of  foreign  corporations  are  assesged  to  shareholders, 
if  residents. 

BANKS. — Shares  in  State  and  national  banks  are  assessed  to  the 
shareholder  where  the  bank  is  located,  less  deductions  for  real  estate. 

INSURANCE  COMPANIES.— The  property  and  assets  of  life  in- 
surance companies  organized  under  the  laws  of  the  State,  are  as- 
sessed to  a  corporation  as  to  an  individual  person;  and  in  computing 
the  taxable  property,  the  value  of  the  real  property  taxed  is  deducted 
from  its  net  admitted  assets  above  liabilities  and  returned  to  the  in- 
surance commissioner. 

FOREIGN  CORPORATIONS.— Foreign  corporations  doing  business 
in  the  State  pay  the  State  one  hundred  dollars  for  the  privilege,  and 
are  subject  to  the  general  property  tax  upon  their  property. 

INHERITANCE  TAX.— The  inheritance  tax  is  at  the  rate  of  on© 
per  cent  when  the  person  is  a  parent,  or  husband,  or  wife,  brother  or 
sister,  wife,   widow  and   the  son   or   husband   of  a   daughter,   adopted 


812  STATE   TAXATION    SYSTEM — ILLINOIS. 

child  or  any  legitimate  lineal  descendant,  when  the  amount  is  $20,- 
000.00  and  over  up  to  $100,000.00.  The  property  passing  to  religious, 
educational  or  charitable  purposes  is  exempt.  In  other  cases,  the 
rate  of  tax  is  according  to  the  relationship  and  amount  of  the  in- 
heritance. The  law  applies  to  all  property  thus  passing  by  will  of 
testator's  where  the  deceased  is  a  resident;  and  if  a  non-resident,  to 
property  situated  within  the  State  at  the  time  of  death.  Shares  of 
stock  in  an  Illinois  corporation  at  the  time  of  death  are  subject  to 
the  tax.  This  law  was  sustained  by  the  Supreme  Court  of  U.  S. 
(Supra,  Sec.  516.)  For  construction  of  the  Act  see  Stein  v.  Meyers, 
253  111.  199. 

There  is  also  a  list  of  business  taxes,  licenses  and  fees  for  different 
occupations,  whether  corporations  or  individuals,  levied  by  the  State, 
counties  and  municipalities.  The  cities  and  villages  and  incorporated 
towns  are  given  authority  to  license  all  business  and  occupations,  in- 
cluding liquor  licenses. 

POLL  TAX.— While  there  is  no  State  or  county  poll  tax,  counties 
under  the  township  organization  may  levy  a  poll  tax  of  not  less  than 
one  dollar  nor  more  than  five  dollars  for  road  purposes;  and  such 
tax  may  be  paid  by  the  labor  system. 

EXEMPTIONS. — Exemptions  include  all  public  property  and  also 
all  investments  of  local  and  purely  public  charity,  and  all  church 
property  actually  and  exclusively  used  for  church  purposes  (as  to 
construction  excluding  passages,  see  First  Congregational  Church  v. 
Board  of  Review,  254  111.  220),  cemeteries  and  for  public  libraries, 
and  all  property  used  for  agricultural,  horticultural,  mechanical  and 
philanthropic  purposes,  when  not  used  for  public  profit,  and  all  mar- 
ket houses  and  the  property  of  drainage  districts. 

ASSESSMEJNTS. — County  and  city  taxes  are  paid  upon  the  same 
assessment  made  for  State  taxes. 

From  the  gross  amount  of  credit  the  taxpayer  may  deduct  from  his 
list  the  amount  of  all  bona  fide  debts  owing  by  him,  these  deductions 
being  verified  by  oath. 

Property  is  assessed  as  of  the  first  day  of  April;  real  estate  is 
assessed  once  every  four  years;  personal  property  is  assessed  annually. 
The  assessed  value  of  both  real  and  personal  property  fixed  by  the 
assessor  is  one-third  of  the  full  value  required  to  be  returned  by  the 
taxpayer. 

COLLECTIONS. — ^All  taxes,  State,  county  and  municipal,  are  paid  to 
the  same  collectors,  the  Sheriff  being  ex-ofl5cio  collectors  in  most  of  the 


STATE   TAXATION    SYSTEM — INDIANA.  813 

counties.  Personal  property  taxes  are  collected  by  distress  and  sale  of 
goods  and  chattels.  The  collector  receives  the  return  on  or  before  Janu- 
ary first  following  the  year  in  which  the  taxes  are  levied.  Taxes  on  real 
estate  become  delinquent  March  10th  of  the  year  following  the  as- 
sessment, and  the  land  may  be  sold  for  taxes  by  publication  of  the 
proper  notice  and  obtaining  judgment  and  order  of  sale  at  the  June 
term  of  the  County  Court.  Taxes  become  a  lien  upon  real  property 
upon  May  1st  of  the  year  in  which  the  taxes  are  levied,  and  interest 
is  charged  from  that  time. 

INDIANA 

Art  10,  Sec.  1.  The  General  Assembly  shall  provide,  by  law,  for  a 
uniform  and  equal  rate  of  assessment  and  taxation,  and  shall  prescribe 
such  regulations  as  shall  secure  a  just  valuation  for  taxation  of  all 
property,  both  real  and  personal,  excepting  such  only  for  municipal, 
educational,  literary,  scientific,  religious  or  charitable  purposes  as  may 
be  specifically  exempted  by  law. 


ADMINISTRATION.— A  State  Board  of  Tax  Commisioners,  three  of 
the  members  appointed  by  the  Governor  (not  more  than  two  of  same 
political  party),  with  the  Secretary  of  State  and  the  Auditor  of  State, 
ex  officio  members,  has  general  supervision  of  the  tax  administration 
in  the  State  and  of  equalization  of  county  assessments,  hearing  appeals 
from  the  County  Boards  of  Review.  The  board  also  makes  original 
assessment  of  the  operating  property  of  railroads,  telegraph,  telephone 
and  express  and  pipe  line  companies,  the  value  whereof  in  the  State 
being  determined  by  an  apportionment  of  the  total  mileage  and  the 
State  valuation  thus  ascertained  is  apportioned  to  the  counties,  where 
the  State  mileage  is  located. 

A  special  Tax  Commission  for  investigation  and  report  was  created 
in  1915.     (See  report.) 

The  general  property  tax  in  general  terms  is  applicable  to  all  property 
of  the  State,  individual  and  corporate  not  specially  exempted. 

The  County  Assessor  in  each  county  is  responsible  to  the  State  Tax 
Commissioner,  and  exercises  supervisory  authority  over  the  township 
assessors  with  power  to  make  assessments  where  the  County  Assessors 
fail  to  do  so. 

RAILROADS  AND  PUBLIC  UTILITIES.— Railroad  property,  includ- 
ing street  railroad  property,  that  is,  railroad  tracks  and  improvements 
thereon  and  rolling  stock,  and  telegraph,  telephone,  express  companies, 
sleeping  car  companies,  car  companies,  oil  and  gas  pipe  line  companies 
are  aesessed  by  the  State  Board  of  Tax  Commissioners  on  the  basis  of 


814  STATE   TAXATION    SYSTEM — INDIANA. 

the  market  value  of  the  stocks  and  bonds  less  the  value  of  real  estate 
and  tangible  personalty  taxed  locally  and  the  assessment  so  made  is 
apportioned  on  a  mileage  basis  to  the  assessment  districts  in  which 
the  property  is  located.  (The  taxation  of  interstate  railroads  sustained 
by  Supreme  Court,  Sec.  263  et  seq.,  supra.) 

Corporations  are  assessed  as  individuals  on  all  corporate  property, 
including  corporate  stock  and  franchises,  corporate  taxation  being  thus 
a  part  of  the  general  property  tax  system  of  the  State.  The  capital 
stock  is  listed  for  taxation  at  its  excess  value  over  franchises  and 
tangible  property. 

BANKS. — State  and  national  banks,  except  savings  banks,  are  as- 
sessed upon  their  real  estate,  and  such  assessment  is  deducted  from 
assessment  of  shares. 

INSURANCE  COMPANIES. — Foreign  insurance  companies  pay  a 
tax  of  $3.00  on  each  $100.00  excess  of  premiums  received  over  losses. 
Foreign  bridge  companies  are  taxed  on  their  gross  earnings  as  well  as 
on  property.  Also  a  special  tax  of  3  cents  per  ton  on  registered  ton- 
nage on  navigation  companies.  Freight  associations  pay  the  State  a 
sum  in  the  nature  of  an  excise  tax  equal  to  1  per  cent  of  the  amount 
fixed  by  the  Tax  Commission  after  deducting  the  value  of  real  estate. 

POLL  TAXES. — A  poll  tax  is  assessed  on  every  male  inhabitant  of 
the  State  between  the  age  of  21  and  50  years,  members  of  the  militia 
being  exempted.  The  amount  to  be  charged  on  each  poll  is  fixed  by  the 
General  Assembly  for  State  purposes  and  for  schools. 

INHERITANCE  TAX. — An  inheritance  tax  was  imposed,  by  Laws  of 
1913,  upon  intangible  or  tangible  property  within  the  State,  passing 
from  any  person  dying,  seized  or  possessed  thereof  while  a  resident  of 
the  State,  and  also  upon  tangible  property  within  the  State  where  the 
decedent  owner  was  a  non-resident  of  the  State  at  the  time  of  his 
death. 

The  exemptions  from  this  tax  include  all  property  transferred  to  any 
public  or  religious,  charitable  or  educational  purpose  within  the 
State.  The  rates  vary  with  the  degree  of  relationship  and  the  amount 
of  the  legacy  from  $1.00  where  the  devise  is  to  husband,  wife,  lineal 
issue,  lineal  ancestor  of  decedent,  l^^  per  cent  in  the  case  of  brother 
or  sister,  3  per  cent  in  the  case  of  brother  or  sister  of  a  father  or 
mother  of  descendant  thereof,  4  per  cent  in  the  case  of  a  brother  or 
sister  of  the  grandfather  or  grandmother,  and  5  per  cent  in  the  case 
of  a  stranger  in  blood.     There  is  an  exemption  of  $10,000  when  the 


STATE   TAXATION    SYSTEM IOWA.  815 

transfer  is  to  the  widow,  and  $2000  to  each  of  the  other  persons  in 
the  first  class.  The  tax  is  payable  to  the  Treasurer  of  the  county  and 
the  Circuit  Court  or  the  court  having  probate  jurisdiction  determines 
the  amount  and  has  jurisdiction  of  the  inheritance  tax.  For  details 
see  Burns  Annotated  Statute,  Sees.  10143,  Act  of  1915. 

The  owner  of  real  estate  may  have  mortgage  debt  thereon  on 
March  1st,  not  exceeding  $700.00,  and  .not  greater  than  one-half  of 
assessed  value,  deducted  from  assessed  valuation  of  mortgaged  prem- 
ises.    (See  Smith  v.  Indiana,  158  Ind.  543,  supra.) 

ASSESSMENTS. — The  assessment  of  real  estate  is  made  quadren- 
nially, and  the  personal  assessment  is  made  annually  as  of  March  1st. 

EXEMPTIONS. — Exemptions  include  public  property  and  that  held 
for  charitable,  educational  and  religious  uses,  bonds  of  the  State  and 
municipalities  of  the  State  including  local  improvement  bonds,  also 
the  property  of  Greek  letter  fraternities,  of  schools  and  colleges.  Also 
registered  bloodhounds  for  detecting  crime  or  apprehending  crim- 
inals. 

COLLECTIONS. — Taxes  attach  as  a  lien  on  March  1,  and  penalties 
attach  on  first  Monday  in  May.  Unpaid  taxes  are  collectible  there- 
after by  distress  and  sale  of  personalty.  Sales  of  real  estate  for 
taxes,  are  second  Monday  in  February,  and  the  owner  has  two  years 
thereafter  in  which  to  redeem,  and  if  not  redeemed,  deed  is  made  to 
purchaser  by  county  auditor. 

IOWA 

Art.  I,  Sec.  6.    The  General  Assembly  shall  not  grant  to  any  citizen, 

or  class  of  citizens,   privilges   or   immunities,   which,  upon  the  same 
terms,  shall  not  equally  belong  to  all  citizens. 

Art.  Ill,  Sec.  30.  The  General  Assembly  shall  not  pass  local  or  spe- 
cial laws  for  the  assessment  and  collection  of  taxes  for  State,  county 
or  road  purposes. 

Art.  VTI,  Sec.  7.  Every  law  which  imposes,  continues  or  revises  a 
tax  shall  distinctly  state  the  tax  and  object  to  which  it  is  to  be  ap- 
plied, and  it  shall  not  be  sufficient  to  refer  to  any  other  law  to  fix 
such  tax  or  object. 

Art.  VIII,  Sec.  2.  The  property  of  all  corporations  for  pecuniary 
profit  shall  be  subject  to  taxation,  the  same  as  that  of  indiriduals. 


ADMINISTRATION.— The  State  executive  council  composed  of  the 
Governor,  Secretary,  Auditor  and  Treasurer  of  the  State  constitutes 
the  State  Board  of  Review  and  acts  as  a  State  Board  of  Equalization 
and  also  as  an  assessment  board  for  certain  classes  of  property. 


816  STATE  TAXATION   SYSTEM — IOWA.  * 

The  local  assessing  officers  are  city  and  township  assessors,  town- 
ship trustees  and  city  counsellors  which  act  as  boards  of  review  and 
as  county  boards  of  superyisors  which  act  as  county  boards  of  reriew 
and  equalization. 

RAILROADS  AND  PUBLIC  UTILITIES.— The  State  Board  of  Re- 
view assesses  public  utilities  including  railroads,  and  in  assessing 
such  property,  takes  into  consideration  the  gross  earnings  appor- 
tioned to  the  State,  proceeding  generally  upon  the  unit  rule. 

CORPORATIONS. — Corporations  are  assessed  by  locarassessors  on 
their  property,  the  shares  of  stock  being  exempt.  The  excess  of  the 
Yalue  of  the  capital  stock  of  the  corporation,  however,  over  and  above 
its  tangible  property  is  assessed  and  taxable  to  the  company.  There 
are  no  special  corporation  taxes  except  on  insurance  companies.  For- 
eign corporations  pay  taxes  upon  their  property  as  domestic. 

BANKS. — Shares  in  banks  are  assessed  to  holders  at  office  of  bank, 
less  value  of  real  estate. 

MERCHANTS  AND  MANUFACTURERS.— Merchants  and  manu- 
facturers are  assessed  upon  the  average  amount  of  stock  held  during 
the  year. 

Grain,  ice  and  coal  dealers  are  assessed  on  the  average  amount  of 
capital  used  during  the  year. 

ASSESSMENT. — All  property  is  subject  to  taxation  at  a  value  de- 
fined to  be  the  value  in  the  market  in  the  ordinary  course  of  trade. 
After  it  is  assessed  on  such  basis,  it  is  then  assessed  at  25  per  cent 
of  such  actual  value  except  that  credits,  monies,  corporation  shares, 
stocks,  cash,  bank  notes,  notes  secured  by  mortgage,  accounts,  con- 
tracts for  cash,  bills  of  exchange,  judgments,  choses  in  action,  etc., 
are  assessed  at  their  actual  cash  value  and  taxed  on  a  uniform  basis 
of  five  mills  on  the  dollar. 

TAX  RATE. — The  General  Assembly  fixes  the  total  amount  of 
money  to  be  raised  for  State  purposes.  The  Executive  Council  de- 
termines the  rate  of  per  cent  on  the  valuation  of  the  taxable  property 
necessary  to  raise  the  amount  fixed  by  the  General  Assembly.  The 
rate  so  determined  is  levied  by  the  County  Boards  of  Supervisors. 
By  Act  of  1917,  in  all  taxing  districts  of  the  State  wherever  the 
people  are  authorized  to  determine  by  vote,  or  the  officers  are  au- 
thorized to  estimate  or  determine  a  rate  of  taxation  required  for  any 
public  purpose,  such  rate  shall  in  all  cases  be  estimated  and  based 
upon  the  adjustable  and  taxable  valuation  of  such  district  for  the 
preceding  calendar  year. 


STATE   TAXATION    SYSTEM — IOWA.  817 

INHERITANCE  TAX. — The  graduated  inheritance  tax  is  in  force, 
the  amount  to  be  paid  depending  upon  amount  received  from  a  dece- 
dent and  the  degree  of  relationship  of  the  inheritor  to  the  decedent. 
The  tax  is  paid  to  the  State  Treasurer  by  the  executors  and  admin- 
istrators, and  is  a  lien  upon  the  estate.  No  discount  is  allowed  for 
prompt  payment;  but  unless  paid  within  eighteen  months,  interest  at 
the  rate  of  8  per  cent  is  added  from  the  date  of  the  death  of  the 
decedent. 

This  tax  applies  to  the  estates  of  all  deceased  persons,  whether  in- 
habitants of  the  State  or  not,  and  whether  the  property  be  real  or 
personal,  tangible  or  intangible,  when  the  property  is  at  the  time 
of  death,  or  thereafter  becomes,  subject  to  the  jurisdiction  of  the 
courts  of  the  State  for  purposes  of  distribution,  or  the  property  of  any 
decedent  domiciled  within  the  State  at  the  time  of  the  death  of  such 
decedent,  even  though  the  property  of  such  decedent  so  domiciled 
■was  situated  without  the  State,  except  real  estate  located  outside  of 
the  State  passing  in  fee  to  the  decedent  owner.  A  tax  of  5  per  cent 
in  case  of  residents  is  made  20  per  cent  when  the  heirs  and  bene- 
ficiaries are  non-residents;  except  when  they  are  brothers  or  sisters, 
the  charge  is  10  per  cent. 

INSURANCE  COMPANIES.— Insurance  companies  other  than  fra- 
ternal, beneficial  and  county  mutual  companies  are  taxed  upon  their 
annual  gross  receipts.     Many  occupations  pay  a  license  tax. 

The  Board  of  Supervisors  have  power  to  remit  the  taxes,  in  whole 
or  in  part,  on  property  destroyed  by  fire  if  such  properties  are  not 
covered  by  insurance. 

POLL  TAX. — There  is  a  county  poll  tax  of  fifty  cents  on  each  male 
resident.  Cities  and  towns  have  the  power  to  provide  that  able- 
bodied  male  residents  shall  work  two  days  on  the  highways,  or,  in  de- 
fault of  such  work,  may  be  penalized  not  to  exceed  two  or  four  dollars. 

COLLECTION. — Taxes  are  payable  between  the  first  Monday  in  Jan- 
uary and  the  first  day  of  March,  or  one-half  may  be  paid  before 
March,  and  the  remaining  half  before  the  first  day  of  Set)tember.  If 
at  least  one-half  is  not  paid  before  the  first  day  of  April,  the  whole 
amount  becomes  delinquent  as  of  March  1st.  In  case  the  second  in- 
stallment is  not  paid  before  the  first  of  October,  then  it  becomes  de- 
linquent on  the  first  day  of  September.  After  a  tax  becomes  de- 
linquent, it  draws  1  per  cent  a  month.  All  taxes  are  a  lien  on  prop- 
erty and  may  be  collected  by  sale. 


818  STATE   TAXATION    SYSTEM — KANSAS. 

Land  sold  for  taxes  may  be  redeemed  within  three  years  upon  the 
payment  of  the  purchase  price,  plus  accrued  taxes  and  interest  added 
as  penalty. 

KANSAS 

Art.  XI,  Sec.  1.  "The  legislature  shall  provide  for  a  uniform  and 
equal  rate  of  assessment  for  taxation;  but  all  property  used  ex- 
clusively for  State,  county,  municipal,  literary,  educational,  scientific, 
religious,  benevolent  and  charitable  purposes,  and  personal  property 
to  the  amount  of  at  least  $200,00  for  each  family  shall  be  exempt 
from  taxation." 

"Sec.  2.  The  legislature  shall  provide  for  taxing  the  notes  and 
bills,  discounted  or  purchased,  moneys,  loans,  or  other  properties, 
effects,  or  dues  of  every  description  (without  deduction)  of  all  banks 
now  existing  or  hereafter  to  be  created,  and  all  bankers,  so  that  all 
property  employed  in  banking  shall  always  bear  the  burden  of  taxa- 
tion equal  to  that  imposed  upon  property  of  individuals." 

Sec.  3.  (The  proceeds  of  government  land  grants  and  of  escheats 
to  be  a  perpetual  school  fund.) 

Sec.  7.      (Provides   for   taxation   to  support   the   State   University.) 


ADMINISTRATION.— The  State  Tax  Commission,  composed  of  three 
commissioners  appointed  by  the  Governor  for  a  term  of  four  years, 
also  constitutes  a  State  Board  of  Equalization.  It  assesses  the  rail- 
roads, and  the  valuations  fixed  by  the  State  Board  must  be  used  as  the 
basis  for  local  taxes.  It  has  general  supervision  over  the  assessment 
and  collection  of  taxes  and  acts  as  a  Board  of  Assessors  for  railroad 
property. 

The  County  Board  of  Equalization  equalizes  the  assessments  of  real 
property  in  each  county,  and  an  appeal  lies  therefrom  to  the  State 
Board  of  Equalization.  The  State  Tax  Commission  determines  the 
rate  of  taxation  for  State  purposes. 

RAILROADS. — Railroads  pay  the  general  property  tax  locally  for 
both  State  and  local  taxation.  Assessment  of  the  property  (other 
than  local  real  estate)  is  made  by  the  State  Tax  Commission.  The 
real  estate  not  used  in  daily  operation  is  assessed  locally. 

In  the  assessment  by  the  Board,  the  intangible  value  is  included  in 
the  average  value  fixed,  and  apportioned  to  the  counties. 

Public  utilities  (other  than  express  companies),  see  supra,  are  as- 
sessed in  same  manner. 

CORPORATE  TAXATION.— Domestic  corporations  pay  a  graduated 
annual  tax  ranging  from  $10.00  where  the  capital  is  $10,000.00  or  less, 
to  $2,500.00  on  one  whose  paid-up  capital  stock  exceeds  $5,000.00.    This 


STATE   TAXATION    SYSTEM KANSAS.  819 

tax  is  supplemental  to  the  general  property  tax.  Foreign  corporations 
authorized  to  do  business  in  the  State,  pay  the  same  tax  based  upon 
the  proportion  of  the  issued  capital  stock  of  the  company  devoted  to 
its  Kansas  business,  this  proportion  being  determined  by  the  amount 
of  its  property  located  and  used  in  the  State.  For  decisions  of  Su- 
preme Court  of  United  States  concerning  this  tax,  see  supra,  Sees. 
199,  254.  Failure  to  file  the  annual  report  and  pay  the  fee  may  sub- 
ject the  corporation  to  a  forfeiture  of  its  charter  or  of  authority  to  do 
business  in  the  State. 

Holders  of  shares  in  domestic  and  foreign  companies,  are  exempt, 
when  the  capital  stock  is  listed  by  the  corporation  for  taxation  in  the 
State.  Holders  of  bonds  in  both  domestic  and  foreign  companies  are 
taxed   (in  theory)   upon  such  property. 

BANKS. — The  stock  in  banking  institutions  is  taxed  to  the  holders. 
From  the  valuation  of  stock  and  surplus  is  deducted  the  value  of  cor- 
porate property,  not  only  in  the  State,  but  located  out  of  the  State, 
if  there  taxed. 

POLL  TAXES.— There  is  no  State  poll  tax,  but  in  townships  there 
is  a  poll  tax  on  males  between  the  ages  of  twenty-one  and  fifty  for 
the  benefit  of  the  public  roads,  commuted  by  labor  in  lieu  of  a  tax. 
There  is  no  county  poll  tax. 

COUNTY  LICENSES. — The  counties  do  not  receive  any  revenue 
from  business  companies,  licenses  or  fees,  but  in  cities,  the  city  coun- 
cil may  levy  on  adult  males  of  not  more  than  $1.50,  and  may  also 
classify  lawful  corporations  and  levy  a  license  tax  thereon.  See  151 
S.  W.  Rep.  932,  holding  a  license  tax  of  $300  when  the  profits  of  the 
business  was  only  $500,  was  unreasonable  and  oppressive. 

COLLECTION. — The  general  property  is  assessed  as  of  September 
1st  for  the  following  year  and  taxes  are  due  on  March  1st.  There  is 
provision  for  retrospective  assessments  of  omitted  property.  Taxes 
not  paid  by  December  1st  pay  6  per  cent  additional.  The  Sheriff  may 
levy  on  personal  property  and  may  levy  on  and  sell  real  estate;  and 
if  there  is  no  other  purchaser  the  State  may  purchase  subject  to  right 
of  redemption  within  two  years,  by  paying  the  purchase  money  with 
interest  at  10  per  cent  and  15  per  cent  damages  and  costs.  Persons 
of  unsound  mind  and  married  women  have  five  years  after  notice  of 
sale  to  redeem,  when  sale  is  made  to  a  purchaser  other  than  the 
State. 

ASSESSMENT. — There  is  but  one  assessment  for  State,  county, 
and  municipal  purposes;   and  the  property  included  and  exempt,  and 


820  STATE   TAXATION    SYSTEM KANSAS. 

the    method    of   assessment    and    equalization    are    the    same    for    the 
county  as  for  tlie  State,  and  it  is  also  the  same  for  municipalities. 

By  Act  of  1917,  oil  and  gas  leases,  wells  and  equipment  are  assessed 
as  personal  property. 

EXEMPTIONS. — The  constitutional  provision*  as  to  exemptions  was 
held  not  to  be  exclusive,  but  the  legislature  can  provide  other  ex- 
emptions or  increase  the  personal  property  exemptions  of  each  family 
so  long  as  the  exempt  property  benefits  the  public  in  a  way  different 
from  other  property.     (See  Wheeler  v.  Wightman,  96  Kan.  50.) 

The  established  exemptions  include,  in  addition  to  all  public  prop- 
erty, churches  and  school  houses,  moneys  and  credits  of  universities, 
colleges,  academies,  public  libraries,  family  libraries,  and  school  books 
up  to  fifty  dollars;  Grand  Army  Post  buildings;  reserve  and  emer- 
gency funds  of  fraternal  beneficiary  societies;  building  and  one-half 
acre  of  land  used  exclusively  by  college  societies  as  library  halls  or 
dormitories. 

State,  county,  city,  school,  district  and  municipal  bonds  of  the 
State  of  Kansas  need  not  be  listed  for  taxation.  Debts  to  specified 
extent  may  be  deducted  from  credits  in  returns. 

MORTGAGE  TAXATION.— The  mortgage  registration  tax  of  1915 
was  adjudged  invalid,  as  it  was  held  to  be  a  property  tax,  and  there 
was  no  power  of  classification  contained  in  the  Constitution.  (See 
Wheeler  v.  Wightman,  supra.) 

INHERITANCE  TAX.— The  Inheritance  Tax  of  1915  exempts  the 
husband  and  wife,  lineal  ancestors  or  descendants,  adopted  child  or 
descendants  of  an  adopted  child,  or  widow  of  a  son,  or  husband  of  a 
deceased  daughter  are  exempt,  and  also  bequests  to  charitable,  educa- 
tional and  religious  institutions.  Shares  of  brothers  or  sisters  of  de- 
ceased are  exempted  up  to  $5000.00;  and  all  other  distributees  are 
taxed  on  the  full  value  of  their  shares  at  a  rate  varying  according  to 
amount.  Taxes  are  assessed  on  the  distributees  of  all  property  lo- 
cated in  the  State,  whether  owned  by  the  inhabitants  or  not. 

A  tax  is  assessed  on  the  distributees  of  all  property  located  within 
the  State,  whether  owned  by  inhabitants  thereof  or  not,  and  is  also 
imposed  on  non-residents,  owning  stocks  in  Kansas  corporations.  The 
tax  applies  to  all  property  within  the  jurisdiction  of  the  State,  whether 
belonging  to  the  inhabitants  of  the  State  or  not,  passing  by  will  or 
intestacy.  The  Tax  Commission  determines  the  amount  of  tax  du9 
upon  any  estate,  and  certifies  the  amount  to  the  Probate  Court;  and 
the  tax  is  paid  to  the  State  Treasurer. 


STATE   TAXATION    SYSTEM — KENTUCKY.  821 

By  Act  of  1917,  tlie  Inheritance  Tax  Law  was  amended  as  to  ad- 
ministration of  tlie  act. 

EXPRESS  COMPANIES. — Express  companies  pay  an  excise  tax  of 
4  per  cent  of  their  gross  receipts,  assessed  by  State  Tax  Commission, 
for  business  done  within  the  State  in  addition  to  the  taxes  on  tangi- 
ble property. 

INSURANCE  COMPANIES. — Insurance  companies  organized  under 
the  laws  of  another  State  pay  2  per  cent  on  gross  premiums  collected, 
while  those  organized  under  the  laws  of  a  foreign  State  pay  4  per 
cent  on  the  gross  premiums  collected  in  the  State;  and  all  insurance 
companies,  domestic  or  foreign,  doing  business  in  the  State,  pay  an 
annual  tax  of  fifty  dollars  to  the  State  Treasurer  for  the  State  school 
fund. 

MERCHANTS  AND  MANUFACTURERS.— By  Act  of  1917,  the  situs 
for  taxing  the  property  of  merchants  and  manufacturers  is  the  county 
where  such  business  of  manufacturing  is  carried  on;  and  if  there  is 
more  than  one  place  of  business  in  the  State,  each  place  shall  be 
taxed.  Merchants  and  manufacturers  who  are  non-residents  or  for- 
eign corporations  are  assessed  on  the  same  basis  as  residents  of  the 
same  State  or  domestic  corporations. 

COLLECTIONS. — Taxes  for  State  purposes,  as  well  as  township  and 
county  taxes  are  collected  by  the  county  treasurer.  Taxes  become  a 
lien  on  property  on  November  1st  of  each  year.  They  may  be  paid  in 
installments,  one-half  on  or  before  December  20th,  and  one-half  on  or 
before  June  20th;  but  if  the  first  installment  is  not  paid  when  due, 
the  whole  tax  becomes  delinquent  and  may  be  collected  at  once,  to- 
gether with  a  penalty  of  5  per  cent  on  the  first  installment.  All  taxes 
delinquent  after  June  20th  involve  an  additional  penalty  of  5  per 
cent.  The  taxpayer  pays  both  installments  in  December,  but  re- 
ceived a  rebate  of  5  per  cent,  on  the  second  installment. 

Delinquent  personal  taxes  are  collected  by  the  Sheriff  by  seizure 
and  sale  of  property. 

By  Act  of  1917,  the  Tax  Commission  is  authorized  to  correct  errors 
in  the  assessment,  and  also  to  direct  the  refunding  of  taxes  shown  to 
have  been  unlawfully  collected.  Valuations,  however,  are  not  con- 
sidered in  that  connection  as  erroneous  assessments. 

KENTUCKY 

(Constitution  as  amended  in  1915.) 
Sec.   170.     There   shall    be    exempt    from    taxation    public    property 
used  for  public  purposes;   places  actually  used  for  religious  worship, 


822  STATE   TAXATION    SYSTEM — KENTUCKY. 

with  the  grounds  attached  thereto  and  used  and  appurtenant  to  houses 
of  worship,  not  exceeding  one-half  acre  in  cities  or  towns,  and  not 
exceeding  two  acres  in  the  country;  places  of  burial  not  held  for  pri- 
vate or  corporate  profit,  institutions  of  purely  public  charity,  and  in- 
stitutions of  education  not  used  or  employed  for  gain  by  any  person 
or  corporation,  and  the  income  of  which  is  devoted  solely  to  the 
cause  of  education;  public  libraries,  their  endowments,  and  the  in- 
come of  such  property  as  is  used  exclusively  for  their  maintenance; 
all  parsonages  or  residences  owned  by  any  religious  society,  and  oc- 
cupied as  a  home,  and  for  no  other  purpose,  by  the  minister  of  any 
religion,  with  not  exceeding  one-half  acre  of  ground  in  towns  and 
cities  and  two  acres  of  ground  in  the  country  appurtenant  thereto; 
household  goods  and  other  personal  property  of  a  person  with  a  fam- 
ily, not  exceeding  $250  in  value;  crops  grown  in  the  year  in  which 
the  assessment  is  made,  and  in  the  hands  of  the  producer;  and  all 
laws  exempting  or  commuting  property  from  taxation  other  than 
the  property  above  mentioned  shall  be  void.  The  General  Assembly 
may  authorize  any  incorporated  city  or  town  to  exempt  manufactur- 
ing establishments  from  municipal  taxation,  for  a  period  not  exceed- 
ing five  years,  as  an  inducement  to  their  location. 

Sec.  172.  All  property,  not  exempted  from  taxation  by  this  Con- 
stitution, shall  be  assessed  for  taxation  at  its  fair  cash  value,  esti- 
mated at  the  price  it  would  bring  at  a  fair  voluntary  sale;  and  any 
officer  or  other  person  authorized  to  assess  values  for  taxation,  who 
shall  commit  any  willful  error  in  the  performance  of  his  duty,  shall 
be  deemed  guilty  of  misfeasance,  and  upon  conviction  thereof  shall 
forfeit  his  office,  and  be  otherwise  punished,  as  may  be  provided  by 
law. 

Sec.  174.  All  property,  whether  owned  by  natural  persons  or  cor- 
porations, shall  be  taxed  in  proportion  to  its  value,  unless  exempted 
by  this  Constitution;  and  all  corporate  property  shall  pay  the  same 
rate  of  taxation  as  is  paid  by  individual  property.  Nothing  in  this 
Constitution  shall  be  construed  to  prevent  the  General  Assembly 
from  providing  for  taxation  based  on  income,  licenses  or  franchises. 

Sec.  175.  The  power  to  tax  property  shall  not  be  surrendered  or 
suspended  by  any  contract  or  grant  to  which  the  commonwealth  shall 
t)e  a  party. 

Sec.  180.  The  General  Assembly  may  authorize  the  counties,  citie3 
or  towns  to  levy  a  poll  tax  not  exceeding  $1.50  per  head.     .     .     . 

Sec.  181.  The  General  Assembly  shall  not  impose  taxes  for  the 
purposes  of  any  county,  city,  town,  or  other  municipal  corporation 
but  may,  by  general  laws,  confer  on  the  proper  authorities  thereof,  re- 
spectively, the  power  to  assess  and  collect  taxes.  The  General  As- 
sembly may,  by  general  laws  only,  provide  for  the  payment  of  license 
fees  on  franchises,  stock  used  for  breeding  purposes,  the  various 
trades,  occupations  and  professions,  or  a  special  or  excise  tax;  and 
may,  by  general  laws,  delegate  the  power  to  counties,  towns,  cities 
and  other  municipal  corporations,  to  impose  and  collect  license  fees 
on  stock  used  for  breeding  purposes,  on  franchises,  trades,  occupa- 
tions, and  professions.     And  the  General  Assembly  may,  by  general 


STATE    TAXATION    SYSTEM — KENTUCKY.  823 

laws  only,  authorize  cities  or  towns  of  any  class  to  provide  for  taxa- 
tion for  municipal  purposes  on  personal  property,  tangible  and  in- 
tangible, based  on  income,  licenses  or  franchises,  in  lieu  of  an  ad 
valorem  tax  thereon:  Provided,  Cities  of  the  first  class  shall  not  be 
authorized  to  omit  the  imposition  of  an  ad  valorem  tax  on  such  prop- 
erty of  any  steam  railroad,  street  railway,  ferry,  bridge,  gas,  water, 
heating,  telephone,  telegraph,  electric  light,  or  electric  power  com- 
pany. 

Sec.  182.  Nothing  in  this  Constitution  shall  be  construed  to  pre- 
vent the  General  Assembly  from  providing,  by  law,  how  railroads 
and  railroad  property  shall  be  assessed  and  how  taxes  thereon  shall 
be  collected.  And,  until  otherwise  provided,  the  present  law  on  said 
subject  shall  remain  in  force. 

"The  General  Assembly  shall  provide  by  law  an  annual  tax,  which, 
with  other  resources,  shall  be  sufficient  to  defray  the  estimated  ex- 
penses of  the  commonwealth  for  each  fiscal  year.  Taxes  shall  be 
levied  and  collected  for  public  purposes  only,  and  shall  be  uniform 
upon  all  property  of  the  same  class  subject  to  taxation  within  the 
territorial  limits  of  the  authority  levying  the  tax;  and  all  taxes  shall 
be  levied  and  collected  by  general  laws. 

"The  General  Assembly  shall  have  power  to  divide  property  into 
classes  and  to  determine  what  class  or  classes  of  property  shall  be 
subject  to  local  taxation.  Bonds  of  the  State  and  of  counties,  muni- 
cipalities, taxing  and  school  districts  shall  not  be  subject  to  taxation." 

(The  amendment  contains  the  further  provision  that  any  law  en- 
acted by  the  General  Assembly  in  the  classification  of  property,  and 
providing  a  lower  rate  on  personal  property,  tangible  or  intangible, 
and  upon  real  estate,  should  be  subject  to  the  referendum  power  of 
the  people,  which  was  declared  to  apply  only  to  this  amended  sec- 
tion. This  referendum  may  be  demanded  against  any  one  or  more 
items  of  any  such  act,  and  the  veto  power  of  the  Governor's  does  not 
apply  thereto.) 


TAX  COMMISSIONS.— A  State  Tax  Commission,  consisting  of  three 
members,  the  Auditor  of  the  State  together  with  two  members  ap- 
pointed by  the  Governor  with  the  consent  of  the  Senate,  one  from 
each  of  the  two  dominant  political  parties,  was  established  in  1917, 
and  is  charged  with  the  general  supervision  of  the  tax  system  and 
with  the  assessment  of  public  utilities. 

CLASSIFICATION  LEGISLATION.— The  legislation  enacted  in 
1917,  under  this  classification  amendment,  and  which  is  to  be  sub- 
mitted to  a  referendum  vote  of  the  people,  may  be  summarized  as 
follows: 

Bonds  of  the  United  States.  State  of  Kentucky,  counties,  and  muni- 
cipalities  thereof,  are  exempt  from  all   taxation. 

Real  estate  comprising  land  and  improvements,  is  ta.xable  for  both 


824  STATE  TAXATION   SYSTEM — KENTUCKY. 

State  and  local  purposes  at  forty  cents  on  each  $100.00  valuation  for 
the  State,  and  local  rates  for  localities. 

Stocks  of  corporations  having  more  than  25  per  cent  of  their  tax- 
able assets  in  Kentucky,  are  exempt  froin  all  taxation.  Bonds  and 
stocks  other  than  above,  mortgages,  notes,  accounts,  cash  in  hand, 
agricultural  and  manufacturing  machinery,  raw  material,  products  in 
course  of  manufacture  are  subject  to  State  taxes  only  at  the  rate  of 
40  cents  on  each  $100  valuation.  Mortgages  running  over  five  years, 
subject  to  an  additional  registration  fee,  when  recorded,  of  20  cents 
on  each  $100.  Bank  deposits  of  individuals,  subject  to  taxation  for 
State  purposes  only  of  10  cents  for  each  $100,  may  be  paid  by  the 
bank. 

Live  stock  is  subject  to  State  tax  of  10  cents  on  each  $100  valua- 
tion, and  local  tax  at  the  rate  fixed  by  local  taxing  authorities. 

Tangible  personal  property  other  than  above,  such  as  merchandise, 
building  material,  vehicles,  steamboats,  liquors  not  in  government 
warehouses,  household  appurtenances,  etc.,  will  be  taxable  for  both 
State  and  local  purposes  at  40  cents  on  each  $100  valuation  in  the 
State,  and  at  local  rates  for  localities. 

Public  utility  corporations  pay  taxes  as  individuals  on  the  classes 
of  property  owned  and  on  their  franchises,  which  are  valued  for  as- 
sessment by  the  State  Tax  Commission.  Franchises  are  taxable  for 
both  State  and  local  purposes  40  cents  for  each  $100  valuation  for  the 
State,  and  at  local  rates  for  localities. 

Private  corporations  are  taxed  on  their  properties  as  individuals, 
there  being  an  annual  occupation  tax  of  50  cents  on  each  $100  of  au- 
thorized capital. 

Banks  and  trust  companies  are  taxable  for  both  State  and  local  pur- 
poses on  the  valuation  of  their  shares  by  the  State  Tax  Commission, 
and  on  their  real  estate  and  tangible  property  by  local  assessors,  the 
taxes  whereon  are  deducted  from  the  total  valuation  of  their  shares. 

(See  Reports  of  Special  Tax  Commission  to  the  Legislature  of  Ken- 
tucky, 1913;  also  Report  of  the  Committee  on  Tax  Reform  of  Louis- 
ville Commercial  Organization,  1915;  also  Bulletin  of  National  Tax 
Association,  Vol.  2,  p.  263;  also  Report  of  U.  S.  Commissioner  of  Cor- 
porations, Part  VI,  March  15,  1915,  pp.  154  to  183.) 

RAILROADS,  ETC. — ^Railroads,  Express  companies,  telegraph  and 
telephone  companies  are  assessed  by  the  State  Board  upon  the  value 
of  their  franchise,  which  value  is  determined  by  subtracting  from  the 
value  of  the  capital  stock  the  value  of  all  tangible  property  otherwise 


STATE  TAXATION   SYSTEM — KENTUCKY.  825 

assessed.  The  tangible  property  is  assessed  by  local  officers  subject 
to  the  general  property  tax.  Domestic  companies  doing  business  en- 
tirely without  the  State  pay  a  State  license  tax  of  1  per  cent  upon  the 
authorized  amount  of  capital  stock  in  lieu  of  all  other  taxes  within 
the  State.  The  shares  of  foreign  companies  not  owning  property 
within  the  State  are  taxed  to  the  holders. 

INHERITANCE  TAX.— In  1916  the  former  collateral  inheritance 
tax  was  made  a  tax  both  upon  direct  and  collateral  inheritances,  the 
primary  rate  varying  from  1  per  cent  on  property  passing  to  the 
husband  and  wife,  lineal  ancestors  or  descendants,  or  adopted  child, 
to  5  per  cent  in  case  of  collateral  heirs,  strangers  and  bodies  politic 
or  corporate.  Property  bequeathed  to  municipal  corporations  for  pub- 
lic purposes  is  exempt;  and  in  case  of  widows  and  each  minor  child 
the  exemption  is  $10,000;  for  other  classes  of  heirs  the  exemption  is 
$500;  on  estates  in  excess  of  $25,000  the  rate  progresses  from  li/^ 
to  three  times  the  primary  rate  to  the  excess  over  $25,000.  All  cor- 
porations, domestic  and  foreign,  pay  an  annual  license  tax  of  30  cents 
on  each  $1000  which  is  assessed  on  the  basis  of  property  owned  and 
business  done  in  the  State. 

The  tax  applies  to  all  property  passing  by  will  or  intestacy  either 
of  any  person  who  died  while  a  resident  of  the  State;  or  if  the  de- 
ceased was  a  non-resident,  it  also  applies  to  any  property  within  the 
State. 

POLL  TAXES. — The  Stat©  does  not  share  in  the  poll  taxes  which 

are  levied  by  the  counties  both  in  a  money  levy  not  to  exceed  $1.50 

to  be  applied  for  the  maintenance  of  public  roads  and  bridges  and 
also  of  work  on  the  road. 

The  exemptions  are  set  forth  in  the  Constitution,  Sec.  170. 
Counties  and  cities  do  not  share  in  the  inheritance  tax  or  special 
corporation  tax. 

COLLECTIONS. — Taxes  are  due  on  March  1st,  assessment  having 
been  made  as  of  September  1st  of  the  preceding  year.  The  sheriff 
is  tax  collector  of  State  and  county  taxes,  municipalities  selecting 
their  own  tax  collector.  Taxes  are  a  lien  on  real  estate  from  date 
of  assessment.  A  penalty  of  6  per  cent  is  imposed  for  failure  to  pay 
taxes  by  December  1st.  The  sheriff  may  levy  on  personal  property;  and 
if  there  be  no  personal  property,  he  may  levy  on  real  estate,  and  the 
State  may  purchase  if  there  is  no  other  purchaser.  Redemption  may 
be  made  within  two  years  by  paying  purchase  money  with  interest  at 


826  STATE  TAXATION   SYSTEM — LOUISIANA. 

the  rate  of  10  per  cent  with  15  per  cent  damages  and  costs.  Those 
under  disabilities  have  one  year  after  removal  of  disability.  Special 
provision  is  made  in  case  of  guardian  and  married  women,  after  notice 
of  sale,   to  redeem. 

LOUISIANA 

Constitution  of  1898.  Art.  224.  The  taxing  power  may  be  exer- 
cised by  the  General  Assembly  for  State  purposes,  and  by  parishes 
and  municipal  corporations  and  public  boards,  under  authority  granted 
to  them  by  the  General  Assembly,  for  parish,  municipal  and  local  pur- 
poses, strictly  public  in  their  nature. 

Art.  225.  Taxation  shall  be  equal  and  uniform  throughout  the  ter- 
ritorial limits  of  the  authority  levying  the  tax,  and  all  property  shall 
be  taxed  in  proportion  to  its  value,  to  be  ascertained  as  directed  by 
law;  provided  the  assessment  of  all  property  shall  never  exceed  the 
actual  cash  value  thereof;  and  provided,  further,  that  the  taxpayers 
shall  have  the  right  of  testing  the  correctness  of  their  assessments 
before  the  courts  of  justice.  In  order  to  arrive  at  this  equality  and 
uniformity,  the  General  Assembly  shall,  at  its  first  session  after  the 
adoption  of  this  Constitution,  provide  a  system  of  equality  and  uni- 
formity in  assessments  based  upon  the  relative  value  of  property  in 
different  portions  of  the  State.  The  valuation  put  upon  property 
for  the  purposes  of  State  taxation  shall  be  taken  as  the  proper  valua- 
tion for  purposes  of  local  taxation,  in  every  subdivision  in  this  State. 

Art.  227.  The  taxing  power  may  be  used  to  provide  pensions  for 
indigent  Confederate  soldiers  and  sailors,  and  their  widows,  to  estab- 
lish markers  or  monuments  upon  the  battlefields  of  the  country,  com- 
memorative of  the  services  of  Louisiana  soldiers  on  such  fields,  and 
to  maintain  a  memorial  hall  in  New  Orleans,  to  collect  memorials  of 
the  late  Civil  War. 

Art.  228.  The  power  to  tax  corporations  and  corporate  property 
shall  never  be  surrendered  nor  suspended  by  act  of  the  General  As- 
sembly. 

(Article  230  as  amended  in  1902,  1904,  1908,  1910  and  1912.) 

("It  is  provided  that  the  subjects  specified,  and  none  other,  shall 
be  exempt,  to-wit,  public  property,  churches,  parsonages,  household 
property  of  the  value  of  $500.00,  mortgages  upon  real  estate  in  the 
State,  and  loans  by  life  insurance  companies  to  their  policy  holders, 
provided  the  rate  of  interest  does  not  exceed  5  per  cent  per  annum, 
the  legal  reserve  of  all  life  insurance  companies  organized  in  the 
State,  the  capital  and  surplus  of  corporations  loaning  money  on  coun- 
try real  estate,  also  steamship  companies  for  the  term  of  fifteen  years, 
and  railroads  constructed  subsequently  to  January  1,  1905  and  prior 
to  January  1,  1909.") 

Art.  231.      (Gives  special  authority  to  levy  a  poll  tax  for  mainten- 
ance of  public  schools  in  parish  where  located.) 
Art.  232.     (Fixes  rate  of  taxation.) 


STATE   TAX-^TION    SYSTEM LOUISIANA.  827 

Amendment  adopted  November,  1914: 

(a)  Requiring  foreign  banking  corporations  to  pay  to  the  State  a 
yearly  license  tax  of  $250.00  and  2%  per  cent  on  gross  interest 
earned  on  all  money  loaned  and  a  like  tax  to  the  municipality  or 
parish. 

(b)  Exempting  from  taxation  all  money  in  hand  or  on  deposit. 

(c)  Exempting  from  taxation  for  ten  years  from  date  of  com- 
pletion the  capital  stock,  franchises  and  property  of  all  corporations 
constructing,  owning,  and  operating  within  the  State  a  combined 
system  of  irrigation,  navigation,  and  hydroelectric  power,  provided 
that  not  less  than  $3,000,000  shall  have  been  expended  in  the  con- 
struction. 

Art.  233.  There  shall  be  no  forfeiture  of  property  for  non-payment 
of  taxes,  but  there  must  be  sale,  with  the  privilege  to  the  taxpayer 
of  redeeming  within  one  year.  All  deeds  of  sale  made  by  the  col- 
lectors shall  be  received  as  privia  facie  evidence  of  a  valid  sale. 

Art.  234.  The  tax  shall  be  designated  by  the  year  in  which  it  is 
collectible,  and  the  tax  on  movable  property  shall  be  collected  in  the 
year  in  which  the  assessment  is  made. 

Art.  235.  An  inheritance  tax  may  be  levied  by  the  legislature 
solely  for  support  of  the  public  schools  on  all  inheritances  greater 
than  $10,000. 

Art.  237.  The  legislature  shall  pass  no  law  postponing  the  pay- 
ment of  taxes,  except  in  case  of  overflow,  general  conflagration,  gen- 
eral destruction  of  crops,  or  other  public  calamity. 

Art.  242.  Foreign  corporations  doing  business  in  Louisiana  may  be 
licensed  or  taxed  by  a  mode  different  from  that  provided  for  home 
companies,  provided  that  this  different  mode  shall  be  uniform,  upon 
a  graduated  system,  and  shall  be  equal  and  uniform  as  to  all  cor- 
porations doing  the  same  kind  of  business- 
Amendment  adopted  Nov.  7,  1916: 

Art.  225.  Taxation  shall  be  equal  and  uniform  throughout  the  ter- 
ritorial limits  of  the  authority  levying  the  tax,  and  property  shall  be 
taxed  in  a  manner  directed  by  law;  provided,  that  the  valuation  of 
property  for  the  assessment  of  State  taxes,  levied  by  the  General  As- 
sembly and  by  this  Constitution,  may  be  different  from  the  valuation 
fixed  for  all  other  purposes;  provided,  further,  the  assessment  of  all 
property  shall  never  exceed  the  actual  cash  value  thereof;  and  pro- 
vided, further,  that  the  taxpayers  shall  have  the  right  of  testing  the 
correctness  of  their  assessments  before  the  courts  of  justice. 

Art.  226.  There  shall  be  and  is  hereby  created  a  Board  of  State 
Affairs  whose  duty  it  shall  be  to  assess,  for  State  purposes,  all  tax- 
able property  throughout  the  State  of  Louisiana.  It  shall  have  such 
other  authority  relative  to  State  assessment,  budget,  income,  and  e.x- 
penditure  as  may  be  conferred  upon  it  by  the  General  Assembly. 
The  said  Board  shall  be  composed  of  three  members,  who  shall  be 
appointed  by  the  Governor  for  such  terms  as  may  be  fixed  by  the 
General  Assembly. 


828  STATE   TAXATION    SYSTEM — LOUISIANA. 

ADMINISTRATION.— The  Board  of  State  Affairs,  though  subject 
to  future  legislation,  under  the  amendment  of  1916,  is  empowered  to 
assess  for  State  purposes  all  taxable  property  throughout  the  State. 
For  each  parish,  except  that  of  Orleans,  one  assessor  is  appointed  by 
the  Governor,  affirmed  by  the  Senate,  for  a  term  of  four  years.  All 
taxable  property,  except  that  assessed  by  the  State  Board,  is  assessed 
locally. 

RAILROADS. — Railroads  pay  locally  the  general  property  tax  for 
State  and  local  purposes.  Railroad  track,  real  estate  used  for  rail- 
road purposes,  and  rolling  stock  are  assessed  by  the  Board  of  State 
Affairs.  The  various  classes  of  rolling  stocls  are  valued  separately. 
"Where  the  road  extends  into  another  State  a  portion  of  the  value  of 
the  rolling  stock  assignable  to  Louisiana  is  that  percentage  of  the 
aggregate  value  of  all  cars  which  the  length  of  track  in  Louisiana 
over  which  they  travel  bears  to  the  total  length  of  the  track  wherever 
traveled.  The  valuation  of  rolling  stock  is  assigned  to  the  parish  in 
which  the  road  has  its  principal  office,  and  terminal  property  to  the 
parish  in  which  such  property  is  located.  (See  Statutes,  p.  1541,  as 
amended.  Laws  of  1914.) 

EXPRESS,  SLEEPING  CAR,  ETC.,  COMPANIES.— Express,  sleep- 
ing car,  telegraph,  and  telephone  companies  pay  locally  the  General 
Property  Tax  for  State  and  local  purposes.  In  addition,  companies 
of  these  classes,  except  sleeping  car  companies,  pay  locally  the  license 
tax  for  both  State  and  local  purposes.  All  property  used  in  the  oper- 
ation of  these  companies  is  assessed  by  the  State  Board.  Each  of 
these  companies  pays  locally  for  State  purposes  license  taxes  based 
upon  gross  earnings,  as  specified  in  the  statute.  (Statute,  pp.  1715, 
1715.)  Additional  licenses  for  local  purposes,  levied  by  each  parish 
through  which  the  lines  or  routes  extend,  are  sometimes  equal  in 
amount  to  the  State  license. 

PUBLIC  UTILITY  COMPANIES.— Other  public  utility  companies, 
street  railway,  electric  light,  etc.,  pay  the  General  Property  Tax,  and 
also  locally  both   State  and   local   license  taxes. 

DOMESTIC  BUSINESS  CORPORATIONS.— Mercantile,  mining  and 
manufacturing  companies  pay  locally  for  State  and  local  purposes, 
the  General  Property  Tax  on  all  property.  Mercantile  companies  are 
assessed  upon  their  stock  in  trade,  etc.,  so  that  the  assessment  will 
represent  in  the  aggregate  a  fair  average  of  the  capital  employed  in 


STATE  TAXATION   SYSTEM — LOUISIANA,  829 

the  business.  Certain  companies  also  pay  locally  annual  license 
taxes,  based  upon  gross  receipts.  (See  Constitution,  Art.  229,  Stat- 
utes, pp.  1675,  etc.,  as  amended.  Laws  of  1914,  p.  516.) 

BANKS. — ^Banks  are  taxed  upon  the  value  of  their  capital  stock  less 
the  real  estate. 

FOREIGN  CORPORATIONS.— Foreign  corporations  pay  the  Gen- 
eral Property  Tax  and  also  an  annual  license  tax  levied  upon  certain 
classes  of  foreign  corporations.     (See  Statutes,  pp.  1714,  1715.) 

LICENSES. — There  is  an  extensive  system  of  business  taxes,  li- 
censes, and  fees  applicable  to  different  classes,  businesses  and  pro- 
fessions. 

POLL  TAX. — ^The  poll  tax  is  paid  out  to  the  parishes  for  support  of 
the  public  schools. 

INHERITANCE  TAX.-^An  inheritance  tax  distributed  to  the  par- 
ishes for  the  sole  use  of  public  schools,  is  2  per  cent  on  direct  in- 
heritances to  the  parents,  descendants  and  the  surviving  husband  or 
wife,  and  5  per  cent  for  collateral  inheritances,  there  being  an  exemp- 
tion in  the  first  case  below  $10,000.00.  Educational,  religious  and 
charitable  bequests  are  exempted,  and  there  is  also  an  exemption 
when  the  property  bequeathed  or  donated  has  borne  its  just  propor- 
tion of  taxes  prior  to  such  donation. 

The  statute  taxes  all  property  within  the  jurisdiction  of  the  State, 
but  it  has  been  held  that  the  act  does  not  include  in  its  terms  real 
estate  of  the  decedent  in  another  State.  All  personal  property  of  the 
decedent,  when  a  resident  of  the  State,  is  taxed.  Property  to  the 
value  of  $10,000  is  exempt. 

EXEMPTIONS.— Mortgages  upon  real  estate  in  the  State  are  ex- 
empt from  taxation  under  the  constitutional  amendment  of  1908.  Na- 
tional, State  and  municipal  bonds  or  stocks  owned  continuously  for 
six  months;  public  property,  places  of  religious  worship  or  burial, 
all  charitable  institutions,  historical  collections  and  monuments,  and 
household  furniture  to  the  value  of  $500  are  also  exempt.  Capital 
and  machinery  employed  in  mining  operations  are  also  exempt  from 
parochial  and  municipal  taxation  for  ten  years  from  January  1,  1909, 
and  also  property  employed  in  specified  manufacturing  enterprises, 
provided  not  less  than  five  hands  are  employed  in  any  one  factory; 
and  any  railroad   completed   prior  to  January  1,  1909,  provided  the 


830  STATE   TAXATION    SYSTEM — MAINE. 

railroad  had  not  received  public  aid;  and  any  railroad  the  construc- 
tion of  which  had  begun,  and  the  roadbed  of  which  was  substantially 
completed  at  the  time  of  the  adoption  of  the  Constitution  of  1898. 
Property  of  military  organizations  and  State  national  guards  is  also 
exempt. 

COLLECTION.— Property  holders  make  return  to  the  assessor  of  val- 
ues in  the  country  parish  before  May  1st  and  New  Orleans  20  days  after 
lists  are  returned  to  the  assessor.  Parties  dissatisfied  with  assessments 
can  appeal  to  the  courts.  Taxes  become  a  lien  on  real  estate  after 
December  31st.  Officers  of  corporations  are  required  to  make  sworn 
reports  upon  blanks  furnished  by  assessors  before  January  20th  of 
each  year.  Property  on  which  the  taxes  are  delinquent  can  be  sold 
by  tax  collectors  by  advertisement,  or  after  advertisement  without 
intervention  of  court  proceedings. 

MAINE 

Art.  I,  Sec.  22.  No  tax  or  duty  shall  be  imposed  without  the  con- 
sent of  the  people  or  of  their  representatives  in  the  legislature. 

Art.  IX,  Sec.  7.  While  the  public  expenses  shall  be  assessed  on 
polls  and  estates,  a  general  valuation  shall  be  taken  at  least  once  in 
ten  years. 

Sec.  8.  (As  amended  by  Amendment  36,  Resolves  of  1913,  c.  264, 
adopted  September  8,  1913.)  All  taxes  upon  real  and  personal  estate, 
assessed  by  authority  of  this  State,  shall  be  apportioned  and  assessed 
equally,  according  to  the  just  value  thereof;  but  the  legislature  shall 
have  power  to  levy  a  tax  upon  intangible  personal  property  at  such 
rate  as  it  deems  wise  and  equitable  without  regard  to  the  rate  ap- 
plied to  other  classes  of  property. 

Sec.  9.  The  legislature  shall  never,  in  any  manner,  suspend  or 
surrender  the  power  of  taxation. 


ADMTNTSTRATTON.— A  Board  of  State  Tax  Assessors  of  three 
members,  appointed  by  the  Governor  (one  to  be  member  of  the  min- 
ority party  in  the  State)  "possessing  knowledge  of,  and  training  in 
the  subject  of  taxation  and  taxing  laws,  and  skilled  in  matters  per- 
taining thereto,"  devoting  their  entire  time  to  duties  of  the  office, 
constitute  a  State  Board  of  Equalization,  with  supervision  of  local 
assessments. 

CORPORATIONS. — The  real  and  personal  property  of  corporations 
in  the  State  are  taxed  as  other  property  under  the  general  property 
tax.  Domestic  business  corporations  pay  as  a  corporate  tax  an  an- 
nual tax  of  $5.00  if  the  authorized  capital   does  not  exceed   $50,000; 


STATE   TAXATION    SYSTEM MAINE.  831 

$10.00  if  it  exceeds  $50,000  and  does  not  exceed  $200,000;  $50.00  if  it 
exceeds  $200,000  and  does  not  exceed  $500,000;  $75.00  if  it  exceeds 
$500,000  and  does  not  exceed  $1,000,000;  and  ttie  further  sum  of 
$50.00  per  annum  per  million  dollars  or  any  part  thereof  in  excess  of 
one  million  dollars.  This  franchise  tax  is  in  addition  to  the  general 
property  tax  on  property  located  in  the  State.  Buildings  within  and 
without  the  right  of  ways  and  fixtures  are  taxed  as  other  property 
by  cities  and  towns. 

RAILROADS. — Railroads  pay  an  annual  license  tax  based  on  gross 
receipts  of  transportation  within  the  State.  Each  city  or  town  in 
which  any  stock  of  railroad  is  held,  is  entitled  to  an  amount  equal 
to  1  per  cent  of  the  value  of  such  stpck  as  determined  by  the  State 
Board  of  Assessors,  provided  the  total  receipts  from  this  source  are 
sufficient  to  cover  such  payment.  This  tax  based  upon  gross  receipts 
within  the  State  has  been  sustained  as  not  a  tax  upon  interstate  com- 
merce.    (See  supra,  p.  249.) 

Street  railroads  are  taxed  as  other  railroads.  For  the  specific  rates, 
see  statute.  Sleeping  car  and  other  companies  pay  an  excise  tax  of 
9  per  cent  on  gross  receipts  of  business  done  wholly  within  the 
State,  in  lieu  of  all  other  taxes  on  cars  and  equipments. 

PUBLIC  UTILITIES. — For  the  excise  taxes  imposed  on  telephone 
and  telegraph  companies,  press  companies,  and  insurance  companies, 
see  statute. 

BANKS. — Shares  in  banks  and  moneyed  corporations  are  assessed  to 
holders,  less  assessed  value  of  corporate  property. 

POLL  TAXES. — A  poll  tax  is  assessed  upon  every  male  inhabitant 
of  the  State  above  the  age  of  twenty-one  years,  whether  citizens  or 
aliens,  with  specified  exemptions.  The  poll  tax  is  not  to  exceed  three 
dollars,  and  not  to  be  less  than  one  dollar,  and  is  assessed  upon  each 
taxable  person  at  the  place  where  he  resides  on  April  first.  In  prac- 
tice, the  poll  tax  inures  to  the  benefit  of  towns. 

INHERITANCE  TAX. — There  is  a  direct  inheritance  tax  enacted 
In  lieu  of  the  collateral  inheritance  tax  theretofore  existing,  where- 
under  all  property  within  the  jurisdiction  of  the  State  and  any  in- 
terest therein,  whether  belonging  to  the  inhabitants  of  the  State  or 
not,  and  whether  tangible  or  intangible,  passing  by  will  or  intestacy,  is 
made  subject.  Property  transferred  for  the  use  of  any  educational, 
charitable,  religious,  or  benevolent  institution  in  the  State,  the  prop- 
erty of  which  is  by  law  exempt  from  taxation,  is  exempt  from  this 
tax. 


832     .  STATE   TAXATION    SYSTEM MARYLAND. 

The  exemption  from  inheritance  tax  in  the  case  of  husband,  wife, 
child,  natural  or  adopted,  of  $10,000;  and  in  other  cases  $500.00. 
When  the  property  transferred  exceeds  in  value  the  exemptions,  and 
does  not  exceed  $50,000,  the  rate  is  1  per  cent;  if  it  is  in  excess  of 
$50,000,  and  not  more  than  $100,000,  11/2  per  cent;  and  above  $100,000, 
2  per  cent.  When  the  property  is  transferred  to  a  brother,  sister, 
uncle,  aunt,  nephew,  niece  or  cousin,  the  rate  of  4  per  cent  for  $50,000; 
and  for  more  than  $50,000  and  not  more  than  $100,000,  4^2  per  cent; 
and  over  $100,000,  5  per  cent.  Where  the  property  is  transferred  to 
others,  the  rates  are  5  per  cent  under  $50,000;  6  per  cent  between 
$50,000  and  $100,000;   and  7  per  cent  for  $100,000. 

The  exemption  of  property  of  non-residents,  whose  own  States  as- 
sess no  tax  upon  the  personal  property  of  male  residents,  was  re- 
pealed by  Act  of  1917. 

EXEMPTIONS. — The  exemptions  include  the  personal  property  of 
literary  and  scientific  institutions,  the  real  and  personal  property  of 
all  benevolent  and  charitable  institutions  incorporated  by  the  State, 
and,  to  a  specified  extent,  the  property  of  colleges;  also  household 
furniture  not  exceeding  ten  hundred  dollars  to  each  family,  wearing 
apparel,  farming  utensils,  mechanic's  tools  necessary  for  his  business, 
and  musical  instruments  not  exceeding  fifty  dollars  to  each  family; 
also  churches  and  parsonages;  also  live  stock  under  specified  ages, 
agricultural  products  in  possession  of  producer,  planted  forests  (on 
application)  for  twenty  years,  and  mines  for  ten  years  from  opening. 
Bonds  issued  by  State,  or  any  county  or  municipality  thereof  also 
exempt;  and  all  loans  of  money  secured  by  mortgage  on  real  estate 
in  the  State  deposited  in  banks  and  trust  companies,  are  exempt  from 
municipal  taxation. 

COLLECTIONS. — Taxes  are  assessed  as  of  April  1,  annually.  In- 
corporated towns  may  fix  time  of  payment  therein.  Taxes  on  real 
estate  must  be  paid  before  first  Monday  in  February  of  year  suc- 
ceeding assessment,  when  land  may  be  sold,  subject  to  right  of  non- 
residents to  redeem  within  one  year,  and  of  residents  within  two  years. 

(See  report  of  State  Board  of  Assessors,  1915.) 

MARYLAND 

(Constitution  as  Amended  in  1915.) 

"Constitutional  Provisions:  Declaration  of  rights:  Art.  XIV.  That 
no  aid,  charge,  tax  burthen  or  fees  ought  to  be  rated,  or  levied,  under 
any  pretense  without  the  consent  of  the  legislature. 


STATE   TAXATION    SYSTEM MARYLAND.  833 

"Art.  XV.  (As  amended  November  2,  1915)  That  the  levying  of 
taxes  by  the  poll  is  grievous  and  oppressive  and  ought  to  be  pro- 
hibited; that  paupers  ought  not  to  be  assessed  for  the  support  of  the 
government;  that  the  General  Assembly  shall,  by  uniform  rules,  pro- 
vide for  separate  assessment  of  land  and  classification  and  sub- 
classifications  of  improvements  on  land  and  personal  property,  as  it 
may  deem  proper;  and  all  taxes  thereafter  provided  to  be  levied  by 
the  State  for  the  support  of  the  general  State  government,  and  by  the 
counties  and  by  the  City  of  Baltimore  for  their  respective  purposes, 
shall  be  uniform  as  to  land  within  the  taxing  district,  and  uniform 
within  the  class  or  sub-class  of  improvements  on  land  and  personal 
property  which  the  respective  taxing  powers  may  have  directed  to 
be  subjected  to  the  tax  levy;  yet  fines,  duties  or  taxes  may  properly 
and  justly  be  imposed,  or  laid  with  a  political  view  for  the  good 
government  and  benefit  of  the  community." 


(Amendment  of  1916  to  Sec.  52  of  Art.  3,  providing  for  a  budget 
system  in  all  appropriation  bills  except  supplemental  appropriation 
bills.) 

HOME  RULE. — Under  amendment  of  1915  the  legislature  has  con- 
ferred home  rule  as  to  local  taxes  on  all  towns  and  cities  in  the 
State,  giving  them  the  right,  subject  to  the  laws  of  the  State,  to  de- 
termine what  classes  of  property  should  be  the  subject  of  taxation. 
(See  Act  of  1916.) 

The  system  of  taxation  in  Maryland  has  been  described  as  prac- 
tically one  of  separation  of  the  sources  of  taxation.  The  ordinary 
expenses  of  the  State  government  are  paid  by  indirect  taxation,  the 
chief  sources  of  which  are  the  collateral  inheritance  tax,  share  of 
liquor  license  in  Baltimore  City,  gross  receipts  tax  of  railroads,  and 
certain  other  classes  of  corporations,  traders'  licenses,  excess  fees  of 
officers,  receipts  of  State  institutions,  interest  on  investment,  and  the 
tax  on  intangibles  at  a  fixed  rate. 

ADMINISTRATION.— There  is  a  State  Tax  Commission  of  three 
members,  with  powers  of  supervision  and  equalization.  (See  Tax 
Commission  v.  Lowenstein,  128  Md.  327.) 

RAILROADS. — Railroads  pay  a  graduated  tax  based  on  domestic 
gross  receipts  per  mile  for  the  first  1000  or  less  1^4  per  cent,  and 
from  1000  to  2000,  2  per  cent  and  2i/L.  per  cent  upon  the  gross  re- 
ceipts above  2000.  Interstate  railroads  pay  the  proportion  of  gross 
receipts  based  upon  the  mileage  in  the  State  to  the  total  mileage. 
(The  B.  &  O.  Railroad  has  a  special  contract  with  the  State  as  to  tax 
on  gross  receipts,  see  laws  of  1878,  ch.   155).     Railroads  are  exempt 


834  STATE   TAXATION    SYSTEM MARYLAND. 

from  other  taxation  for  State  purposes,  but  are  taxed  locally  on  real 
and  personal  property  as  individuals. 

PUBLIC  UTILITIES.— telegraph,  cable,  express,  transportation, 
parlor  cars,  sleeping  cars,  safe  deposit  and  trust  companies  pay  2 
per  cent  on  gross  receipts.  Telephone  and  oil  pipe  companies,  guar- 
antee and  fidelity  companies,  title  insurance  companies,  1  per  cent; 
electric  light  companies  IVz  Per  cent  of  gross  receipts  or  electric 
construction  and  gas  companies  incorporated  and  doing  business  in 
Maryland,  and  1%  per  cent  of  gross  receipts  of  guana,  phosphate  or 
fertilizer   companies  wherever  incorporated. 

CORPORATIONS. — Business  corporations  pay  the  ordinary  prop- 
erty tax  on  real  and  personal  property,  and  foreign  corporations  ex- 
cept those  taxed  on  gross  receipts  as  above  are  subject  to  a  special 
graduated  tax  based  on  capital  employed  in  the  State.  There  is  a 
system  of  special  taxes  and  licenses  imposed  upon  occupations  to 
which  corporations  as  well  as  individuals  are  subject. 

CORPORATE  STOCKS.— Stocks  in  domestic  corporations  are  ex- 
empt, but  stocks  in  foreign  corporations  are  assessed  at  actual  value, 
and  taxed  to  the  individual  holders  at  the  rate  of  16  cents  for  State 
and  30  cents  for  local  purposes.  Such  tax  held  constitutional,  see 
Wilkins  Co.  v.  Baltimore,  103  Md.  293. 

BANKS. — Are  assessed  locally  on  real  estate,  as  other  corporations; 
and  the  shares  are  assessed  to  the  stockholders,  less  assessed  value  of 
real  estate,  and  paid  through  the  corporation. 

INHERITANCE  TAX.— There  is  no  direct  inheritance  tax  law,  but 
a  collateral  inheritance  tax  amounting  to  5  per  cent  on  every  $100 
of  value  where  the  estate  is  left  to  other  than  the  parents,  husband, 
wife  or  children,  or  lineal  descendants,  there  being  no  tax  If  the  es- 
tate is  less  than  $500. 

The  property  of  residents  and  non-residents  found  within  the  juris- 
diction of  the  State  is  subject  to  the  taxes,  irrespective  of  the  domicile 
of  the  decedent.     (State  v.  Dalrymple,  70  Md.  294.) 

MORTGAGES.— Mortgages  are  subject  to  taxation  at  the  rate  of  8 
per  cent  per  annum  on  the  interest  paid  on  the  mortgage;  but  this 
act  is  repealed  in  all  but  three  counties,  so  that  mortgages  are  exempt 
in  twenty  counties  and  in  Baltimore  City. 

EXEMPTIONS. — No  person  who  is  not  assessed  to  the  amount  of 
$100  is  required  to  pay  a  tax.     All  household  furniture  and  effects 


STATE   TAXATION   SYSTEM MASSACHUSETTS.  835 

held  for  household  use  are  exempt  from  taxation   for  local   purposes 
to  the  extent  of  $500.     (See  Act  of  1916,  c.  393.) 

ASSESSMENTS.— Assessments  are  not  annual,  but  continuing,  sub- 
ject to  change  on  demand  of  the  public  authorities  or  on  application 
of  the  property  owner. 

There  is  a  rate  of  45  cents  on  securities,  includiHg  all  bonds  and 
certificates  of  indebtedness  issued  by  corporations. 

Taxes  are  payable  in  the  counties  at  any  time  before  the  end  of 
the  year,  interest  and  costs  accruing  if  not  then  paid. 

COLLECTIONS. — In  Baltimore  City  taxes  on  personal  property  are 
in  arrear  on  May  1st,  and,  on  real  property,  July  1st  in  the  year; 
and  thirty  days  thereafter  a  penalty  of  3  per  cent  is  added.  Property 
is  sold  for  taxes  in  the  third  year,  redeemable  by  the  owner  on  pay- 
ment of  purchase  money  with  interest  at  6  per  cent  and  costs  and 
expenses,  in  Baltimore,  at  any  time  within  a  year  and  a  day,  and  in 
the  counties  at  any  time  within  twelve  months. 

State  taxes  are  due  July  1st  and  after  September  1st  bear  interest. 

A  uniform  plan  of  tax  assessment  in  counties  throughout  the  State 
was  adopted  in  1916.     (See  Act  of  1916,  .) 

MASSACHUSETTS 

Declaration  of  Rights,  Art.  X.  No  part  of  the  property  of  any  in- 
dividual can,  with  justice,  be  taken  from  him  or  applied  to  public 
uses,  without  his  own  consent  or  that  of  the  representative  body  of 
the  people. 

Part  2,  Ch.  1,  Art.  IV.  The  general  court  has  power  to  impose  and 
levy  proportional  and  reasonable  assessments,  rates,  and  taxes,  upon 
all  the  inhabitants  of,  and  persons  resident,  and  estates  lying  within 
the  said  commonwealth,  (For  a  full  statement  of  the  Massachusetts 
system  of  taxation  and  the  practical  exemption  of  mortgages  there- 
under, see  the  report  of  the  Tax  Commission  of  1897.) 

Amendment  to  Constitution  adopted   November,   1912: 

"Full  power  and  authority  are  hereby  given  and  granted  to  the 
general  court  to  prescribe  for  wild  or  forest  lands  such  methods  of 
taxation  as  will  develop  and  conserve  the  forest  resources  of  the  Com- 
monwealth." 

Amendment  to  Constitution  adopted  November  2,  1915: 

Full  power  and  authority  are  hereby  given  and  granted  to  the  general 

court  to  impose  a  lax  on  income  in  the  manner  hereinafter  provided. 

Such  tax  may  be  at  different  rates  on   income  derived  from  different 

classes  of  property,  but  shall  be  levied  at  a  uniform  rate  throughout 


836  STATE   TAXATION    SYSTEM MASSACHUSETTS. 

the  commonwealth  when  income  is  derived  from  the  same  class  of 
property.  The  general  court  may  tax  incomes  not  derived  from  prop- 
erty at  a  lower  rate  than  incomes  derived  from  property,  and  may 
grant  reasonable  exemptions  and  abatements.  Any  class  of  property, 
the  income  from  which  is  taxed  under  the  provisions  of  this  article, 
may  be  exempted  from  the  imposition  and  levied  in  proportional  and 
reasonable  assessments,  rates  and  taxes,  as  at  present  authorized  by 
the  Constitution.  This  article  shall  not  be  construed  to  limit  the  power 
Of  the  general  court  to  impose  and  levy  reasonable  duties  and  excises. 

ADMINISTRATION. — An  appointed  tax  commissioner,  who  is  also 
commissioner  of  corporations,  has  supervision  over  assessments;  and 
under  him  there  are  three  supervisors  of  assessments  with  power  over 
local  boards  of  assessors.  Jurisdiction  is  vested  in  the  court  to  hear 
complaints  as  to  assessors  and  grant  abatements. 

POLL  TAX. — ^A  poll  tax  is  assessed  upon  every  male  inhabitant  above 
the  age  of  20  years,  whether  citizen  or  alien,  and  payment  is  mad©  ft 
requirement  for  voting. 

INCOME  TAX. — The  income  tax  law  enacted  in  1916,  which  was  pre- 
pared by  special  commission,  has  been  termed  in  effect  a  "partial"  as 
distinguished  from  a  "general"  income  tax  law.     It  applies  to  income: 

First — ^At  the  rate  of  6  per  cent  derived  from  intangible  property 
theretofore  exempted'upon  the  payment  of  such  tax.  There  is  an  allow- 
ance for  indebtedness  to  the  extent  that  the  taxpayer  may  deduct  such 
proportion  of  the  interest  paid  on  his  total  indebtedness  as  the  income 
which  he  derives  from  taxable  intangible  property  bears  to  his  total  in- 
come from  all  sources,  and  an  exemption  of  $300.00  of  income  from  tax- 
able intangible  property  to  persons  whose  total  income  from  all  sources 
does  not  exceed  $60.00. 

Second — ^An  income  tax  of  1%  per  cent  is  levied  upon  income  de- 
rived from  annuities,  trades  and  professions  subject  to  an  exemption 
of  $2,000.00  of  professional  or  business  income,  and  a  further  exemption 
of  $500.00  for  a  married  person  and  of  $250.00  for  each  child  under  the 
age  of  15  years,  or  for  a  parent  dependent  upon  the  taxpayer  for  sup- 
port; but  provided  that  in  no  case  will  this  total  exemption  exceed 
$1,000.00.  In  the  case  of  annuities  there  is  an  exemption  of  the  same 
sort  as  in  the  case  of  income  from  intangible  property. 

Third — There  is  a  tax  of  3  per  cent  upon  the  excess  of  gains  over 
losses  resulting  from  purchases  or  sales  of  intangible  personal  prop- 
erty. This  applies  to  the  individual  speculator  as  well  as  to  a  banker 
or  broker. 


STATE  TAXATION   SYSTEM — MASSACHUSETTS.  837 

Under  this  income  tax  law  the  taxpayer  must  make  a  return  of  his 
personal  estate,  and  in  default  is  liable  to  the  assessment  of  the  local 
tax. 

INHERITANCE  TAX.— The  inheritance  tax  law  applies  to  all  prop- 
erty within  the  jurisdiction  of  the  State  and  every  interest  therein 
belonging  to  the  inhabitants,  and  all  real  estate  within  the  State  be- 
longing to  non-residents.  Devises  to  charitable,  educational  or  re- 
ligious societies  are  exempted  from  the  act.  The  taxes  are  graded 
according  to  the  degree  of  relationship,  there  being  no  tax  on  $1,000 
or  under,  and  in  case  of  husband,  wife,  father,  mother,  child,  adopted 
child,  adopted  parent,  no  tax  on  share  of  $10,000  or  under. 

FOREIGN  CORPORATIONS.— A  foreign  corporation  is  subject  t(v 
taxation  locally  on  all  its  real  estate  where  located,  and  is  subject  to 
an  excise  tax  of  one-fiftieth  of  1  per  cent  of  the  par  value  of  its  author- 
ized capital  stock,  but  the  amount  of  the  excise  tax  shall  not  in  any  year 
exceed  $2,000.  This  tax  was  held  valid  by  Supreme  Court  of  United 
States.  See  Sec.  196,  supra.  As  to  limitations  of  power  to  tax  foreign 
franchises,  see  Glue  Co.  r.  Commonwealth,  195  Mass.  528. 

EXEMPTIONS.— Exemptions  include  bonds  of  the  State,  counties  and 
municipalities,  and  bonds  and  other  debts  secured  by  mortgage  on  real 
estate  in  the  State,  and  bonds  secured  by  mortgage  on  tangible  property 
within  or  without  the  State  when  an  annual  fee  is  paid  and  the  bond 
registered;  property  of  religious,  educational  and  certain  other  societies 
and  corporations  to  the  extent  of  $500.00  where  the  estate  does  not 
exceed  $1,000.00  to  widows,  unmarried  women  above  the  age  of  21 
years,  persons  over  75,  and  any  minor  whose  father  is  deceased;  also 
wearing  apparel,  farming  utensils,  household  furniture  not  exceeding 
$1,000.00,  and  necessary  tools  of  mechanic  not  exceeding  $300.00;  also 
property  of  soldiers  and  sailors  to  a  limited  extent,  and  cattle  of  lim- 
ited age;  also  plantations  of  timber  lands  in  certain  cases. 

COI^PORATIONS. — Railroads  are  subject  to  a  general  corporation 
tax  which  is  based,  as  in  case  of  other  corporations,  upon  the  value  of 
the  shares  of  capital  stock  less  items  locally  taxed  and  others  beyond 
the  jurisdiction  of  the  State.  The  tax  on  "corporate  excess"  is  paid 
directly  into  the  State  Treasury.  Apportionment  is  made  where  the 
lines  extend  beyond  the  jurisdiction   of  the  State. 

The  .same  principle  is  applied  in  the  assessment  of  public  utility  and 
other  corporations.  This  corporation  tax  is,  in  addition  to  the  tax 
upon  real  estate,  locally  taxed. 


838  STATE  TAXATION   SYSTEM — MASSACHUSETTS. 

BUSINESS  CORPORATIONS.— The  principle  of  the  assessment  of 
"corporate  excess"  has  been  modified  in  the  case  of  general  business 
companies  in  that  there  is  a  deduction  of  value  of  real  estate  and  ma- 
chinery and  of  property  which  is  subject  to  taxation  in  another  State. 
The  tax  is  not  to  exceed  20  per  cent  in  excess  of  the  value  of  real  estate, 
machinery  and  merchandise,  and  is  not  to  be  less  than  one-tenth  of  1 
per  cent  of  the  market  value  of  the  capital  stock.  Acts  of  1907,  ch.  395. 
As  to  power  of  State  in  imposing  excise  taxes,  see  Opinion  of  Justices, 
195  Mass.  607. 

APPORTIONMENT  OF  TAX  ON  CORPORATE  EXCESS.— The 
amount  raised  by  the  taxes  on  corporate  excess  is  distributed  to  parks 
in  towns  and  cities  in  proportion  to  the  number  of  shares  held  by 
citizens  thereof  in  each  town.  The  remainder  which  represents  the  tax 
on  shares  of  stock  held  outside  of  the  State  remains  in  the  State  Treas- 
ury. 

BANKS. — Shares  of  stock  in  banks,  national  or  state,  are  assessed 
locally  to  the  owners,  and  not  to  the  State  Tax  Commission.  The  bank 
advances  the  tax.  The  revenue  obtained  is  apportioned  among  the 
towns  and  cities  where  the  shareholders  reside,  and  the  State  receives 
as  its  share  the  levy  on  the  foreign  shareholders. 

INSURANCE. — ^Life  insurance  companies,  domestic  and  foreign,  pay 
an  excise  tax  of  one-fourth  of  1  per  cent  per  annum  on  the  net  value 
of  all  policies  in  force  and  held  by  residents.  Domestic  insurance  com- 
panies other  than  life,  and  except  companies  liable  to  taxation  on  cor- 
porate franchise,  pay  1  per  cent  on  net  premiums,  except  the  premiums 
received  in  other  States  where  they  are  subject  to  like  tax,  and  1  per 
cent  on  all  assessments  made  by  the  company  upon  policy  holders. 
All  other  foreign  insurance  companies  pay  2  per  cent  on  net  premiums 
charged  and  received  in  Massachusetts.  There  is  also  provision  for 
retaliatory  taxation. 

It  may  be  said  that  substantially  all  the  tangible  estate  subject  to 
income  tax  as  above  is  exempt  from  other  taxation.  A  surplus  of  in- 
debdtedness  is  not  deducted  from  other  items  of  personal  estate. 

COLLECTIONS.— Return  of  property  subject  to  taxation  on  April 
1st  of  each  year  is  made  on  a  date  fixed  by  local  assessors  usually  the 
month  of  May.  Payment  of  taxes  is  fixed  by  the  towns  between  Oc- 
tober 1st  and  January  1st.  Income  taxes  are  payable  on  or  before  the 
15th  of  October.  Local  Tax  Commissioner  is  charged  with  the  collec- 
tion of  income  taxes  in  the  same  manner  as  of  personal  taxes;  that  is, 
by  distress  and  sale,  by  arrest  and  imprisonment. 


STATE  TAXATION   SYSTEM — MICHIGAN.  839 

Taxes  assessed  on  real  estate  are  a  lien  from  April  1st,  and  if  not 
paid  within  14  days  after  demand,  sale  may  be  made  of  the  smallest 
undivided  part  of  the  real  estate  sufficient  to  discharge  the  taxes  and 
charges,  or  of  the  whole  property,  if  necessary.  The  deed  when  re- 
corded is  prima  facie  evidence  of  all  facts  essential  to  its  validity. 
The  owner  may  redeem  within  two  years  after  a  sale  by  paying  taxes, 
costs  and  interest  at  the  rate  of  8  per  cent. 

The  Supreme  and  Superior  Courts  have  jurisdiction  in  equity  of  all 
cases  of  sale  or  taking  of  real  estate  for  taxes,  if  relief  is  sought  within 
five  years. 

MICHIGAN 

(New  Constitution  adopted  in  1908.) 

Art.  X,  Sec.  1.  (Provides  for  the  primary  school,  university,  and 
other  educational  funds  in  the  order  named.) 

Sec.  2.  (Provides  for  a  tax  sufficient  to  pay  the  estimated  expense  of 
State  government  and  interest  on  State  debt.) 

Sec.  3.  The  legislature  shall  provide  by  law  a  uniform  rule  of 
taxation,  except  on  property  paying  specific  taxes,  and  taxes  shall  be 
levied  on  such  property  as  shall  be  provided  by  law:  Provided,  that 
the  legislature  shall  provide  by  law  a  uniform  rule  of  taxation  for  such 
property  as  shall  be  assessed  by  the  State  Board  of  Assessors;  and  the 
rate  of  taxation  on  such  property  shall  be  the  rate  which  the  State 
Board  of  Assessors  shall  ascertain  and  determine  is  the  average  rate 
levied  upon  other  property  upon  which  ad  valorem  taxes  are  assessed 
for  State,  county,  township,  school  and  municipal  purposes. 

Sec.  4.  The  legislature  may  by  law  impose  specific  taxes  which  shall 
be  uniform  upon  the  classes  upon  which  they  operate. 

Sec.  5.  The  legislature  may  provide  by  law  for  the  assessment  at  its 
true  cash  value  by  the  State  Board  of  Assessors,  of  which  the  Gov- 
ernor shall  be  ex  officio  a  member,  of  the  property  of  corporations, 
and  the  property  by  whomsoever  owned,  operated  or  conducted,  en- 
gaged in  the  business  of  transporting  passengers  and  freight,  transport- 
ing property  by  express,  operating  any  union  station  or  depot,  transmit- 
ting messages  by  telephone  or  telegraph,  loaning  cars,  operating  re- 
frigerator cars,  fast  freight  lines,  or  other  car  lines,  or  running  or 
operating  cars  in  any  manner  upon  railroads,  or  engaged  in  any  other 
public  service  business,  and  for  the  levy  and  collection  of  taxes  thereon. 

Sec.  6.    Every  tax  law  shall  distinctly  state  the  objects. 

Sec.  7.  All  assessments  hereafter  authorized  shall  be  on  property  at 
its  cash  value. 

Sec.  8.  In  the  year  1911  and  every  fifth  year  thereafter,  or  at  such 
other  times  as  the  legislature  may  direct,  the  legislature  shall  provide 
by  law  an  equalization  of  assessment  by  the  State  Board  of  all  taxes 
on  property  except  that  fixed  under  laws  passed  pursuant  to  Sections 
4  and  5  of  this  article.  (By  -an  act  of  the  legislature  the  Board  meets 
every  third  and  fifth  year,  beginning  in  1911.) 


840  STATE   TAXATION    SYSTEM MICHIGAN. 

(Held  in  State  Tax  Commissioners  v.  Grand  Rapids  Board  of  As- 
sessment, 124  Mich.  491,  that  this  section  did  not  prevent  the  organiza- 
tion of  a  Board  of  State  Tax  Commissioners.) 

Sec.  9.  (Prohibits  the  surrender  or  suspension  of  the  power  of  taxa- 
tion by  any  grant  or  contract.) 

Sec.  10.  (Prohibits  the  contracting  of  State  debts  in  the  aggregate 
in  excess  of  $250,000.00.) 

Sec.  11.  (Prohibits  the  issue  of  scrip  or-  other  form  of  State  in- 
debtedness except  for  debts  expressly  authorized  by  the  Constitution.) 

Sec.  12.  (Prohibits  the  granting  of  State  aid  in  aid  of  any  person, 
association,  or  corporation.) 

Sec.  13.  (Prohibits  the  subscription  by  the  State  to  the  stock  of 
any  company  or  association.) 

Sec.  14.  (Prohibits  the  State  from  being  a  party  to  or  interested 
in  any  work  of  internal  improvement,  except  the  public  wagon  roads 
and  the  necessary  forestation  and  the  protection  of  State  lands.) 

Sec.  15.    (Regulates  the  deposit  of  public  money.) 

Sec.  16.  (No  money  to  be  paid  out  of  the  treasury  except  in  pursu- 
ance to  appropriation.) 

ADMINISTRATION. — The  Board  of  State  Tax  Commissioners  consists 
of  three  members  appointed  by  the  Governor,  and  this  Board,  including 
the  Governor,  who  is  a  member  ex  oflBcio,  forms  the  State  Board  of 
Assessors  provided  for  by  Section  5  of  Art.  X  of  the  Constitution. 

The  State  Board  of  Equalization  consists  of  the  Secretary  of  State, 
the  Auditor-General,  the  Superintendent  of  Public  Instruction,  the 
State  Treasurer,  and  Chairman  of  the  Board  of  State  Tax  Commis- 
sioners. 

All  property,  real  and  personal,  within  the  jurisdiction  of  the  State, 
not  expressly  exempted,  is  subject  to  the  general  property  tax. 

EXEMPTIONS. — Exemptions  in  addition  to  public  property,  include 
property  of  libraries,  benevolent,  charitable,  educational  and  scientific 
institutions,  houses  of  public  worship  and  parsonages,  cemeteries, 
.  property  of  State  and  local  agricultural  societies,  parks,  and  armories; 
real  estate  owned  as  a  homestead  by  a  soldier  or  sailor  of  the  Federal 
Government,  who  served  in  the  Civil  or  Mexican  War,  or  the  wife  or 
widow  of  such,  to  the  value  of  $1,000.00;  property  of  posts  of  the  Grand 
Army  of  the  Republic  and  of  the  Women's  Relief  Corps,  personal 
property  of  Sons  of  Veterans,  Union  Veterans'  Union,  and  Young  Men's 
Christian  Associations,  and  similar  associations;  funds  of  fraternal 
benevolent  societies,  pensions  received  from  the  United  States,  bona 
fide  debts,  property  of  Indians  who  are  not  citizens;  libraries,  family 
pictures,  school  books,  one  sewing  machine  used  and  owned  by  each 


STATE   T.VXATION    SYSTEM MICHIGAN.  S41 

individual  family,  wearing  apparel  of  every  individual,  household 
furniture,  provisions,  and  fuel  to  the  value  of  $500.00  to  each  house- 
hold; working  tools  of  any  mechanic  to  the  value  of  $100.00;  fire  ap- 
paratus of  organized  companies;  all  mules,  horses  and  cattle  not  over 
one  year  old,  all  sheep  and  swine  not  over  six  months  old,  all  domesti- 
cated birds;  personal  property  owned  and  used  by  any  householder  in 
connection  with  his  business  to  the  value  of  $200.00;  all  property  of 
the  Woman's  Auxiliary  Society  of  the  University  of  Michigan,  and  all 
municipal   bonds. 

MORTGAGES. — Mortgages  are  subject  to  a  recording  tax  of  fifty 
cents  for  each  $100.00  and  each  remaining  fraction  thereof  of  the  debt 
secured  by  the  mortgage  upon  real  property  situated  in  the  State  re- 
corded on  or  after  January  1st,  1912.  This  tax  is  divided  equally 
between  county  and  State  and  is  collected  by  the  County  Treasurer. 
Any  instrument  creating  a  lien  on  real  estate  or  executory  contracts 
for  the  sale  of  real  estate  and  deeds  given  to  operate  as  security  for  a 
debt  are  deemed  to  be  mortgages  for  the  purposes  of  the  act.  This  tax 
on  mortgages  is  in  lieu  of  all  other  taxes.  In  1913  this  tax  on  mort- 
gages was  extended  to  those  recorded  outside  of  the  State  securing 
debts  originating  in  the  State.  The  mortgage  recording  tax  held 
valid  in  Union  Trust  Co.  v.  Detroit,  170  Mich.  692. 

SECURED  DEBTS,  as  defined  in  the  statute  (see  Act  of  1913,  page 
242),  including  bonds  secured  by  mortgage  in  any  State  or  country 
other  than  Michigan  and  not  recorded  in  Michigan,  and  bonds  issued 
by  any  foreign  country  or  by  any  State  or  municipality,  are  subject 
to  a  tax,  payable  to  the  county,  of  one-half  of  1  per  cent  on  the  face 
value;  and  the  payment  of  this  tax  exempts  from  further  taxes  under 
the  laws  of  the  State. 

CORPORATIONS  as  a  rule  pay  taxes  upon  their  property  the  same 
as  individuals,  and  all  corporations,  foreign  and  domestic,  pay  a  fran- 
chise tax  of  one-half  of  one  mill  on  each  dollar  of  capital  stock,  or  any 
increase  thereof,  the  minimum  fee  being  five  dollars. 

The  State  Board  of  Assessors  makes  an  annual  assessment  of  rail- 
roads and  certain  other  public  utility  corporations,  under  the  rule 
fixed  by  Section  3,  Article  X,  of  the  Constitution. 

As  to  general  rule  for  assessment  of  corporations,  see  Citizens  Street 
Railway  v.  Common  Council  of  Detroit,  125  Mich.  673. 

Money  deposited  in  banks  is  assessed  not  as  chattels  but  as  credits. 
Radiator  Co.  v.  Wayne  County.  192  Mich.  449. 


842  STATE   TAXATION    SYSTEM — MICHIGAN. 

BANKS  are  assessed  upon  their  real  estate,  the  shares  being  assessed 
at  their  actual  cash  value,  less  the  value  of  the  real  estate,  to  the  stock- 
holders and  at  the  place  where  the  bank  is  located,  except  that  shares 
owned  by  residents  of  the  county  in  which  the  bank  is  located  are  as- 
sessed to  the  owner  where  he  resides.  First  National  Bank  v.  St. 
Joseph,   46  Mich.   326. 

INHERITANCE  TAX. — The  inheritance  tax  law  imposes  a  tax  upon 
the  transfer  of  any  property  by  will  or  intestacy  over  the  value  of 
$100.00,  whether  by  a  resident  of  the  State  or  where  the  transfer  is  of 
any  property  within  the  State  when  the  decedent  was  a  non-resident 
of  the  State  at  the  time  of  his  death.  When  an  inheritance  passes  to 
a  direct  heir  of  decedent,  no  tax  is  collected  except  on  personal  property 
valued  at  $2,000.00  or  over,  in  which  case  the  rate  is  1  per  cent. 

The  tax  is  for  the  use  of  the  State  and  is  applied  to  educational 
purposes  and  to  the  payment  of  principal  and  interest  of  the  State 
debts.  The  amount  of  inheritance  tax  is  determined  by  the  Probate 
Court,  and  the  Insurance  Commissioner  is  directed,  upon  application 
of  any  judge  of  the  Probate  Court,  to  determine  the  value  of  any  future 
or  contingent  estate. 

LICENSES. — As  to  licenses  upon  different  business  and  occupations, 
see  statute. 

FOREIGN  LIFE  AND  INSURANCE  COMPANIES  other  than  life,  are 
taxed  2  per  cent  of  their  gross  premiums,  and  fire  insurance  companies 
pay  a  tax  of  3  per  cent.  A  retaliatory  tax  is  levied  upon  insurance 
companies  of  other  States  which  levy  heavier  taxes  on  Michigan  com- 
panies. 

POLL  TAX. — There  is  no  State  or  county  poll  tax,  but  villages  have 
power  to  levy  a  poll  tax  on  males  between  the  ages  of  21  and  60  to 
pay  for   the  general   highway   fund. 

COUNTY  AND  MUNICIPAL  TAXATION.— For  county  and  municipal 
taxation,  the  property  included  in  the  assessment  and  equalization  is 
the  same  as  in  State  taxation.  The  assessment  of  all  property  is  made 
annually.  The  State  Board  of  Tax  Commissioners  is  supervisory 
board  over  the  assessment  oflBcials  and  has  power  to  compel  an  observ- 
ance of  the  law. 

ASSESSMENT. — There  is  no  equalization,  so-called,  between  indi- 
viduals, but  excessive  assessments  and  under-valuations  may  be  cor- 
rected by  the  local  Board  of  Review  in  the  township,  or  by  the  Count}' 


STATE   TAXATION    SYSTEM MINNESOTA.  843 

\ 

Board  of  Supervisors,  or  by  the  Board  of  State  Tax  Commissioners. 
The  State  Board  of  Equalization  in  every  consecutive  third  and  fifth 
year  after  1911  equalizes  the  valuation  of  all  property  in  the  State. 

Deduction  of  debts  from  credits  in  listing  personal  property  held 
valid  in  Stumpf  v.  Storz,  156  Mich.  228. 

COLLECTIONS. — General  taxes  are  assessed  on  the  second  Monday 
of  April  in  each  year.  The  State,  county  and  school  taxes  are  payable 
on  December  1st.  On  March  1st  a  list  is  made  of  all  land  on  which  the 
tax  is  delinquent.  All  taxes  create  a  lien  on  land  and  personal  property, 
and  lands  may  be  sold  for  payment  of  taxes.  Taxes  are  delinquent 
on  the  10th  of  January,  when  the  collection  fee  becomes  4  per  cent; 
and  in  case  payment  is  not  made,  the  treasurer  collects  by  seizure  and 
sale. 

MINNESOTA 

(Constitution  as  amended  1906,  Art.  IX,  Sec.  1.) 
"Article  IX,  Sec.  1.  The  power  of  taxation  shall  never  be  surren- 
dered, suspended,  or  contracted  away.  Taxes  shall  be  uniform  upon  the 
same  class  of  subjects,  and  shall  be  levied  and  collected  for  public 
purposes,  but  public  burying  grounds,  public  schoolhouses,  public  hos- 
pitals, academies,  colleges,  universities,  and  all  seminaries  of  learning, 
all  churches,  church  property  used  for  religious  purposes,  and  houses 
of  worship,  institutions  of  purely  public  charity,  and  public  property 
used  exclusively  for  any  public  purposes,  shall  be  exempt  from  taxa- 
tion, and  there  may  be  exempted  from  taxation  personal  property  not 
exceeding  in  value  $200,  for  each  household,  individual,  or  head  of  a 
family,   as  the  legislature  may  determine. 

"Art.  rv,  Sec.  32a.  Any  law  providing  for  the  repeal  or  amendment 
of  any  law  or  laws  heretofore  or  hereafter  enacted,  which  provides 
that  any  railroad  company  now  existing  in  this  State,  or  operating  its 
road  therein,  or  which  may  be  hereafter  organized,  shall  in  lieu  of  all 
other  taxes  and  assessments  upon  their  real  estate,  roads,  rolling  stock, 
and  other  personal  property,  at  and  during  the  time  and  periods  therein 
specified,  pay  into  the  treasury  of  this  State  a  certain  percentage 
therein  mentioned  of  the  gross  earnings  of  such  railroad  companies 
now  existing  or  hereafter  organized,  shall,  before  the  same  shall  take 
effect  or  be  in  force,  be  submitted  to  a  vote  of  the  people  of  the  State 
and  be  adopted  and  ratified  by  a  majority  of  the  electors  of  the  State 
voting  at  the  election  at  which  the  same  shall  be  submitted  to  them." 


ADMINISTRATION. — There  is  a  Tax  Commission  charged  with  the 
duty  of  supervision,  equalization  and  recommendation. 

RAILROADS. — Railroad  companies,  in  lieu  of  all  other  taxes  and 
assessments  upon  their  property  within  the  State  owned  and  operated 
for  railroad  purposes,  pay  into  the  State  Treasury  5  per  cent  of  the 


844*  STATE   TAXATION    SYSTEM MINNESOTA. 

gross  earnings  derived  from  the  operation  of  ttieir  lines  within  the 
State,  including  a  portion  of  the  entire  earnings  based  upon  the  pro- 
portion of  the  mileage  within  the  State  to  the  entire  mileage.  It  is 
defined  as  a  property  tax  based  upon  earnings.  (See  State  v.  Express 
Co.,  114  Minn.  346.     See  also  Sec.  254,  supra.) 

PUBLIC  UTILITIES. — Sleeping  car  companies  are  taxed  on  the  same 
basis.  Express  companies  pay  6  cents  on  their  gross  earnings  (sus- 
tained by  Supreme  Court  of  U.  S.,  supra.  Sec.  254),  telephone  com- 
panies 3  per  cent  on  their  gross  earnings.  Telegraph  companies  are 
assessed  by  the  State  Tax  Commission  on  the  basis  of  the  value  of 
the  entire  system.  Trust  companies  not  receiving  deposits  subject  to 
check,  pay  5  per  cent  on  their  gross  earnings. 

Trust  companies  that  do  a  banking  business  are  assessed  and  taxed 
the  same  as  banks. 

BANKS. — The  stock  of  national  and  State  banks  is  assessed  to  the 
holders,  and  the  real  estate  assessment  is  deducted  the  balance  of  stock 
valuation  being  extended  on  basis  of  40  per  cent. 

INSURANCE  COMPANIES. — Insurance  companies  pay  a  sum  equal 

to  2  per  cent  of  their  gross  premiums  on  business  in  the  State. 

MORTGAGES. — There  is  a  mortgage  recording  tax.  If  the  mortgage 
by  its  terms  is  payable  not  more  than  five  years  after  its  date,  the  tax 
is  15  cents  on  each  $100;  if  more  than  five  years  it  is  25  cents.  The 
payment  of  the  registry  tax  exempts  the  mortgage  from  all  other 
tax.  The  mortgage  recording  taxes  are  apportioned  one-sixth  to 
revenue  fund  of  the  State,  one-sixth  to  the  county  revenue  fund,  and 
the  balance  divided  equally  between  the  school  district  and  the  city 
or  town  where  the  property  is  located.  (This  law  held  valid  in  Ins. 
Co.  V.  County  of  Martin,  104  Minn.  179.     See  also  117  Minn.  192.) 

MONEY  AND  CREDITS.— Money  and  credits  in  lieu  of  all  other 
taxes  are  subject  to  an  annual  tax  of  three  mills  on  each  dollar.  The 
proceeds  are  apportioned  in  the  same  manner  as  the  mortgage  recording 
taxes.  (This  classification  was  held  valid  in  State  v.  Minn.  Tax  Com., 
117  Minn.  192  (1912)  1.) 

Grain  in  elevators  and  vessels  navigating  the  international  waters, 
are  subject  to  specific  taxes. 

CLASSIFICATION.— All  real  and  personal  property  in  the  State 
which  is  not  subject  to  a  gross  earnings  or  other  tax  in  lieu  thereof, 
or  specifically  exempted  from  taxation,  is  subject  to  a  classified  general 
property  tax.     (See  Chap.  483,  Laws  of  1913.) 


STATE   TAXATION    SYSTEM — MINNESOTA.  845 

Property  subject  to  this  tax  is  divided  into  four  classes,  and  each 
class  assessed  at  a  different  percentage  of  the  "true  and  full  value." 
The  first  class  covers  iron  ore,  whether  mined  or  in  the  ground,  and 
assessed  at  50  per  cent  of  Its  value.  The  second  class  covers  household 
goods  assessed  at  25  per  cent  of  its  full  value.  The  third  class  covers 
live  stock,  agricultural  products,  merchandise,  manufacturer's  ma- 
terials and  products,  tools,  implements  and  machinery,  and  all  un- 
platted real  estate  assessed  at  SZVs  cents  of  its  full  value.  The  fourth 
class  covers  all  platted  real  estate  not  included  in  the  first  three 
classes  and  is  assessed  at  40  per  cent  of  its  full  value.  The  assessor,  in 
valuing  property,  is  required  to  set  down  the  true  and  full  value  of 
the  article  of  personal  property  and  the  tract  of  real  estate  assessed 
by  him,  and  to  enter  in  a  separate  column  the  assessed  value  according 
to  the  class  in  which  the  property  belongs. 

POLL  TAX. — There  is  also  a  poll  tax  assessed  at  the  rate  of  ?l-?0 
per  day  for  each  male  inhabitant  within  the  age  of  21  and  50  years, 
except  paupers  and  insane  persons,  in  labor  of  not  less  than  one  nor 
more  than  four  days'  road  labor.  A  person  subject  to  the  tax  must 
furnish  an  able-bodied  substitute  or  commute  for  the  labor  at  that  rate 
of  $1.50  per  day. 

INHERITANCE  TAX. — ^An  inheritance  tax  is  levied  upon  the  trans- 
fer of  any  property  in  the  State  by  will  or  intestacy,  or  in  contempla- 
tion of  death,  by  any  resident,  or  of  any  property  by  a  non-resident, 
within  the  State  or  the  jurisdiction  of  the  State,  with  an  exemption  of 
$10,000  to  the  husband  or  widow  or  lineal  child  or  adopted  children, 
$3,000  to  a  lineal  ancestor,  $1,000  to  a  collateral  relative,  with  exemp- 
tions of  collateral  relatives  from  $1,000  to  $100,  according  to  the  degree 
of  relationship;  $2,500  to  charities  within  the  State,  and  a  full  exemp- 
tion of  any  devise  to  any  municipal  corporation  in  the  State,  the  rates 
varying  from  1  per  cent  to  wife  or  lineal  issue  where  the  amount  does 
not  exceed  $15,000,  to  15  per  cent  to  remote  collaterals  and  strangers 
in  blood  in  excess  of  $100,000. 

EXEMPTIONS. — Exemptions  include  property  held  for  religious, 
charitable  and  educational  uses,  libraries,  personal  property  of  indi- 
viduals up  to  $100,  agricultural  societies,  fraternal,  beneficial  associa- 
tions, armories  and  drill  halls,  uniforms,  arms  and  equipment  of  na- 
tional guard  up  to  $200. 

ASSESSMENT. — Assessment  is  made  with  reference  to  holding  on 
May  1st.  Real  property  assessed  each  even  numbered  year.  Personal 
property  is  assessed  annually. 


846  STxVTE  TAXATION   SYSTEM — MISSISSIPPI. 

Counties  receive  10  per  cent  of  inheritance  tax;  balance  goes  to  the 
State. 

COLLECTIONS. — The  lien  of  the  State  attaches  on  the  first  Monday 
in  January  and  personal  property  is  listed  as  of  May  1st  and  taxes 
become  delinquent  March  1st,  and  is  thereafter  subject  to  penalty  of 
10  per  cent  added.  On  real  estate  a  penalty  of  10  per  cent  is  added  on 
the  first  of  June  unless  one-half  the  tax  is  paid,  in  which  case  no 
penalty  attaches  until  November  1st,  when  the  penalty  is  added  to  the 
unpaid  tax.  On  the  first  Monday  in  January  the  additional  penalty 
of  5  per  cent  is  added  and  the  tax  becomes  delinquent.  Judgment  is 
entered  by  the  County  Auditor  against  the  land  and  when  the  three 
years'  time  redemption  expires  notice  is  given  and  if  not  redeemed 
the  purchaser's  title  becomes  absolute  60  days  thereafter. 

MISSISSIPPI 

(Constitution.) 

Sec.  70.  No  revenue  bill  or  any  bill  providing  for  assessment  of 
property  for  taxation  shall  become  a  law  except  by  a  vote  of  at  least 
three-fifths  of  the  members  of  each  House,  present  and  voting.  (As  to 
enforcement  of  this  section,  see  Hunt  v.  Wright,  70  Miss.  298.) 

Sec.  80.  Provision  shall  be  made  by  general  laws  to  prevent  the 
abuse  by  cities,  towns,  and  other  municipal  corporations,  of  their 
powers  of  assessment,  taxation,  borrowing  money  and  contracting 
debts. 

Sec.  90.  (The  legislature  prohibited  from  passing  local  and  special 
laws  exempting  property  from  taxation  or  from  levy  of  taxation.) 

Sec.  100.  No  obligation  or  law  of  any  person,  association  or  corporar 
tion  held  or  owned  by  this  State,  or  levee  board,  or  any  county,  city 
or  town  thereof,  shall  ever  be  remitted,  released  or  postponed,  or  in 
any  wise  diminished  by  the  legislature,  nor  shall  such  liability  or 
obligation  be  extinguished  except  by  payment  thereof  into  the  proper 
treasury. 

Sec.  112.  Taxation  shall  be  uniform  and  equal  throughout  the  State. 
Property  shall  be  taxed  in  proportion  to  its  value.  The  legislature  may, 
however,  impose  a  tax  per  capita  upon  such  domestic  animals  as  from 
their  nature  and  habits  are  destructive  of  other  property.  Property 
shall  be  assessed  for  taxes  under  general  laws,  and  by  uniform  rules, 
according  to  its  true  value.  But  the  legislature  may  provide  for  a 
special  mode  of  valuation  and  assessment  for  railroads,  and  railroad 
and  other  corporate  property,  or  for  particular  species  of  property  be- 
longing to  persons,  corporations  or  associations  not  situated  wholly  in 
one  county.  But  all  such  property  shall  be  assessed  at  its  true  value, 
and  no  county  shall  be  denied  the  right  to  levy  county  and  special 
taxes  upon  such  assessments  as  in  other  cases  of  property  situated 
and  assessed  in  the  county. 


STATE   TAXATION    SYSTEM — MISSISSIPPI.  847 

Sec.  178.  Corporations  shall  be  formed  under  general  laws  only. 
.  .  .  In  assessing  for  taxation  the  property  and  franchises  of  cor- 
porations having  charters  for  a  longer  period  than  ninety-nine  years, 
the  increased  value  of  such  property  and  franchises  arising  from  a 
longer  duration  of  their  charter  shall  be  considered  and  assessed; 
but  any  such  corporation  shall  have  the  right  to  surrender  the  excess 
over   ninety-nine   years   of   its   charter. 

Sec.  182.  The  power  to  tax  corporations  and  their  property  shall 
never  be  suspended  or  abridged  by  any  contract  or  grant  to  which  the 
State  or  any  political  subdivision  thereof  may  be  a  party,  except  that 
the  legislature  may  grant  exemptions  from  taxation  in  the  encourage- 
ment of  manufactures  and  other  new  enterprises  of  public  utility  ex- 
tending for  a  period  not  exceeding  five  years.  .  .  .  (Provided  that 
the  legislature  shall  grant  such  exemptions  for  five  years  or  less  by 
general  laws.) 

Sec.  192.  (Providing  that  cities  and  towns  may,  by  general  laws, 
be  authorized  to  encourage  the  establishment  of  manufactories,  etc., 
within  the  limits  of  the  city  by  exempting  property  used  for  such 
purposes  from  municipal  taxation  for  a  period  longer  than  ten  years.) 

Sec.  195.  The  rolling  stock  of  a  railroad  company  is  considered 
personal  property. 

Sec.  243.  A  poll  tax  of  two  dollars,  in  aid  of  common  schools  and 
for  no  other  purpose,  is  imposed  on  "males  between  twenty-one  and 
sixty  years  of  age. 


ADMINISTRATION.— A  Board  of  State  Tax  Commissioners  was 
created  in  1916  consisting  of  three  members  appointed  by  the  Gov- 
ernor with  the  advice  and  consent  of  the  Senate  for  a  term  of  four 
years,  and  are  required  to  give  their  entire  time  to  the  duties  of 
their  office.  This  commission  is  authorized  to  adjust  and  equalize 
valuation  throughout  the  State  and  one  or  more  of  its  members  must 
visit  every  county  in  the  State  each  year  to  confer  with  local  asses- 
sors, and  has  powers  of  investigation  and  recommendation.  The 
county  assessors  are  elected  and  the  Sheriff  is  ex-officio  tax  collector. 
The  county  boards  of  supervisors  sit  as  boards  of  equalization. 

GENERAL  PROPERTY  TAX.— All  property,  whether  of  corpora- 
tions or  individuals,  unless  exempt,  is  subject  to  the  General  Prop- 
erty Tax  paid  locally  for  State  and  local  purposes.  Property  of  rail- 
road, express,  sleeping  car,  telegraph  and  telephone  companies  used 
in  their  business,  is  assessed  by  the  Railroad  Commission.  All  other 
taxable   property   is  assessed   by  the  local   assessors. 

RAILROADS. — Railroads  are  taxed  for  State  and  local  purposes 
upon  the  value  of  their  property;  and  an  additional  State  tax  in  the 


848  STATE  TAXATION   SYSTEM — MISSISSIPPI. 

nature  of  a  privilege  tax,  is  levied.  The  value  of  the  franchise  and 
the  capital  stock  engaged  in  business  in  the  State,  is  considered;  and 
the  value  is  then  apportioned  to  counties  and  municipalities.  Real 
estate  not  used  in  the  railroad  business,  is  assessed  locally.  Tele- 
graph, telephone,  express,  sleeping  car,  palace  car,  and  dining  car 
companies  are  assessed  for  ad  valorem  taxation  in  the  same  manner 
as  railroads.  They  are  also  subject  to  privilege  taxes  for  State  pur- 
poses. 

(As  to  privilege  tax  on  telegraph  companies,  see  U.  S.  Telegraph 
Cable  Co.  v.  Adams,  155  U.  S.  688.  As  to  privilege  taxes  on  express 
companies,  see  Code  of  1906,  Sec.  3810,  as  amended.  Laws  of  1910, 
ch.  94,  Sec.  14.  As  to  privilege  tax  on  railroads,  see  Code,  Sec.  3856, 
amended  by  Laws  of  1912,  ch.  102.) 

Counties  and  municipalities  are  prohibited  from  Terying  a  similar 
tax  on  telegraph,  express,  or  sleeping  car  companies.  (See  Code 
1906,  Sec.  3909.) 

FREIGHT  LINE  AND  EQUIPMENT  COMPANIES.— Freight  line 
and  equipment  companies  pay  the  State  for  State  purposes,  in  lieu  of 
all  other  taxes,  a  gross  earning  tax  of  3  per  cent.  (See  Laws  of  1912, 
ch.  113  and  114.) 

BUSINESS  CORPORATIONS.— Business  corporations  other  than 
the  foregoing,  pay  not  only  the  General  Property  Tax,  but,  as  prac- 
tically all  of  these  classes  of  corporations  do,  pay  locally  a  privilege 
tax  for  State  purposes.  Certain  kinds  of  manufacturing  plants  are 
exempt  from  State,  county  and  levee  taxation  for  the  first  five  years 
of  their  establishment;  and  municipalities  may  grant  such  exemption 
for  ten  years.     (See  Laws  of  1912,  ch.  115.) 

FOREIGN  CORPORATIONS.— By  Act  of  1916,  the  law  fixing  fees 
to  be  paid  by  foreign  corporations  filing  their  charters  or  certificates 
of  incorporation,  was  amended  go  as  to  place  foreign  and  domestic 
corporations  on  an  equal  footing  with  respect  to  such  fees,  thus  sub- 
stantially increasing  the  fees  paid  by  foreign  corporations. 

INCOME  TAX.— There  is  a  State  income  tax  of  five  mills  on  the 
dollar  on  all  annual  incomes  which  exceed  $2500..  Where  income  is 
derived  from  property  on  which  an  ad  valorem  tax  is  paid  the  amount 
of  said  tax  is  deducted  from  the  income.  Each  person  is  required  to 
fill  a  blank,  showing  the  amount  of  income  from  all  sources,  and  for- 


STATE   TAXATION    SYSTEM — MISSISSIPPI.  849 

ward  same  to  State  Auditor,  who  notifies  County  Collector  of  amount 
to  be  collected  in  county.     (See  Laws  of  1912,  Chap.  101.) 

BANKS.— Bank  stock  both  State  and  national  is  assessed  to  the 
shareholders  upon  a  statement  by  the  bank  oflBcers  of  the  value  of  the 
shares  exclusive  of  the  real  estate  owned  by  the  bank.  The  taxes  on 
such  shares  of  stock  is  paid  by  the  bank.  The  real  estate  of  the  bank 
is  taxed  as  other  real  estate. 

ASSESSMENT. — Property  in  this  State  is  subject  to  one  assess- 
ment for  State,  county  and  municipal  purposes.  The  taxpayer  must 
furnish  to  the  assessor  a  sworn  list  of  all  taxable  property  in  his 
hands  on  the  first  day  of  February.  Lands  are  assessed  between  Feb- 
ruary first  and  July  first  in  every  second  year.  Valuation  of  lands 
may  be  given  by  the  owner,  but  is  subject  to  revision  by  the  Board 
of  Supervisors.  Property  is  valued  at  the  price  it  would  bring  at  a 
voluntary  sale. 

EXEMPTIONS. — Property  exempt  from  taxation,  in  addition  to  pub- 
lic property  and  property  used  for  religious,  charitable  and  educa- 
tional purposes,  includes  wearing  apparel,  provisions  for  family  con- 
sumption, farm  products  in  the  hands  of  the  producer,  one  gun  for 
each  owner,  poultry,  household  furniture  to  the  value  of  $250,  two 
cows  and  calves,  20  head  of  sheep,  10  head  of  hogs,  colts  under  three 
years  of  age,  farming  implements,  property  of  agricultural  and  me- 
chanical associations,  all  libraries  and  all  works  of  art,  and  me- 
chanics' tools,  certain  factories  for  five  years,  and  municipalities  may 
grant  exemption  to  certain  factories  for  ten  years,  all  State,  county 
and  municipal  levee  and  school  bonds  issued  after  April  1,  1906.  All 
notes  and  evidences  of  indebtedness  and  all  money  loaned  at  a  rate 
not  exceeding  6  per  cent;  grain  separators,  harvesters,  feed  crushers, 
and  cutters,  rice  and  flouring  mills  of  20  horse-power  are  exempt  for 
a  period  of  five  years  from  1912. 

PRIVILEGE  TAXES. — A  large  amount  of  revenue  is  derived  from 
an  elaborate  system  of  privilege  taxes  for  State  revenue.  (See  Act  of 
1916,  ch.  89,  90,  91  and  94.) 

POLL  TAX. — A  State  poll  tax  of  two  dollars  is  levied  upon  every 
male  over  twenty-one  and  under  sixty.  Failure  to  pay  the  poll  tax 
prevents  voting  at  any  election. 

LEVEE  DISTRICT  TAXATION.— This  is  an  important  feature  of 
the  taxing  system  of  the  State,  and  it  has  been  said  that  the  locality 


850  STATE   TAXATION    SYSTEM MISSOURI. 

embraced  in  the  territory  between  the  Mississippi  and  the  Yazoo 
Mississippi  Delta  levee  district  is  one  of  the  most  heavily  taxed  dis- 
tricts in  the  United  States.  (See  Laws  of  1902,  ch.  80,  Privilege  Tax 
Laws  of  the  Yazoo  Mississippi   Delta  District,  1910.) 

COLLECTIONS. — Taxes  become  delinquent  on  December  15  of  each 
year.  Taxes  on  personal  property  are  collected  immediately  after  such 
date  by  distress  and  sale.  After  January  15th  of  each  year  the  tax  col- 
lector advertises  the  sale  of  land  for  taxes  on  the  first  Monday  in  April. 
Taxes  are  a  lien  from  February  1st  of  the  year  of  assessment. 

MISSOURI 

(Constitution.) 

Art.  X,  Sec.  1.  The  taxing  power  may  be  exercised  by  the  General 
Assembly  for  State  purposes  and  by  counties  and  other  municipal 
corporations  under  authority  granted  to  them  by  the  General  As- 
sembly for  county  and  other  corporate  purposes. 

Sec.  2.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  act  of  the  General  Assembly. 

Sec.  3.  Taxes  may  be  levied  and  collected  for  public  purposes  only. 
They  shall  be  uniform  upon  the  same  class  of  subjects  within  the 
territorial  limits  of  the  authority  levying  the  tax,  and  all  taxes  shall 
be  levied  and  collected  by  general  laws. 

Sec.  4.  All  property  subject  to  taxation  shall  be  taxed  in  proportion 
to  its  value. 

Sec.  5.  All  railroad  corporations  in  this  State,  or  doing  business 
therein,  shall  be  subject  to  taxation  for  State,  county,  school,  muni- 
cipal and  other  purposes  on  the  real  and  personal  property  owned  or 
used  by  them,  and  on  their  gross  earnings,  their  net  earnings,  their 
franchises  and  their  capital  stock. 

Sec.  6.  The  property,  real  and  personal,  of  the  State,  counties  and 
other  municipal  corporations,  and  cemeteries,  shall  be  exempt  from 
taxation.  Lots  in  incorporated  cities  or  towns,  or  within  one  mile 
of  the  limits  of  any  such  city  or  town,  to  the  extent  of  one  acre,  and 
lots  one  mile  or  more  distant  from  such  cities  or  towns,  to  the  extent 
of  five  acres,  with  the  buildings  thereon,  may  be  exempted  from  taxa- 
tion when  the  same  are  used  exclusively  for  religious  worship,  for 
schools,  or  for  purposes  purely  charitable;  also,  such  property,  real 
or  personal,  as  may  be  used  exclusively  for  agricultural  or  horticul- 
tural societies;  Provided,  that  such  exemption  shall  be  only  by  gen- 
eral law. 

Sec.  7.  All  laws  exempting  property  from  taxation,  other  than  the 
property  above  enumerated,  shall  be  void. 

Sec.  8.  (The  State  tax  is  limited  to  15  cents  on  $100  valuation,  the 
taxable  property  of  the  State  having  reached   $900,000,000.) 


STATE   TAXATION    SYSTEM — MISSOURI.  851 

Sec.  10.  The  General  Assembly  shall  not  impose  tax  upon  counties, 
cities,  towns  or  other  municipal  corporations,  or  upon  the  inhabitants 
or  property  thereof,  for  county,  city,  town  or  other  municipal  pur- 
poses, but,  may,  by  general  laws,  vest  in  the  corporate  authorities 
thereof  the  power  to  assess  and  collect  taxes  for  such  purposes. 

Sec.  11.  Taxes  for  county,  city,  town  or  school  purposes  may  be 
levied  on  all  subjects  and  objects  of  taxation,  but  the  valuation  of 
property  therefor  shall  not  exceed  the  valuation  of  the  same  property 
in  such  town,  city  or  school  district  for  State  and  county  pur- 
poses. 

(The  tax  rate  for  county,  city  and  town  purposes  is  limited  accord- 
ing to  population  with  provision  for  increase  for  purpose  of  erecting 
public  buildings,  or  by  popular  vote  for  the  purpose  of  erecting  school 
buildings.  For  an  amendment  thereto  held  void  as  violative  of 
Fourteenth  Amendment,  see  State  ex  rel.  v.  Railway,  195  Mo.  228.) 

Sec.  12.  (The  municipal  indebtedness  is  limited  to  not  exceeding  5 
per  cent  of  the  value  of  taxable  property  with  provision  for  an  in- 
crease by  two-thirds  of  voters'  vote  for  the  erection  of  county  buildings 
or  necessary  roads  and  bridges.) 

Sec.  12a.  (Cities  of  between  2000  and  30,000  inhabitants  with  the 
assent  of  two-thirds  of  the  voters  voting  are  allowed  to  become  in- 
debted to  not  exceeding  5  per  cent  of  the  taxable  property  therein  for 
the  purpose  of  purchasing  or  constructing  waterworks,  electric  or 
other  light  plants  to  be  owned  exclusively  by  the  city.  St.  ex.  v. 
Allen,  183  Mo.  283.) 

Sec.  18.  There  shall  be  a  State  Board  of  Equalization  consisting  of 
the  Governor,  State  Auditor,  State  Treasurer,  Secretary  of  State  and 
Attorney  General.  The  duty  of  said  board  shall  be  to  adjust  and 
equalize  the  value  of  real  and  personal  property  among  the  several 
counties  in  the  State  and  it  shall  perform  such  other  duties  as  are 
or  may  be  prescribed  by  law. 

(The  equalization  by  this  board  of  the  valuation  of  any  class  of 
property  under  the  statute  enacted  hereunder  is  controlling  and  such 
valuation  cannot  be  raised  thereafter  by  a  local  board  for  the  taxation 
of  that  year.     See  State  ex  rel.  v.  Schramm,  269  Mo.  489.) 

Sec.  22.  (The  county  court  in  counties  and  township  boards  in 
counties  under  township  organization  authorized  to  levy  a  special  tax 
not  exceeding  25  cents  on  $100  to  be  used  for  road  and  bridge  pur- 
poses.)     Adopted,  1908. 


LEGISLATION  OF  1917.— The  revenues  of  the  State  under  the 
General  Property  Tax  imposed  upon  persons  and  corporations  through 
assessments  by  local  assessors  elected  by  the  people  (railroads  and 
certain  public  utilities  being  assessed  by  the  State  Board  of  Equali- 
zation) proving  inadequate  for  the  demands  of  the  State,  important 
changes  were  made  by  the  General  Assembly  of  1917  (see  Session 
Acts,  1917).     These  changes  include: 


852  STATE   TAXATION    SYSTEM MISSOURI. 

TAX  COMMISSION. — First,  the  creation  of  a  tax  commission  of 
three  members  appointed  by  the  Governor,  whose  duty  it  is  to  co- 
operate with  the  State  Board  of  Equalization  in  equalizing  the  as- 
sessment of  property  throughout  the  State  and  also  to  exercise  a 
supervision  and  investigation  of  State  expenditures,  and  to  make  a 
budget  to  guide  the  legislature  in  making  appropriations. 

CORPORATION  FRANCHISE  TAX.— Second,  a  corporation  fran- 
chise tax  on  the  capital  stock  and  surplus  of  all  corporations,  both 
domestic  and  foreign,  doing  business  in  this  State  amounting,  in  ad- 
dition to  all  other  fees  and  taxes,  to  3/40  of  1  per  cent  of  the  par 
value  of  the  outstanding  capital  stock  and  surplus.  If  the  corpora- 
tion employs  a  part  of  its  capital  stock  in  business  in  another  State 
or  country,  then  it  pays  this  franchise  tax  on  that  proportion  of  its 
capital  and  surplus  employed  in  the  State.  The  Act  does  not  apply 
to  corporations  not  organized  for  profit  nor  to  express  companies 
which  pay  an  annual  tax  on  their  gross  receipts,  nor  to  insurance 
companies  which  pay  an  annual  tax  on  their  gross  premium  receipts. 
Annual  reports  are  required  to  be  made  by  corporations  liable  for  this 
tax  on  or  before  the  first  day  of  February,  in  the  form  prescribed  by 
the  Missouri  Tax  Commission. 

SECURED  DEBT  TAX.— Third,  a  Secured  Debt  Tax,  whereunder 
bonds  of  every  State  or  political  subdivision  thereof,  and  any  bonds 
and  notes  secured  by  collateral,  and  any  bonds  not  payable  within 
one  year  and  not  secured  by  collateral,  or  a  mortgage  or  deed  of 
trust,  wholly  or  in  part  upon  real  estate,  are  made  a  separate  and 
distinct  class  for  taxation,  and  are  subjected  to  a  tax  for  State  pur- 
poses at  the  rate  of  five  cents  per  $100  face  value  for  each  year  the 
secured  debt  has  to  run,  up  to  four  years,  after  which  time  the  tax 
is  twenty-five  cents  per  $100.  Taxes  not  exceeding  this  rate  are  au- 
thorized for  county  purposes,  and  further  taxes  not  exceeding  this 
rate  may  be  levied  by  cities  and  incorporated  towns.  The  City  of  St. 
Louis,  though  not  in  a  county,  is  authorized  to  levy  taxes  as  a 
county  and  as  a  city. 

After  the  payment  of  this  tax  the  Secured  Debt  is  exempted  from 
all  other  or  further  taxation  by  the  State  or  any  county,  municipality 
or  subdivision  thereof  except  that  renewals  of  the  debt  are  taxed  as 
provided  in  the  act. 

INCOME  TAX.— Fourth,  an  Income  Tax  of  one-half  of  one  per 
cent  levied  upon  incomes  from  all  sources  in  excess  of  $3000  for 
single  persons  and  $4000  married  persons,  the  general  provisions  of 


STATE   TAXATION    SYSTEM MISSOURI.  853 

the  Act  being  similar  to  those  of  the  Federal  Income  Tax.  This  tax 
upon  incomes  is  imposed  both  upon  individuals  and  corporations.  The 
concluding  clause  of  the  Act,  Sec.  32,  provides  that  the  exhibition  of 
a  tax  receipt  upon  any  real  or  personal  property  may  be  exhibited  in 
payment  of  the  income  tax. 

INHERITANCE  TAX.— In  lieu  of  the  Collateral  Inheritance  Tax  of 
5  per  cent  theretofore  existing,  a  direct  inheritance  tax  upon  all  de- 
grees of  relationship  was  imposed,  varying  according  to  the  degree 
of  relationship  from  1  per  cent  to  5  per  cent,  and  also  progressing 
according  to  the  amount  of  inheritance,  this  rate  applying  where  the 
amount  is  $20,000  or  less.  From  $20,000  to  $40,000  the  rate  is 
double;  from  $40,000  to  $80,000,  treble;  from  $80,000  to  $200,- 
000,  quadruple;  from  $200,000  to  $400,000  the  rates  were  quintuple, 
and  upon  all  in  excess  of  $400,000  sextuple.  $15,000  are  exempted  in 
the  case  of  surviving  husband  or  wife,  and  $5,000  to  direct  ances- 
tors or  descendants;  $250  to  brothers  or  sisters  of  the  father  or 
mother  of  the  descendants  or  their  descendants.  The  transfers  of 
less  than  $100  are  not  subject  to  any  tax.  Devises  for  any  religious, 
educational,  or  charitable  purposes  in  this  State  are  exempted. 

The  tax  applies  to  all  property  passing  by  will  or  intestacy  from  a 
resident  of  the  State,  or  to  property  within  the  jurisdiction  of  the 
State  where  deceased  was  a  non-resident  of  the  State  at  the  time  of 
his  death. 

LICENSES. — Sixth.  State  saloon  licenses  were  increased,  and  a 
tax  also  imposed  upon  "soft  drinks,"  the  same  being  required  to  be 
inspected  by  the  Inspector  of  Beer  and  Malt  Products. 

Seventh.  A  State  automobile  license  was  increased  by  being  doubled 
and  appropriated  to  the  Good  Roads  Fund. 

These  taxes  were  all  supplemental  to  the  General  Property  Tax  on 
real  and  personal  property,  except  in  the  case  of  the  Secured  Debt 
Tax,  supra. 

EXPRESS  COMPANIES  AND  INSURANCE  COMPANIES.— As  to 
taxation  of  the  gross  receipts  of  express  companies,  see  R.  S,  1909, 
Sees.  11,606,  11,612;  also  as  to  bridges,  telephone,  telegraph,  car  and 
express  companies. 

INSURANCE  COMPANIES.— For  taxation  of  insurance  companies, 
see  R.  S.  1909,  Sec.  7098,  e^  srq.  And  as  to  Occupation  Tax  on  insur- 
ance agents  in  cities,  see  Sec.  7104. 


854  STATE   TAXATION    SYSTEM — MISSOURI. 

BANKS.— The  list  of  shareholders  in  banks  and  banking  institutions 
is  delivered  by  the  chief  officer  of  the  corporation  to  the  assessor  with 
statement  of  all  property  represented  thereby — and  such  shares  are 
valued  at  "true  value  in  money" — less  value  of  real  estate.  The  tax 
is  paid  by  the  banks  for  the  holders.  The  valuation  of  all  the  bank- 
ing institutions  are  equalized  by  the  State  Board,  in  1916  at  50  per  cent 
of  "full  value,"  and  this  valuation  was  held  controlling  in  State  ex  rel. 
v.  Schramm,  supra. 

POLL  TAX.— There  is  no  State  poll  tax,  but  cities  of  different 
classes  are  authorized  to  levy  and  collect  a  poll  tax  not  exceeding 
$1.50  each  year  on  males  between  21  and  60  for  street  improvements. 
(See  R.  S.  1909,  Sec.  8588.) 

CORPORATE  SECURITIES.— The  shares  of  domestic  corporations 
are  not  taxable,  where  the  corporate  property  is  taxable.  The  shares 
of  stock  in  foreign  corporations  have  not  been  subjected  to  taxation  in 
the  State.  State  ex  rel.  v.  Lesser,  237  Mo.  310,  siipra.  Sec.  484.  The 
bonds  of  corporations,  whether  domestic  or  foreign,  are  subject  to  taxa- 
tion except  as  controlled  by  the  Secured  Debt  Law,  supra. 

MERCHANTS  AND  MANUFACTURERS  are  made  a  separate  class 
for  taxation,  and  pay  an  ad  valorem  general  property  tax  on  the  high- 
est amount  of  goods  in  their  possession  between  the  first  Monday  in 
March  and  the  first  Monday  in  June  of  each  year,  this  tax  being  paid 
in  the  form  of  a  license  which  the  merchants  and  manufacturers 
must  take  out  each  year.  The  counties  are  prohibited  from  levy- 
ing upon  such  licenses  more  than  100  per  cent  more  than  authorized 
for  State  purposes. 

The  City  of  St.  Louis  under  special  legislative  authority,  levies  a 
city  tax  of  one-fifth  of  1  per  cent  upon  merchants'  and  manufacturers' 
licenses  in  lieu  of  1.56  per  cent  levied  upon  other  property,  and  in 
lieu  of  such  reduction  in  the  ad  valorem  tax,  the  city  levies  a  tax 
on  sales  at  the  rate  of  $1.00  per  thousand.  See  Am.  Mfg.  Co.  v.  St. 
Louis,  238  Mo.   268. 

COLLECTIONS. — Taxes  are  assessed  as  of  the  first  day  of  June  of 
each  year  and  made  payable  in  the  year  following  the  assessment. 
If  not  paid  on  or  before  the  last  day  of  December,  a  penalty  of  one 
per  centum  per  month  is  added  as  interest  until  paid;  and  these 
penalties  with  the  taxes  are  a  lien  upon  the  property  assessed.  All 
taxes  remaining  unpaid  on  January  1st  which  are  previously  due  and 
payable,    are   termed    "delinquent"    or   back    taxes,    and    payment    of 


STATE   TAXATION    SYSTEM MONTANA.  855 

these  taxes  is  to  be  enforced  by  suit  and  sale  of  the  property,  as  in 
ordinary  actions.  In  suits  to  enforce  the  payment  of  taxes  on  real 
estate,  the  procedure  is  by  plenary  action,  wherein  all  persons  inter- 
ested in  the  property  are  made  necessary  parties.  (For  illustration  of 
this  procedure  in  Arizona,  adopted  from  Missouri,  see  Sec.  374,  supra.) 

MONTANA 

Art.  XII,  Sec.  1.  The  necessary  revenue  for  the  support  and  main- 
tenance of  the  State  shall  be  provided  by  the  legislative  assembly, 
which  shall  levy  a  uniform  rate  of  assessment  and  taxation,  and  shall 
prescribe  such  regulations  as  shall  secure  a  just  valuation  for  taxation 
of  all  property,  except  that  specially  provided  for.  The  legislature 
may  also  impose  a  license  tax,  both  upon  persons  and  corporations 
doing  business  in  the  State. 

Sec.  2.  The  property  of  the  United  States,  the  State,  counties, 
cities,  towns,  school  districts,  municipal  corporations,  and  public 
libraries  shall  be  exempt  from  taxation;  and  such  other  property  as 
may  be  used  exclusively  for  agricultural  and  horticultural  societies, 
for  educational  purposes,  places  for  actual  religious  worship,  hospi- 
tals and  places  of  burial  not  used  or  held  for  private  or  corporate 
profit,  and  institutions  of  purely  public  charity  may  be  exempt  from 
taxation. 

Sec.  3.  All  mines  and  mining  claims,  both  placer  and  roclc  in  place, 
containing  or  bearing  gold,  silver,  copper,  lead,  coal,  or  other  valuable 
mineral  deposits,  after  purchase  thereof  from  the  United  States,  shall 
be  taxed  at  the  price  paid  the  United  States  therefor,  unless  the  sur- 
face ground,  or  some  part  thereof,  of  such  mine  or  claim,  is  used  for 
other  than  mining  purposes,  and  has  a  separate  and  independent 
value  for  such  other  purposes,  in  which  case  said  surface  ground,  or 
any  part  thereof,  so  used  for  other  than  mining  purposes,  shall  be 
taxed  at  its  value  for  such  other  purposes,  as  provided  by  law;  and 
all  machinery  used  in  mining,  and  all  property  and  surface  improve- 
ments upon  or  appurtenant  to  mines  and  mining  claims  which  have 
a  value  separate  and  independent  of  such  mines  or  mining  claims, 
and  the  annual  net  proceeds  of  all  mines  and  mining  claims  shall  be 
taxed  as  provided  by  law. 

Sec.  4.     (Same  as  Sec.  181,  Kentucky  Const.  1891,  supra.) 
Sec.  5.     (Same  as  Sec.  11,  Missouri  Const.  1875,  supra.) 
Sec.  7.     (To  the  same  effect  as  Sec.  228  Const,  of  La.  1898.) 
Sec.  8.    Private  property  shall  not  be  taken  or  sold  for  the  corporate 
debts  of  public  corporations,  but  the  legislative  assembly  may  provide 
by  law  for  the  funding  thereof,  and  shall  provide  by  law  for  the  pay- 
ment thereof,  by  assessment  and  taxation  of  all  private  property  not 
exempt  from  taxation   within   the   limits  of  the  territory  over  which 
such  corporations  respectively  have  authority. 

Sec.  11.    Taxes  shall  be  levied  and  collected  by  general  laws  and  for 


856  STATE  TAXATION   SYSTEM — MONTANA. 

public  purposes  only.  They  shall  be  uniform  upon  the  same  class  of 
subjects  within  the  territorial  limits  of  the  authority  levying  the  tax. 

Sec.  12.  No  appropriation  of  public  moneys  shall  be  made  for  a 
longer  term  than  two  years. 

Sec.  16.  (Provides  for  assessment  of  railroad  tracks,  rolling  stock, 
etc.,  by  the  State  Board  of  Equalization  and  mileage  apportionment.) 

Sec.  17.  The  word  property  as  used  in  this  article  is  hereby  de- 
clared to  include  moneys,  credits,  bonds,  stocks,  franchises  and  all 
matters  and  things  (real,  personal  and  mixed)  capable  of  private  own- 
ership, but  this  shall  not  be  construed  so  as  to  authorize  the  taxation 
of  the  stocks  of  any  company  or  corporation  when  the  property  of 
such  company  or  corporation  represented  by  such  stocks  is  within  the 
State  and  has  been  taxed. 

(As  amended,  1916.) 

Chap.  47,  Sec.  15,  Art.  XII.  The  Board  of  County  Commissioners 
of  each  county  shall  constitute  a  County  Board  of  Equalization,  and 
the  Governor,  Secretary  of  State,  State  Treasurer,  State  Auditor  and 
Attorney  General  shall  constitute  a  State  Board  of  Equalization.  The 
duty  of  the  County  Board  of  Equalization  shall  be  to  adjust  and 
equalize  the  valuation  of  taxable  property  within  their  respective 
counties  and  all  such  adjustments  and  equalization  may  be  super- 
vised, reviewed,  changed,  increased  or  decreased  by  the  State  Board 
of  Equalization.  The  State  Board  of  Equalization  may  adjust  and 
equalize  the  valuation  of  taxable  property  among  the  several  coun- 
ties and  the  different  classes  of  taxable  property  in  the  same  and  in 
the  several  counties  and  between  individual  taxpayers;  supervise  and 
review  the  acts  of  County  Assessors  and  County  Boards  of  Equaliza- 
tion; change,  increase  or  decrease  valuations  made  by  County  As- 
sessors or  equalized  by  County  Boards  of  Equalization  and  has  such 
authority  and  may  do  all  things  necessary  to  secure  a  fair,  just  and 
equitable  valuation  of  taxable  property  among  the  counties  and  be- 
tween the  different  classes  of  property  and  individuals. 

Chap.  48,  Sec.  2,  Art.  XT!  as  amended.  The  property  of  the  United 
States,  the  State,  counties,  cities,  towns,  school  districts,  municipal 
corporations  and  public  libraries  shall  be  exempt  from  taxation;  and 
such  other  property  as  may  be  used  exclusively  for  agricultural  or 
horticultural  societies,  for  education  or  religious  purposes,  places  for 
actual  religious  worship,  hospitals  and  places  for  burial  not  used  or 
held  for  private  or  corporate  profit,  and  institutions  of  purely  public 
charity  may  be  exempted  from  taxation.  The  legislative  assembly 
may  authorize  the  exemption  from  taxation  of  evidences  of  debt  se- 
cured by  mortgages  of  record  upon  real  or  personal  property. 


ADMINISTRATION.— The  system  of  equalization  in  the  State  and 
counties  and  the  powers  of  the  State  Board  of  E}qualization  are  set 
out  in  the  Constitution,  also  the  exempt  property. 

RAILROADS. — The  operating  property  and  franchise  of  railroads, 
also   railroad   cars   operating   in   more  than   one   county,  are  assessed 


STATE   TAXATION    SYSTEM — MONTANA.  857 

by  the  State  Board  of  Equalization.  Other  railroad  property  is  as- 
sessed by  the  county  assessors.  The  assessment  made  by  the  State 
Board  is  apportioned  among  the  different  counties  on  the  basis  of 
mileage;  and  to  the  city,  town  and  school  district,  on  the  same  basis. 
Railroads  also  pay  the  State  for  State  purposes  a  graduated  license 
tax,  based  upon  quarterly  interstate  gross  receipts. 

PUBLIC  UTILITIES. — Express,  street  railways  and  other  public 
utilities  pay  the  general  property  tax,  collected  locally,  for  all  prop- 
erty; and  also  pay  a  license  tax,  graduated  according  to  population 
of  town  where  they  operate. 

CORPORATIONS. — The  capital  stock  and  franchise  of  corporations 
are  listed  where  the  principal  oflSce  is  located.  Corporations  are  as- 
sessed on  their  property  the  same  as  individuals.  By  Act  of  1917,  a 
license  tax  of  1  per  cent  on  the  net  income  of  all  corporations  was  im- 
posed. 

Foreign  corporations  are  taxed  on  same  basis  as  domestic. 

LIVEiSTOCK. — ^Livestock  grazing  in  more  than  one  county  is  as- 
sessed where  located  at  the  date  of  the  annual  assessment.  All 
money  derived  from  the  assessment  of  livestock  after  remitting  the 
portion  levied  for  State  purposes,  is  deposited  to  the  credit  of  the 
migratory  stock  fund.  The  Board  of  County  Commissioners  an- 
nually apportion  the  same  among  the  counties  where  the  stock  has 
grazed  according  to  the  records  of  the  county. 

INSURANCE  COMPANIES. — Insurance  companies  are  taxed  one- 
fourth  of  1  per  cent  on  the  gross  premium  receipts  of  such  com- 
panies, less  cancellations  and  return  premiums,  which  is  paid  into 
the  State  fire  marshal  fund. 

LICENSES. — All  insurance  and  surety  companies  pay  an  annual 
license  fixed  by  the  State. 

BANKS. — Banks  are  taxed  on  real  estate  the  same  as  other  real  es- 
tate, and  the  residue  of  their  property  represented  by  shares  of  stock 
is  taxed  to  the  individual  shareholders  the  same  as  other  personal 
property.  The  assessment  is  to  be  of  no  greater  proportion  to  face 
value  than  is  the  assessment  of  other  personal  property.  Shares  of 
stock  of  banks  located  without  the  State  owned  by  residents  are  not 
subject  to  taxation. 

TAXATION  OP  CREDITS.— In  making  up  the  credits  which  any 
person   is  required   to   list   he   is  entitled   to  deduct   from   the   bross 


858  STATE   TAXATION    SYSTEM MONTANA, 

amount  all  bona  fide  debts  owing  by  him  except  notes  for  insurance 
premiums  and  unpaid  subscriptions  to  societies  or  to  the  capital 
stock  of  any  corporation.  As  to  county  taxes  and  licenses,  see  statute. 
Municipal  Councils  may  by  ordinance  license  all  industries  and  oc- 
cupations for  which  under  the  State  law  a  license  is  required,  and  the 
amount  must  not  exceed  the  sum  required  by  the  State  law, 

SHARES  OF  STOCK,— Shares  of  stock  in  domestic  and  foreign 
corporations  are  not  taxed  in  hands  of  holder  when  the  corporate 
property  is  taxed  in  the  State.  Bonds  of  both  domestic  and  foreign 
companies  are  taxed  to  the  holder. 

INHERITANCE  TAX.— There  is  a  State  inheritance  tax  of  5  per 
cent  of  the  market  value  of  property  descending  to  any  person  or 
corporation  except  the  parent,  husband,  wife,  lawful  issue,  brother  or 
sister  or  adopted  child  in  which  event  the  tax  is  1  per  cent  provided 
that  an  estate  valued  at  less  than  $7500  is  not  subject  to  any  tax. 
40  per  cent  of  the  inheritance  tax  goes  to  the  county  school  fund. 
Real  estate  is  not  subject  to  the  inheritance  tax. 

The  statute  is  modeled  after  the  New  York  statute  of  1885  (State  r. 
District  Court,  41  Mont.  357),  and  taxes  all  property  passing  by  will, 
or  intestacy  laws,  within  the  jurisdiction  of  the  State,  whether  owned 
by  a  resident  or  non-resident. 

MORTGAGES, — 'Mortgages  have  not  been  exempted  from  taxation 
though  such  exemption  is  authorized  by  the  constitutional  amend- 
ment of  1916, 

POLL  TAXES.— Poll  taxes  are  for  county  and  municipal  purposes 
only.  There  is  no  State  poll  tax,  but  there  is  a  county  poll  tax  of 
$2.00  for  every  male  inhabitant  over  21  and  under  60  years  of  age, 
except  paupers,  insane  persons  and  Indians  not  taxed.  This  tax  is 
for  the  exclusive  use  of  the  poor  fund  in  the  county.  There  is  also  a 
road  tax  of  $2.00  for  every  able-bodied  man  over  21  and  under  50 
years  of  age. 

There  is  no  income  tax. 

COLLECTION.— Taxes  are  collected  by  the  county  treasurer.  They 
are  delinquent  on  the  30th  day  of  November  and  a  penalty  of  1  per 
cent  is  added  to  the  amount.  Taxes  on  real  property  are  o  lien 
against  the  property  assessed,  and  the  taxes  on  personal  property  are 
a  lien  upon  the  real  property  of  the  owner  thereof.  This  lien  at- 
taches as  of  the  first  Monday  in  March  in  each  year.     The  county 


STATE  TAXATION  SYSTEM NEBRASKA.  859 

treasurer  must  collect  the  taxes  on  all  personal  property  when  such 
taxes  are  not  in  his  opinion  a  lien  upon  real  property  sufficient  to  se- 
cure their  payment.  The  delinquent  tax  list  is  published  in  some 
newspaper  on  or  before  the  last  Monday  in  each  year  and  in  not  less 
than  21  and  not  more  than  28  days  after  the  first  publication  sale  of 
the  real  estate  is  made  subject  to  redemption  within  36  months  from 
date  of  sale.  The  purchase  money  draws  Interest  at  1  per  cent  per 
month  from  the  date  the  taxes  become  delinquent.  The  purchaser 
is  entitled  to  a  deed  at  the  end  of  the  36  months  but  must  give  30 
days'  notice  to  the  owner  or  occupant  of  the  property. 

NEBRASKA 

Art.  IX,  Sec.  1.  The  legislature  shall  levy  a  tax  by  valuation,  so 
that  every  person  and  corporation  shall  pay  a  tax  in  proportion  to  the 
value  of  his,  her,  or  its  property  and  franchises,  the  value  to  be  as- 
certained in  such  manner  as  the  legislature  shall  direct,  and  it  shall 
have  power  to  tax  peddlers,  auctioneers,  brokers,  bankers,  commis- 
sion merchants,  showmen,  jugglers,  innkeepers,  liquor  dealers,  toll 
bridges,  ferries,  insurance,  telegraph  and  express  interests  or  business, 
venders  of  patents,  in  such  manner  as  it  shall  direct  by  general  law, 
uniform  as  to  the  class  upon  which  it  operates. 

Sec.  2.  The  property  of  the  State,  counties  and  municipal  corpora- 
tions, both  real  and  personal,  shall  be  exempt  from  taxation,  and 
such  other  property  as  may  be  used  exclusively  for  agricultural  and 
horticultural  societies,  for  school,  religious,  cemetery,  and  charitable 
purposes,  may  be  exempted  from  taxation,  but  such  exemptions  shall 
be  only  by  general  laws.  In  the  assessment  of  all  real  estate  incum- 
bered by  public  easement,  any  depreciation  occasioned  by  such  ease- 
ment may  be  deducted  in  the  valuation  of  such  property.  The  legisla- 
ture may  provide  that  the  increased  value  of  lands,  by  reason  of  live 
fences,  fruit  and  forest  trees  grown  and  cultivated  thereon,  shall  not 
be  taken  into  account  in  the  assessment  thereof. 

Sec.  3.  The  right  of  redemption  from  all  sales  of  real  estate  for 
the  non-payment  of  taxes  or  special  assessments  of  any  character 
whatever,  shall  exist  in  favor  of  owners  and  persons  interested  in 
such  real  estate  for  a  period  of  not  less  than  two  years  from  such 
sales  thereof;  Provided,  That  occupants  shall  in  all  cases  be  served 
with  personal  notice  before  the  time  of  redemption  expires. 

Sec.  4.  The  legislature  shall  have  no  power  to  release  or  discharge 
any  county,  city,  township,  town  or  district  whatever,  or  the  inhab- 
itants thereof,  or  any  corporation,  or  the  property  therein,  from  their 
or  its  proportionate  share  of  taxes  to  be  levied  for  State  purposes,  or 
due  any  municipal  corporation,  nor  shall  commutation  for  such  taxes 
be  authorized  in  any  form  whatever. 

Sec.  6.  The  legislature  may  rest  the  corporate  authorities  of  cities, 
towns,  or  villages  with  power  to  make  local  Improvements  by  special 


860  STATE   TAXATION    SYSTEM — NEBRASKA. 

assessments,  or  by  special  taxation  of  property  benefited.  For  all 
other  corporate  purposes,  all  municipal  corporations  may  be  vested 
with  authority  to  assess  and  collect  taxes,  but  such  taxes  shall  be  uni- 
form in  respect  to  persons  and  property  within  the  jurisdiction  of  the 
body  imposing  the  same. 


ADMINISTRATION. — The  administration  machinery  consists  of  a 
State  Board  of  Equalization  and  Assessment,  consisting  first  of  the 
Governor  and  other  elective  public  officials,  which  has  general  super- 
vision over  all  taxation  matters  and  has  authority  to  equalize  and 
change  local  assessments  as  a  class  by  counties,  and  also  to  assess 
certain  railroad  and  car  company  properties,  fixes  the  amount  and 
rate  of  the  State  tax,  which  cannot  exceed  five  mills  on  the  dollar. 
The  County  Board  of  Assessments  deal  with  the  individual  local  as- 
sessment; but  an  appeal  from  their  decision  goes  to  the  district 
court,  and  not  to  the  State  Board.  The  county  treasurer  acts  as  tax 
collector,  and  the  county  assessor  has  general  supervision  and  the 
assessments  are  made  by  the  precinct  assessors  who  are  elected  and 
assigned  to  the  different  districts  by  the  county  assessors,  who  have 
general  supervision  over  them. 

RAILROADS. — Railroads,  whether  foreign  or  domestic,  pay  locally 
a  general  property  tax  for  State  and  local  purposes,  and  also  pay  a 
capital  stock  tax  based  upon  the  par  value  of  the  subscribed  stock 
levied  upon  all  corporations  (see  infra).  What  may  be  termed  the 
operative  property  of  the  railroads  is  assessed  by  the  State  Board  and 
apportioned  on  the  mileage  basis  to  the  counties.  The  local  right  of 
way  and  tangible  terminal  property  located  in  cities  and  villages  is 
assessed  locally,  but  is  subject  to  equalization  by  the  State  Board. 
(Cobbey's  Statutes,  Sections  10687  and  10697.)  This  is  said  to  have 
been  for  the  purpose  of  giving  municipalities  a  more  adequate  return 
for  the  protection  of  the  valuable  railroad  property  therein  than  could 
be  afforded  under  the  usual  rule  of  apportionment. 

PUBLIC  UTILITY  COMPANIES.— These  companies,  that  is,  telegraph, 
telephone  and  pipe  line  companies,  whether  domestic  or  foreign,  pay  a 
general  property  tax  assessed  and  collected  locally  for  State  and  local 
purposes,  the  gross  receipts  of  the  companies  being  considered  under 
the  statute  in  arriving  at  the  intangible  or  franchise  rights.  These 
companies  pay  also  a  graduated  property  stock  tax.  The  real  estate 
of  this  class  of  corporations  is  assessed  in  the  same  manner  as  that 
of  individuals.  Other  public  utility  companies,  such  as  street  railway, 
water,  electric,  gas  and  lighting  companies,  are  taxed  in  the  same 


STATE   TAXATION   SYSTEM — NEBRASKA.  861 

manner.  Express  companies  under  the  act  of  1913  pay  an  annual 
occupation  tax  to  the  State  equal  to  2  per  cent  upon  its  gross  earnings 
within  the  State. 

CAR  COMPANIES. — Domestic  and  foreign  car  and  freight  line  com- 
panies pay  the  general  property  tax  and  also  the  graduated  capital 
stock  tax.  Parlor  and  sleeping  car  companies  are  assessed  on  that 
proportion  of  the  value  of  their  cars  operated  in  the  State  during  the 
year  that  it  bears  to  the  entire  main  track  mileage  covered  by  sucli 
cars.  The  same  rule  is  applied  in  the  assessment  of  freight  line  com- 
panies. These  car  assessments  are  apportioned  by  the  State  Board 
among  the  several  counties  according  to  mileage,  and  then  reappor- 
tioned by  the  county  clerks  to  the  cities  and  villages. 

BUSINESS  CORPORATIONS.— The  same  rule  is  applied  in  the  as- 
sessment of  these  companies  locally  under  the  general  property  tax  for 
State  and  local  taxation  under  the  general  property  tax.  In  the  as- 
sessment of  merchants,  whether  corporate  or  not,  the  assessor  may 
inspect  the  books  and  insurance  policies  to  determine  the  value  of  the 
stock  on  hand.     (See  Cobbey's  Statutes,  Sec.  10956.) 

CAPITAL  STOCK  TAX. — Every  domestic  and  foreign  corporation  for 
profit,  except  banks,  insurance  and  building  and  loan  corporations,  pays 
an  annual  tax  on  capital  stock,  termed  an  occupation  permit.  Where 
the  stock  has  a  par  value  of  $10,000  or  less,  the  tax  is  $5  and  the  max- 
imum is  $200  where  the  capital  stock  is  $2^000,000  or  over.  This  tax 
is  paid  by  all  corporations,  including  the  railroads  and  public  utilities 
as  stated.  Foreign  corporations  of  the  various  classes  are  taxed  in 
practically  the  same  manner  as  similar  domestic  corporations.  Shares  of 
stock  in  corporations  whose  property  is  taxed  in  Nebraska  is  not  taxed 
to  the  holders.  Stocks  in  other  corporations  and  bonds  of  foreign  and 
domestic  corporations  are  in  theory  taxed  to  the  resident  holder. 
(Cobbey's  Statutes,  Sec.  10920.) 

INSURANCE  COMPANIES. — Domestic  fire  insurance  companies  are 
taxed  upon  their  gross  receipts,  and  foreign  life,  accident  and  surety 
companies  pay  an  annual  tax  of  2  per  cent  on  their  gross  receipts. 

BANKS. — Banks  and  investment  companies  are  assessed  on  their 
tangible  personal  and  real  property.  The  individual  shareholders  are 
assessed  according  to  the  value  of  their  shares  on  any  amount  over  and 
above  the  value  of  the  property  assessed  against  the  bank.  The  banks 
are  compelled  to  pay  both  taxes  and  have  a  lien  on  the  stock  to  secure 
reimbursement. 


862  STATE   TAXATION    SYSTEM — NEBRASKA. 

POLL  TAXES. — There  is  no  State  poll  tax,  but  all  male  citizens  of 
cities  between  5,000  and  25,000  inhabitants  between  21  and  50  years  of 
age  pay  annually  a  labor  tax  of  $3  for  the  repair  of  the  streets,  or  in 
lieu  thereof,  perform  two  days'  labor. 

INHERITANCE  TAX. — The  graduated  inheritance  tax  applies  to  all 
property  passing  by  will  or  by  intestate  laws  or  by  transfer  made  in 
contemplation  of  death,  which  in  the  case  of  father,  mother,  husband, 
wife  or  lineal  descendant  is  subject  to  a  tax  of  one  dollar  on  every 
one  hundred  dollars  of  clear  market  value  in  excess  of  $10,000,  this 
rate  increasing  with  the  different  degrees  of  inheritance  and  in  amount 
so  that  it  is  six  dollars  on  every  one  hundred  dollars  on  an  estate  of 
$50,000,  all  estates  valued  at  less  than  $500  being  exempt.  The  tax 
is  a  lien  on  the  property  for  five  years  and  interest  is  charged  at  7 
per  cent  from  the  date  of  accrual  until  paid  unless  paid  within  a  year 
of  such  time.  This  tax  is  paid  to  the  County  Treasurer  for  the  use 
of  the  State  and  is  expended  under  the  direction  of  the  County  Board 
of  each  county  for  the  purpose  of  the  improvement  of  the  country 
roads. 

The  tax  applies  not  only  to  all  property  passing  by  will  or  intestacy 
from  a  resident,  but  also,  if  the  decedent  was  not  a  resident,  where 
the  property,  or  any  part  thereof,  or  any  interest  therein  is  within  the 
State. 

LICENSE  TAXES. — Business  taxes  and  licenses  other  than  the  State 
corporation  taxes,  are  levied  by  the  counties  and  municipalities.  By 
act  of  1913,  companies  loaning  money  at  more  'than  10  per  cent  interest 
are  to  pay  an  annual  license  fee  of  $100. 

EXEMPTIONS. — Exemptions,  in  addition  to  public  property,  are 
agricultural  and  horticultural  societies,  property  held  for  religious, 
cemetery  and  charitable  purposes,  the  increased  value  of  lands  by 
reason  of  live  fences  and  fruit  and  forest  trees  grown  and  cultivated 
thereon.  Any  depreciation  in  value  of  property  caused  by  public  ease- 
ments is  deducted   from  the  assessed  valuation. 

ASSESSMENTS. — The  assessment  of  all  classes  of  property  is  upon 
20  per  cent  of  the  actual  value,  which  is  defined  as  the  value  in  the 
market  in  the  ordinary  course  of  trade.  (See  Cobbey's  Statutes,  Sec. 
10911.)  Real  estate  is  assessed  quadrennially  and  taxpayers  are  not 
required  to  give  a  list  of  the  real  estate  holdings.  But  improvements 
made  after  the  regular  assessment  are  assessed  in  the  year  of  their 


STATE  TAXATION  SYSTEM — NEVADA.  863 

construction,  and  losses  by  fire  or  otherwise  are  deducted.  Personalty- 
is  assessed  annually.  Improvements  on  realty  and  the  realty  are  sep- 
arately assessed.  The  property  and  assessment  and  equalization  are 
the  same  for  county  and  municipal  taxation  as  for  the  State. 

COLLECTION. — Taxes  are  assessed  against  real  property  on  the 
first  day  of  October  and  become  a  lien  thereon.  Personal  property  is 
assessed  on  the  first  day  of  November,  and  the  assessment  is  a  lien 
thereon.  Personal  taxes  unpaid  by  December  1st  are  delinquent  and 
may  be  collected  by  distress  and  sale,  or  by  civil  action,  on  February 
1st.  Real  taxes  are  delinquent  on  May  1st  and  draw  interest  at  the 
rate  of  10  per  cent  thereafter.  Lands  sold  for  taxes  may  be  redeemed 
within  two  years  from  the  date  of  sale  upon  payment  of  the  taxes  to- 
gether with  15  per  cent  interest  and  ^subsequent  taxes.  Tax  sales  are 
not  invalidated  by  irregularities.  When  real  estate  is  sold  for  taxes, 
the  purchaser  receives  a  certificate  for  such  sale  and  within  five  years 
may  foreclose  such  certificate  as  a  lien  upon  the  land  in  the  same 
manner  as  mortgages  are  foreclosed,  and  demand  a  deed  therefor,  and 
unless  that  certificate  is  foreclosed  within  five  years,  it  ceases  to  be 
a  valid  lien  upon  said  property. 

NEVADA 

(Constitution,  Amended  1906.) 

Sec.  1.  The  legislature  shall  provide  by  law  for  a  uniform  and 
equal  rate  of  assessment  and  taxation  and  shall  prescribe  such  reguia- 
tions  as  shall  secure  a  just  valuation  for  taxation  of  all  property, 
real,  personal  and  possessory,  except  mines  and  mining  claims,  when 
not  patented,  the  proceeds  alone  of  which  shall  be  assessed  and 
taxed,  and  when  patented,  each  patented  mine  shall  be  assessed  at 
not  less  than  five  hundred  dollars  ($500),  except  when  one  hundred 
dollars  ($100)  in  labor  has  been  actually  performed  on  such  patented 
mine  during  the  year,  in  addition  to  the  tax  upon  the  net  proceeds, 
and,  also  excepting  such  property  as  may  be  exempted  by  law  for 
municipal,  educational,  literary,  scientific,  or  other  charitable  pur- 
poses. 


ADMINISTRATION. — A  new  tax  commission  law  was  enacted  by 
the  legislature  of  1917  (see  Acts  of  1917)  which  is  composed  of  the 
Governor  as  chairman,  one  member  of  the  Railroad  Commission,  five 
appointees  by  the  Governor  from  the  State  at  large,  "one  to  be  a  live- 
stock man,  one  a  land  man,  one  a  banker,  one  a  mining  man,  and 
one  a  business  man."  This  commission  has  a  general  supervision  of 
the  assessment  and   collection   of  all   taxes   in   the   State,   assess  the 


864  STATE   TAXATION    SYSTEM NEVADA. 

property  of  all  companies  engaged  in  interstate  commerce,  and  for 
that  purpose  to  make  a  physical  valuation  of  the  property  of  all  com- 
panies engaged  in  interstate  commerce.  It  is  made  the  duty  of  the 
county  assessors,  county  commissioners  and  the  officers  of  munici- 
palities to  report  assessment  rolls  to  the  tax  commission,  and  to  fur- 
nish such  other  data  and  information  as  the  tax  commission  shall 
demand. 

The  State  Board  of  Examiners  must  prepare  and  file  with  the  tax 
commission  a  detailed  budget  estimate  of  the  aggregate  amount  of 
money  necessary  to  be  raised  by  taxation  and  from  other  sources  of 
revenue  to  maintain  the  government  of  the  State  on  a  cash  basis  for 
the  current  fiscal  year.  It  is  the  duty  of  every  board  of  county 
commissioners  sitting  as  a  budget  commission  to  report  its  estimate 
of  the  amount  of  money  necessary  to  conduct  county  business,  and  to 
report  the  same  to  the  State  Tax  Commission.  The  State  Tax  Com- 
mission sits  with  the  county  assessors  annually  as  a  Board  of  Equaliza- 
tion. An  appeal  to  the  courts  of  the  State  lies  from  any  decision  of 
the  State  Tax  Commission,  but  no  citizen  can  appeal  to  the  courts 
for  redress  from  an  assessment  until  he  has  first  complained  to,  and 
obtained  action  from,  the  State  Commission.  The  Commission  is  re- 
quired to  ascertain  the  net  income  of  all  mining  property  in  the 
State  for  the  purposes  of  taxation. 

.RAILROADS. — The  assessment  of  railroad  property  for  the  general 
property  tax  is  made  on  the  mileage  basis  and  apportioned  according 
to  the  various  counties,  except  in  any  eveiit  that  any  portion  of  the 
rolling  stock  or  the  personal  property  of  a  railroad  company  operated 
wholly  within  the  State  shall  not  be  used  in  all  the  counties,  that 
such  railroad  runs,  then  such  portion  of  such  rolling  stock  or  per- 
sonal property  shall  be  assessed  only  in  the  counties  where  used  or 
employed. 

CORPORATIONS. — All  corporations  are  subject  to  the  general  prop- 
erty tax  as  are  individuals,  and  there  is  also  a  license  fee  for  corporations 
of  10  cents  on  each  thousand  dollars  of  the  total  amount  of  the  capital 
stock,  the  minimum  fee  being  $25.00.  Public  service  corporations  pay 
a  franchise  tax  of  2  per  cent  on  the  net  profits  to  the  county  treasurer 
wherever  located  to  the  benefit  of  the  school  fund  of  such  county. 

FOREIGN  CORPORATIONS.— Foreign  corporations  admitted  to  do 
business  in  the  State  pay  the  same  license  fee  as  domestic  corpora- 
tions, but  are  subject  to  retaliatory  provisions  if  the  laws  of  the  State 
from  which  they  come  discriminate  against  Nevada  corporations. 


STATE   TAXA^TION    SYSTEM NEVADA. 


865 


INHERITANCE  TAX.— There  is  a  graduated  inheritance  tax,  the 
rates  being  graded  according  to  the  amount  involved  and  the  degree 
of  inheritance,  an  exemption  of  $20,000  being  allowed  in  the  case  of 
the  widow  or  minor  child  and  this  amount  being  reduced  according 
to  the  degree  of  inheritance.  20  per  cent  of  this  tax  is  paid  to  the 
general  fund  of  the  county,  40  per  cent  to  the  State  school  fund,  and 
40  per  cent  to  the  general  fund  of  the  State. 

This  tax  is  imposed  upon  the  transfer  of  any  and  all  property 
within  the  jurisdiction  of  the  State  and  any  interest  therein,  whether 
belonging  to  the  inhabitants  of  the  State  or  not,  or  whether  tangible 
or  intangible.  The  ownership  of  stock  in  a  corporation  owning  prop- 
erty in  the  State,  is  considered  as  the  ownership  of  a  proportionate 
interest  in  the  property  so  owned  by  the  corporation. 

MINES. — Mining  property  not  patented,  is  not  taxed,  unless  it  is 
producing.  Mining  companies  pay  locally  the  general  property  tax 
on  net  proceeds  of  mines  and  surface  improvements.  (See  Laws, 
1912,  Sees.  3687,  3688.) 

Royalties  are  taxable  to  the  lessor.  Patented  mining  claims  upon 
which  less  than  $500  has  been  expended,  are  subject  to  a  minimum 
annual  assessment  of  $500.  (Laws  of  1913,  ch.  13,  Sec.  1.)  Quar- 
terly reports  are  required  of  mining  companies. 

POLL  TAXES. — Each  male  resident  of  the  State  over  21  and  under 
60  years  of  age,  uncivilized  American  Indians  excepted,  and  not  by 
law  exempt  is  required  to  pay  an  annual  poll  tax  of  $3.00  for  the 
maintenance  and  betterment  of  public  roads,  the  entire  revenue  going 
to  the  county  for  the  maintenance  of  the  road  districts  in  the  county. 

EXEMPTIONS. — Exemptions  other  than  public  property  and  un- 
patented mines  and  mining  claims  as  above,  property  used  for  reli- 
gious worship,  property  of  masons,  odd  fellows  and  similar  charitable 
organizations  or  benevolent  societies  up  to  $5000,  public  free  ceme- 
teries, property  up  to  $1000  of  widows  and  orphans,  who  are  resi- 
dents of  the  State,  the  property  of  Y.  M.  C.  A.,  including  buildings, 
furniture  and  equipment. 

PATENTED  LANDS.— Patented  lands  and  lands  held  under  any 
State  land  contract  are  assessed  for  not  less  than  $1.25  per  acre. 

MORTGAGES. — A  mortgage  or  other  obligation  given  to  secure  a 
debt  is  treated  for  assessment  as  an  interest  in  the  property  affected, 
except  as  to  railroads  and  other  quasi  public  corporations.  The 
property  affected  by  such  mortgage  less  the  value  of  such  security  is 


866  STATE   TAXATION    SYSTEM — NEW    HAMPSHIRE. 

assessed  to  the  owner  of  the  property  and  the  value  of  the  security 
is  assessed  to  the  owner  thereof  in  the  county  where  the  property  is 
situated. 

BANKS. — Banks  are  taxed  on  their  real  estate  and  the  shares  of 
stock  less  the  value  of  the  real  estate  and  the  shares  of  stock  less  the 
value  of  the  real  estate  are  assessed  to  the  owners,  the  bank  paying 
the  tax  on  the  shares  of  stock. 

LICENSES.— For  annual  licenses  by  the  State  and  also  by  the 
counties  to  different  corporations,  whether  individual  or  corporate, 
see  the  statute. 

ASSESSMENTS.— Under  Act  of  March  13,  1903,  the  assessors  of 
the  several  counties  meet  at  the  Capitol  and  establish  a  valuation 
throughout  the  State  of  all  railroads,  rolling  stock,  telegraph  and 
telephone  companies,  electric  light  and  power  lines,  also  livestock 
and  other  kinds  of  property  which  can  be  valued  and  assessed  to  ad- 
vantage by  the  assessors  acting  collectively. 

COLLECTION. — A  lien  for  taxes  assessed  against  property  attaches 
on  the  first  Monday  of  March  of  each  year.  Taxes  are  collected  by 
suit  instituted  by  the  county  attorney,  and  may  be  commenced  at  any 
time  after  the  taxes  become  delinquent.  Such  suits  are  instituted 
only  when  the  delinquent  taxes  and  costs  exceed  the  sum  of  $300. 
If  less  than  $300,  the  property  may  be  sold  by  the  county  treasurer 
after  notice.  Sales  of  real  estate  are  subject  to  redemption  within 
six  months  from  the  date  of  sale  on  payment  of  costs  and  interest  at 
the  rate  of  3  per  cent  per  month  from  the  date  of  sale  to  the  date 
of  redemption.  Taxes  are  levied  by  the  county  commissioners  on 
the  first  Monday  in  March. 

Taxes  are  payable  between  the  first  Monday  of  October  and  the 
first  Monday  in  December,  at  which  time  they  become  delinquent, 
and  a  penalty  of  10  per  cent  is  added  after  the  delinquency. 

Personal  taxes  constitute  a. lien  against  the  real  property  of  a  tax- 
payer. When  a  taxpayer  has  no  real  estate,  then  distraint  may  be 
made  against  personal  property. 

NEW  HAMPSHIRE 

(Constitution.) 

"Full  power  and  authority  are  hereby  given  and  granted  to  said 
general  court  ...  to  impose  and  levy  proportional  and  reason- 
able  assessments,   rates  and   taxes  upon   all   the    inhabitants  of,   and 


STATE   TAXATION    SYSTEM — NEW    HAMPSHIRE.  867 

residents  within,  the  said  State,  and  upon  all  estates  within  the 
same. 

"The  public  charges  of  government,  or  any  part  thereof,  may  be 
raised  by  taxation  upon  polls,  estates  and  other  classes  of  property, 
including  franchises  and  the  transfer  or  succession  of  property  by 
will  or  inheritance;  and  there  shall  be  a  valuation  of  the  estates 
within  the  State  taken  once  in  every  five  years  at  least,  and  as  much 
oftener  as  the  general  court  shall  order." 

As  to  construction  of  constitutional  requirement  of  equality  of 
taxation,  see  Opinion  of  Justices,  79  Atl.  Rep.  31. 


ADMINISTRATION.— A  State  Tax  Commission  of  three  members, 
appointed  by  the  Supreme  Court,  assesses  the  property  of  railroads, 
telegraph,  telephone,  express  and  car  companies.  Local  assessments 
are  made  by  the  selectmen  of  the  towns. 

POLL  TAX. — The  State  levy  of  general  property  taxes  is  appor- 
tioned to  the  towns  and  paid  by  them  in  the  same  manner  as  their 
own  revenue.  The  poll  tax  constitutes  a  part  of  this  tax;  and  in  the 
"invoice,"  as  it  is  termed,  all  poll  taxes  are  assessed  at  50  cents  and 
taxable  property  at  50  cents  on  each  $100  of  its  appraised  value.  The 
polls  included  are  all  males  over  twenty-one  years  of  age  not  spe- 
cifically exempt.  Those  not  included  are  soldiers  and  sailors  of  the 
Civil  War  and,  at  the  discretion  of  the  selectmen,  soldiers  and  sailors 
who  served  in  the  Spanish-American  War,  and  also  paupers  and  in- 
sane persons. 

RAILROADS. — The  railroads  and  also  the  other  public  utilities  are 
assessed  by  the  State  Tax  Commission  upon  the  actual  value  of  the 
property;  and  the  companies  pay  the  State  a  tax  rate  thereon  as 
nearly  equal  as  may  be  to  the  average  rate  on  other  property  through- 
out the  State  (excepting  property  specially  taxed).  This  valuation  is 
assessed  one-half  to  the  towns  in  which  the  railroad  is  located  In 
which  each  town  receives  Its  proportion  according  to  the  share  of  the 
capital  expended  in  each  town  for  buildings  and  right  of  way;  sec- 
ond, to  each  town  in  which  any  stock  is  held,  such  proportion  of  the 
remainder  as  the  number  of  shares  owned  therein  bears  to  the  whole 
number  of  shares;  third,  the  remainder  for  the  use  of  the  State. 
The  expenses  of  the  Public  Service  Commission  are  paid  by  the  levy 
of  a  tax  on  the  gross  receipts  of  the  railroads, 

BANKS. — All  shares  of  stock  in  banks,  except  savings  banks,  build- 
ing and   loan   aasociations,  are  assessed   to   the   owners   In   the  towns 


868  STATE   Tx\:S-VTION    SYSTEM — NEW    HAMPSHIRE. 

where  they  reside  at  the  value  shown  by  the  capital,  surplus  and  un- 
divided profits  after  deducting  real  estate. 

CORPORATIONS.— Corporations  in  general  are  taxed  under  the 
General  Property  Tax.  Savings  banks  and  similar  corporations  pay 
an  excise  tax  based  on  the  amount  of  the  saving  deposit,  with  spe- 
cified deductions.  Building  and  loan  associations  pay  a  tax  of  three- 
fourths  of  1  per  cent  upon  their  capital  stock.  Domestic  fire  insur- 
ance companies  are  taxed  annually  1  per  cent  on  the  amount  of  their 
paid-up  capital.  Fire  insurance  companies  pay  a  tax  of  2  per  cent  on 
gross  premiums,  and  foreign  life  insurance  companies  a  tax  of  2  per 
cent  on  gross  premiums,  less  payments  to  residents  for  death  loss 
suits  during  the  year. 

INHERITANCE  TAX. — The  inheritance  tax  is  for  the  benefit  of 
the  State  only.  A  5  per  cent  inheritance  tax,  collectible  by  the  State 
Treasurer,  is  imposed  on  all  property,  real  and  personal,  of  inhabit- 
ants of  the  State,  and  on  all  real  property  of  non-residents  of  the 
State.  The  only  exemption  is  in  the  case  of  a  child  or  children,  not  in- 
cluding an  adopted  child.  The  statute  also  applies  to  property  granted 
before  the  death,  to  take  effect  on  the  death  of  the  grantor.  Taxes 
are  assessed  April  1st  of  each  year,  and  are  payable  December  1st, 
becoming  delinquent  January  1st.  ^ 

EXEMPTIONS. — Houses  of  worship  and  parsonages  up  to  $2500, 
school  houses,  property  to  the  amount  of  $1000  of  any  soldier  or 
sailor  who  served  sixty  days  in  the  Civil  War  and  was  honorably  dis- 
charged, and  the  wife  or  widow  of  the  same,  provided  the  aggregate 
value  of  the  property  is  not  over  $3000,  improvements  caused  by  re- 
claiming swamp  or  swale  land  for  ten  years;  new  manufacturing  es- 
tablishments for  ten  years,  by  vote  of  the  town;  undeveloped  mines, 
unless  belonging  to  other  than  those  to  whom  the  real  estate  is  taxed; 
all  public  stocks  and  bonds,  material  used  in  ship  building,  money 
loaned  to  a  town  by  a  citizen  at  a  rate  of  interest  not  exceeding  5  per 
cent,  by  a  vote  of  the  town,  and  not  ten  years  in  use;  money  loaned 
at  a  rate  of  interest,  not  exceeding  5  per  cent,  secured  by  real  estate 
in  the  State,  also  live  stock  of  certain  ages,  to  a  limited  extent,  are 
exempt.  A  city  or  town  may  exempt  any  future  issue  of  its  bonds 
owned  or  held  by  its  own  citizens.     (See  also  Laws  of  1911.) 

ABATEMENTS.— Abatements  for  ten  years  of  90  per  cent  are  al- 
lowed to  land  owners  planting  timber  trees  for  the  next  ten  years; 
80  per  cent  for  the  next  ten  years;  and  for  the  third  ten  years,  60 


STATE   TAXATION   SYSTEM — NEW   JERSEY.  869 

per  cent.  Selectmen  may  also  make  reasonable  deductions  from  the 
estates  of  the  insane  when  the  income  from  the  estates  is  not  suffi- 
cient to  support  them.  A  sum  not  exceeding  three  dollars  is  allowed 
from  the  tax  of  any  citizens  who  shall  construct  and  maintain  a 
watering  trough  for  horses;  also  a  reasonable  deduction  for  planting 
and  protecting  shade  trees  by  the  highway  for  the  use  of  wide-tired 
wagons. 

COLLECTIONS. — All  taxes  are  a  lien  upon  the  real  estate  from 
the  date  of  their  assessment.  Owners  of  property  are  required  to 
make  oath  as  to  the  amount  of  property  they  own  subject  to  taxation, 
with  the  value  thereof,  and  return  the  same  to  the  selectmen  of  the 
town  on  or  before  the  15th  day  of  April. 

All  taxes,  State  and  local,  except  those  on  railroads,  etc.,  are  col- 
lected by  the  town  collector.  The  collector  may  distrain  on  goods 
and  chattels,  and,  if  necessary,  take  the  body.  The  lien  for  taxes  on 
real  estate  attaches  as  of  July  1st  after  assessment.  Interest  at  10 
per  cent  is  charged  on  all  taxes  not  paid  on  or  before  October  15th. 
Deeds  are  given  after  public  auction  within  one  year  of  sale  of  prop- 
erty for  non-payment  of  taxes,  provided  the  land  has  not  been  re- 
deemed by  the  payment  of  taxes,  cost  of  sale,  and  12  per  cent  interest 
thereon  from  the  time  of  sale  to  the  date  when  offer  to  redeem  is 
given. 

NEW  JERSEY 

(Constitution  as  amended  in  1875.) 

Art.  IV,  Sec.  7,  Par.  12.  Property  shall  be  assessed  for  taxes  under 
general  laws,  and  by  uniform  rules,  according  to  its  true  value. 


ADMINISTRATION.— The  powers  of  the  Board  of  Equalization  of 
taxes  and  the  State  Board  of  Assessors  were  consolidated  by  Act  of 
April  13,  1915,  Chap.  C.  244,  in  a  State  Board  of  Taxes  and  Assessments 
consisting  of  five  members,  at  least  one  of  them  to  be  a  counselor-at- 
law,  and  not  more  than  three  of  the  same  political  party,  appointed  by 
the  Governor  and  confirmed  by  the  Senate.  There  is  a  substantial 
separation  of  sources  of  State  and  local  taxation,  the  State  deriving 
its  revenue  from  license  taxes  and  the  like,  the  only  State  tax 
being  collected  and  refunded  to  the  towns  for  school  purposes. 

The  State  Board  of  Assessors,  composed  of  four  members  appointed 
by  the  Governor,  constitutes  the  Board  of  Assessment  for  certain 
classes  of  railroad  and  canal  property  and  for  certain  classes  of  cor- 
porations taxed  on  gross  earnings  for  local  purposes. 


870  STATE   TAXATION    SYSTEM — NEW    JERSEY. 

County  boards  of  equalization  are  organized  to  assist  tlie  State  Board 
in  tlie  equalization  of  property. 

RAILROADS. — The  local  property  of  railroads  is  assessed  by  the 
local  assessors  as  other  property.  The  operating  property  and  fran- 
chises of  railroads,  and  such  property  as  rolling  stock,  are  assessed  by 
the  State  Board  of  Assessors;  and  the  rate  of  taxation  levied  on  this 
property  is  the  average  rate  of  taxation  on  all  property  assessed  for 
local  purposes  by  the  local  assessors. 

POLL  TAX. — There  is  a  poll  tax  of  $1.00  upon  every  mail  inhabitant 
of  the  age  of  21  years  and  upwards  except  paupers,  idiots  and  insane 
persons  and  certain  exemptions  of  those  in  public  service.  The  poll 
tax  is  not  applied  to  State  revenues. 

EXEMPTIONS. — The  exemptions  from  general  taxation  include  pub- 
lic property  and  also  the  bonds  of  the  State,  and  any  city  or  county  in 
the  State,  and  the  personal  property  owned  by  citizens  and  corpora- 
tions of  the  State  situated  and  being  out  of  the  State,  upon  which  taxes 
shall  have  been  actually  assessed  and  paid  within  twelve  months 
before  May  20th,  the  date  for  commencing  the  assessment.  The  prop- 
erty of  national  guards,  all  property  used  for  educational  and  charita- 
ble purposes  and  not  conducted  for  profit,  and  all  cemeteries;  members 
of  the  national  guard  are  exempt  to  a  valuation  not  exceeding  $500. 
The  exemptions  include  dwelling  houses  connected  with  a  college 
or  school  for  the  accommodation  of  the  professors  or  other  officers. 

MORTGAGES. — ^Mortgages  secured  by  property  in  the  State  are  not 
listed  for  taxation,  and  no  deduction  from  the  assessed  value  of  real 
property  is  made  on  account  of  any  mortgage  debt,  but  the  mortgagor 
is  entitled  to  credit  on  the  interest  payable  on  the  mortgage  for  so 
much  of  the  tax  as  is  equal  to  the  tax  rate  applied  to  the  amount  due 
on  the  mortgage,  except  where  the  parties  have  otherwise  agreed,  or 
where  the  mortgage  is  an  investment  of  funds  not  subject  to  taxation, 
or  where  the  parties  have  lawfully  agreed  that  no  deduction  shall  be 
made  from  the  taxable  value  of  the  land  by  reason  of  the  mortgage. 

DEDUCTION  OF  DEBTS. — Provision  is  made  for  the  deduction  of 
debts  from  the  valuation  of  personal  property  owing  to  creditors  in 
the  State,  but  by  a  later  act  (see  1914  C.  191)  no  deduction  for  debt  is 
allowed  from  the  assessed  value  of  specific  goods  or  chattels. 

CORPORATIONS. — Corporations  of  the  State  are  regarded  as  resi- 
dents and  inhabitants  of  the  taxing  district  where  their  chief  office 
is  located,  and  foreign  corporations  are  assessed  and  taxed  in  respect 


STATE   TAXATION    SYSTEM — NEW    JERSEY.  871 

to  the  business  done  by  them,  in   the   State,  and   for   the  amount   of 
capital  usually  employed  in  the  State  in  the  doing  of  such  business. 

RETALIATION. — Whenever  taxes,  fines,  penalties  or  other  obliga- 
tions are  imposed  by  the  laws  of  any  State  or  corporations  of  New 
Jersey,  the  same  obligations  are  imposed  on  corporations  of  that  State 
doing  business  In  New  Jersey.     (Laws  of  1894,  Chap.  228.) 

LICENSES. — A  State  tax  is  imposed  by  way  of  license  upon  certain 
corporations;  and  telegraph,  telephone,  cable,  electric  light  companies, 
express,  gas  and  palace  car  and  sleeping  car  companies,  oil  or  pipe 
line  companies  and  insurance  companies  pay  a  percentage  on  their 
gross  incomes.  All  other  companies  incorporated  under  the  laws  of 
the  State  pay  a  lioense  fee  of  one-tenth  of  1  per  cent  on  the  amount 
of  the  capital  stock  up  to  $3,000,000;  on  all  sums  between  $3,000,000 
and  $5,000,000  one-twentieth  of  1  per  cent,  and  a  further  sum  of  $50.00 
per  million,  or  any  part  thereof,  on  all  amounts  in  excess  of  $5,000,000. 
The  act  does  not  apply  to  railway,  canal  or  banking  companies  or  sav- 
ings banks,  cemeteries  or  religious  corporations  or  purely  charitable 
or  educational  associations  or  manufacturing  or  mining  corporations, 
at  least  50  per  cent  of  whose  capital  stock  issued  and  outstanding  is 
invested  in  mining  and  manufacturing  carried  on  in  the  State. 

All  corporations  using  or  occupying  the  public  streets  are  made  sub- 
ject to  the  franchise  tax  of  2  per  cent  upon  their  gross  receipts  in  lieu 
of  all  other  franchise  tax. 

BANKS.-^Banks  are  taxed  upon  the  basis  of  capital,  surplus  and  un- 
divided profits  less  the  assessed  value  of  the  bank's  real  estate. 

INHERITANCE. — There  is  an  inheritance  tax  (see  Laws  of  1909,  ch. 
228)  upon  the  transfer  of  any  property,  real  or  personal,  of  the  value 
of  $500  or  over.  Property  to  the  amount  of  $5000  passing  to  a  father, 
mother,  husband,  wife,  child  or  lawful  lineal  descendant,  brother  or 
sister,  or  the  wife  of  a  son,  or  husband  of  a  daughter  is  exempt.  Also 
certain  religious  and  charitable  institutions.  The  rates  are  grad'uated 
according  to  the  degree  of  relationship.  (Inquiry  should  be  made  in 
any  case  to  the  Comptroller  of  the  State,  Trenton,  New  Jersey.) 

The  transfer  of  property  in  this  State  of  a  non-resident  decedent  is 
made  subject  to  the  tax;  and  the  tax  shall  then  bear  the  same  ratio  to 
the  entire  tax  which  the  said  estate  would  have  been  subject  to  under 
the  act,  if  such  non-resident  decedent  had  been  a  resident  of  this  State, 
and  all  property,  real  and  personal,  had  been  located  within  the  State, 
as  such  taxable  property  within  the  State  bears  to  the  entire  estate 
wherever  situated. 


872  STATE   TAXATION    SYSTEM NEW    MEXICO. 

The  tax  applies  when  the  transfer  is  of  property  by  a  resident  and 
of  tangible  property  in  the  State  when  the  decedent  was  a  non-resident 
at  the  time  of  his  death. 

COLLECTION. — Property  is  assessed  as  of  May  20th,  and  taxes  are 
payable  on  or  before  December  20th,  draw  interest  from  7  to  12  per  cent, 
and  are  collected  by  sale  of  goods  or  arrest  of  the  person,  but  no 
arrest  for  taxes  on  real  estate. 

Timber  may  be  sold  for  taxes  on  unimproved  land,  and  taxes  are  a 
lien  from  December  20th  and  after  September  1st  following;  land  may 
be  sold  in  term  or  in  fee  with  the  right  of  redemption  in  the  owner 
or  the  mortgagee  for  two  years,  and  until  the  right  of  redemption  is 
cut  off  by  60  days'  notice  served  or  mailed,  but  possession  for  20 
years  bars  redemption. 

NEW  MEXICO 

(Constitution  as  amended  by  the  people  Nov.  3,  1914.) 
TAXATION  AND  REVENUE 

Sec.  1.  Taxes  levied  upon  tangible  property  shall  be  in  proportion 
to  the  value  thereof,  and  taxes  shall  be  equal  and  uniform  upon  sub- 
jects of  taxation  of  the  same  class. 

Sec.  2.  Taxes  levied  upon  real  or  personal  property  for  State 
revenue  shall  not  exceed  four  mills  annually  on  each  dollar  of  the 
assessed  valuation  thereof  except  for  the  support  of  the  educational, 
penal  and  charitable  institutions  of  the  State,  payment  of  the  State 
debt  and  interest  thereon;  and  the  total  annual  tax  levy  upon  such 
property  for  all  State  purposes  exclusive  of  necessary  levies  for  the 
State  debt  shall  not  exceed  ten  mills. 

Sec.  3.  The  property  of  the  United  States,  the  State  and  all  counties, 
towns,  cities  and  school  districts,  and  other  municipal  corporations, 
public  libraries,  community  ditches  and  all  laterals  thereof,  all  church 
property,  all  property  used  for  educational  or  charitable  purposes,  all 
cemeteries  not  used  or  held  for  private  or  corporate  profit,  and  all 
bonds  of  the  State  of  New  Mexico,  and  of  the  counties,  municipalities 
and  districts  thereof  shall  be  exempt  from  taxation. 

Sec.  4.  (Regulates  deposit  of  public  money  and  forbids  private 
profit  therein.) 

Sec.  5.  The  legislature  may  exempt  from  taxation  property  of  each 
head  of  a  family  to  the  amount  of  two  hundred  dollars. 

Sec.  6.  Lands  held  in  large  tracts  shall  not  be  assessed  for  taxa- 
tion at  any  lower  value  per  acre  than  lands  of  the  same  character  or 
quality  and  similarly  situated,  held  in  smaller  tracts.  The  plowing' 
of  land  shall  not  be  considered  as  adding  value  thereto  for  the  purpose 
of  taxation. 


STATE   TAXATION    SYSTEM: — NEW    MEXICO.  873 

Sec.  7.  No  execution  shall  issue  upon  any  judgment  rendered  against 
the  Board  of  County  Commissioners  of  any  county,  or  against  any  in- 
corporated city,  town  or  village,  school  district  or  board  of  education; 
or  against  any  officer  of  any  county,  incorporated  city,  town  or  village, 
school  district  or  board  of  education,  upon  any  judgment  recovered 
against  him  in  his  official  capacity  and  for  which  the  county.  Incor- 
porated city,  town  or  village,  school  district  or  board  of  education,  is 
liable,  but  the  same  shall  be  paid  out  of  the  proceeds  of  a  tax  levy 
as  other  liabilities  of  counties,  incorporated  cities,  towns  or  villages, 
school  districts  or  boards  of  education,  and  when  so  collected  shall  be 
paid  by  the  County  Treasurer  to  the  judgment  creditor. 


ADMINISTRATION.— A  State  Tax  Commission  was  created  in  1915. 
composed  of  five  members  each,  to  be  a  representative  of  some  indus- 
try, and  not  more  than  three  of  them  to  be  of  the  same  political 
party.  The  commission  determines  the  value  of  property  of  railroads 
and  public  service  corporations,  and  banks,  and  certifies  its  value  to 
the  assessor  of  the  county  where  the  property  is  situated.  The  valua- 
tions of  the  commission  are  final.  It  also  determines  and  certifies  the 
actual  value  of  live  stock.  It  is  made  its  duty  to  determine  the  actual 
value  of  the  property  subject  to  taxation  in  each  county. 

The  State  Board  of  Equalization,  created  by  the  Constitution,  con- 
sists of  the  Governor  and  other  State  officials,  and  has  the  powers, 
until  otherwise  provided,  vested  in  the  territorial  board  of  equaliza- 
tion. 

RAILROADS. — Railroads  and  car  companies  are  assessed  as  other 
corporations  under  the  General  Property  Tax  by  the  State  Board,  and 
the  valuation  apportioned  to  the  counties  where  the  property  is  lo- 
cated on  a  mileage  basis. 

PUBLIC  UTILITIES.— Telegraph,  telephone  and  oilier  public  utility 
companies  are  assessed  in  the  same  manner  by  the  board.  Express 
companies,  however,  are  taxed  by  the  State  on  their  gross  earnings 
on  business  done  in  the  State  at  2  per  cent  in  addition  to  the  valuation 
of  their  tangible   property. 

INSURANCE. — Insurance  companies  are  taxed  2  per  cent  on  gross 
receipts  received',  less  return  premium. 

BANKS. — Stock  in  national  and  State  banks  is  assessed  where  bank 
is  located  by  State  Board  of  Equalization  and  tax  Is  paid  by  the  bank. 

Real  estate  of  banks  is  assessed  by  local  assessors  as  other  real  estate 
and  deducted  from  valuation  of  stock. 


874  STATE   TAXATION    SYSTEM NEW    MEXICO. 

POLL  TAX.— A  poll  tax  of  $1.00  upon  all  able-bodied  men  over  the 
age  of  21  years  is  levied  for  school  purposes.  There  is  also  a  county 
road  tax  of  $3.00  commuted  by  labor  on  the  public  roads  for  three  days. 
There  is  also  a  poll  tax  of  $1.00  in  the  counties  commuted  by  labor. 

EXEMPTIONS. — Exemptions  in  addition  to  public  property,  include 
bonds  of  the  State  and  of  any  counties,  municipality  and  district 
therein;  the  property  of  literary,  scientific,  benevolent,  agricultural, 
and  religious  institutions  and  societies;  family  homesteads  or  other 
property  to  the  value  of  $200;  mines  and  mining  claims  bearing  gold, 
silver  or  other  precious  metals  (but  not  the  net  product  and  surface 
improvements)  for  a  period  of  ten  years  from  the  date  of  location; 
irrigating  ditches,  canals  and  flumes  belonging  to  cemeteries  and  used 
on  a  mutual  basis,  and  all  other  ditches,  etc.,  for  irrigating  purposes 
for  a  period  of  six  years  after  completion;  property  of  irrigating  dis- 
tricts, tanning  factories  for  six  years,  and  railroads  for  six  years  after 
the  completion  of  the  road  and  branches.  No  tax  is  to  be  levied  on 
any  mining  claim  located  under  the  laws  of  the  United  States  or  upon 
any  shaft  or  work  therein  until  after  a  patent  has  been  issued  by  the 
United  States  and  for  one  year  thereafter;  but  other  net  improvements 
and  the  net  profit  are  taxable.  Bona  fide  debts  may  be  deducted  from 
credits  in  the  assessment. 

LICENSES. — ^A  number  of  licenses  or  corporation  taxes  provided 
for  by  statute  are  required  to  be  paid  direct  to  the  County  Treasurer 
to  be  used  for  school  and;  general  county  purposes  and  are  treated  as 
county  revenues.  There  is  a  like  list  of  such  taxe^  upon  occupations, 
for  which  see  the  statute. 

One  half  of  the  State  tax  upon  car  companies  is  apportioned  to  the 
counties  according  to  mileage  and  one-half  of  the  gross  receipts  of 
express  companies  is  distributed  to  the  counties  according  to  business 
done  therein.  One-half  of  the  tax  on  corporations  provided  for  by 
statute  is  paid  into  the  general  current  expense  fund  of  the  county 
and  one-half  into  a  county  school  fund. 

MINES. — Mines  and  mining  claims  are  exempt  from  taxation  for 
ten  years  from  date  of  location  (Comp.  Laws  Sec.  1560-1756) ;  but  the 
net  product  and!  surface  improvements  are  subject  to  the  general 
property  tax. 

TAX  LEVIES. — Under  the  Act  of  1915,  the  tax  commission  provision 
is  made  for  the  assessment  of  property  at  its  actual  value  and  the 
maximum  rate  of  taxation  levied  for  State  purposes  was  limited  to 


STATE   TAXATION    SYSTEM — NEW    YORK.  875 

three  mills  on  the  dollar,  to  county  purposes  five  mills  and  city  and 
town,  purposes  three  mills  on  the  dollar.  Special  school  levies  are 
authorized  not  to  exceed  five  mills.  The  commission  is  authorized  to 
increase  or  decrease  the  valuation  of  any  county  so  as  to  bring  it  to 
the  actual  value  fixed  by  the  commission. 

COLLECTIONS. — Taxes  are  assessed  as  of  the  first  day  of  March 
and  return  is  made  on  or  before  the  first  Monday  in  April.  One-half 
of  the  taxes  become  due  on  the  first  day  of  August  and  delinquent  on 
the  first  day  of  December.  The  other  one-half  become  due  on  the 
first  day  of  January  following,  and  are  delinquent  on  the  first  day  of 
June.  Real  estate  sold  for  taxes  is  redeemable  within  three  years 
with  interest  at  1*^  per  cent  on  the  purchase  money  and  payment  of 
taxes  by  the  purchaser. 

NEW  YORK 

(Constitution.) 

The  Constitution  contains  no  direct  restriction  upon  the  exercise  of 
the  legislative  power  in  taxation,  that  is,  in  imposing  taxes  or  in 
granting  exemptions  from  taxation. 

The  legislature,  however,  is  prohibited  from  passing  private  or  local 
bills  granting  to  any  person  or  corporation  exemption  from  taxation 
(Art.  Ill,  Sec.  24),  and  every  law  imposing  a  tax  must  state  the  pur- 
pose for  which  it  is  to  be  applied.     (Art.  X,  Sec.  3.) 


GENERAL  SYSTEM. — The  General  Property  Tax  has  not  been  en- 
forced as  the  main  source  of  local  revenues  since  1880.  Special  taxes 
have  been  imposed  on  particular  subjects,  usually  for  State  purposes, 
and  at  the  present  time,  1917,  there  is  an  assortment  of  such  special 
taxes  imposing  rates  which  have  been  established  at  various  times 
during  this  period.  The  General  Property  Tax  upon  the  real  and  per- 
sonal property  of  the  State  subject  to  these  specific  exemptions  and 
special  taxes,  is  levied  upon  the  assessments  made  in  the  counties  and 
cities  of  the  State. 

ADMINISTRATION. — The  State  Tax  Commission,  with  three  ap- 
pointed members,  has  general  power  of  administration  and  recom- 
mendation, and  its  members  sit  with  the  Commissioners  of  the  Land 
Office  and  thus  constitute  the  State  Board  of  Equalization,  with  power 
to  equalize  aggregate  assessments  of  real  estate  in  each  county  with 
the  average  equalized  assessed  values  of  real  estate  in  all  counties,  for 
the  purpose  of  levying  a  direct  State  tax  when  required. 

The  State  Tax  Commission  by  recent  amendment  has  a  limited 


876  STATE   TAXATION    SYSTEM NEW   YORK. 

power  over  local  assessments  through  the  possibility  of  securing,  by- 
application  to  the  court,  a  reassessment  of  property  in  any  taxing  dis- 
trict. 

The  local  assessment  of  real  property  and  of  all  such  personal  prop- 
erty as  is  subject  to  the  General  Property  Tax,  is  made  up  by  a  Board 
of  Assessors,  which  in  a  town  consists  of  three  members  and  in  cities 
and  incorporated  authorities  of  a  varying  number.  The  assessments 
in  the  towns  and  cities  are  subject  to  equalization,  as  between  towns 
by  the  County  Board  of  Supervisors.  This  board  consists  of  a  super- 
visor representing  each  town;  andl  in  the  city,  each  ward.  The  mem- 
bers have  no  function  with  respect  to  the  assessment  of  property  ex- 
cept to  equalize  for  the  purpose  of  county  tax. 

PUBLIC  UTILITY  CORPORATIONS.— Transfer  and  transmission 
corporations,  including  railroads,  are  required  to  pay  an  annual  fran- 
chise tax  for  State  purposes,  based  upon  the  capital  stock  employed 
within  the  State  at  a  rate  varying  according  to  the  amount  of  dividend 
declared.  These  corporations  are  also  required  to  pay  an  additional 
franchise  tax  based  upon  their  earnings  within  the  State  at  the  rate 
of  one-half  of  one  per  cent. 

Other  public  utilities  corporations  above  are  taxed  upon  their  gross 
earnings  within  the  State  andi  upon  dividends  declared  in  excess  of  a 
minimum  amount. 

CORPORATE  FRANCHISE  TAXES.— There  is  a  corporate  fran- 
chise tax  levied  upon  domestic  corporations,  of  one-twentieth  of  one 
per  cent  on  amount  of  capital  stock,  and  upon  foreign  corporations  one- 
eighth  of  one  per  cent  for  the  privilege  of  doing  business  in  a  corpo- 
rate capacity  in  the  State.  The  franchise  tax  on  corporations  whose 
shares  have  no  designated  value,  is  on  the  basis  of  such  portion  of  the 
net  assets  of  the  corporation  as  its  gross  assets  employed  in  any  busi- 
ness within  the  State  bear  to  its  entire  gross  assets  wherever  em- 
ployed in  business.  It  seems,  however,  that  under  the  Act  of  1917, 
corporations,  whether  foreign  or  domestic,  engaged  in  manufacturing 
and  mercantile  business,  are  exempted  from  this  annual  tax  by  paying 
the  income  tax  therein  provided.     See  infra,  Business  Corporations. 

BANKS.— The  shares  of  State  and  national  banks  are  taxed  for  local 
purposes  to  the  shareholders  in  the  taxing  district  where  the  bank  is 
located,  at  the  rate  of  one  per  cent  of  the  capital  surplus  and  undi- 
vided profits.  The  proportionate  amount  of  assessed  ralue  of  real  estate 
is  deducted  from  valuation  of  shares. 


STATE  TAXATION   SYSTEM — NEW  YORK.  877 

Trust  companies  are  taxed  as  such  for  State  purposes  the  same  as 
banks.    The  shareholders  are  not  otherwise  taxed. 

(See  supra,  Sees.  300-302  as  to  judicial  construction  of  this  system  in 
reference  to  national  banks.) 

Savings  banks  are  taxed  for  State  purposes  at  the  rate  of  one  per 
cent  of  their  surplus  and  undivided  earnings,  and  their  deposits  are 
not  taxable  in  the  hands  of  their  depositors. 

Investment  companies  organized  under  the  Banking  Act  pay  a  fran- 
chise tax  of  114  mills  for  every  dollar  face  value  of  their  capital,  plus 
one  per  cent  of  their  surplus  and  undivided  profits.  Certificates  of  in- 
vestment of  such  companies  are  exempted.  See  subdivision  14  of  Sec. 
4  of  Tax  Law  as  amended  in  1917. 

INSURANCE  COMPANIES.— Are  taxed  at  three  per  cent  of  their 
gross  earnings  within  the  State  for  State  purposes. 

BUSINESS  CORPORATIONS.— In  1917  (see  Chapter  726,  Laws  of 
1917)  the  law  was  enacted  providing  for  the  taxation  of  manufacturing 
and  mercantile  corporations  for  State  and  local  purposes,  based  on  an 
apportionment  to  the  State  of  their  net  income,  as  shown  in  the  re- 
ports for  the  Federal  Income  Tax.  In  the  same  year  cities  were  au- 
thorized to  provide  for  a  tax  for  local  purposes  upon  transient  retail 
merchants,  based  upon  gross  sales  at  the  local  tax  rate.  The  mer- 
cantile and  manufacturing  companies  are  taxable  on  such  proportion, 
of  their  net  income  as  is  earned  in  the  State  at  the  rate  of  3  per  cent, 
two-thirds  of  the  yield  going  to  the  State  and  one-third  to  the  locality. 
The  tax  applies  to  both  domestic  and  foreign  corporations,  also  to  joint 
stock  associations.  It  does  not  apply  to  public  service  corporations. 
If  the  company  does  business  both  within  and  without  the  State,  the 
taxable  net  income  will  be  determined  in  proportion  to  the  business 
within  the  State  to  the  total  business  wherever  located. 

Companies  paying  this  tax  are  exempted  from  State  franchise  tax, 
and  personal  property  tax,  and  State  tax  on  capital  stock.  Reports 
for  this  tax  must  be  filed  before  July  1st. 

INVESTMENT  TAX.— Under  the  investment  tax  law,  as  enacted  in 
1917,  a  tax  of  two  mills  on  each  $100  face  value  for  not  over  five  years, 
or  1  per  cent  on  each  $100  for  a  term  of  five  years,  is  imposed  for 
State  purposes;  and  on  payment  of  this  tax  and  the  stamping  of  the 
security,  the  property  is  exempted  for  such  term  from  the  general 
property  tax.  except  it  is  not  exempted  from  the  stock,  transfer  and 
inheritance  taxes.  Parties  engaged  in  the  business  of  buying  and  sell- 
ing such  securities,  may  deduct  indebtedness  from  securities  carried 


878  STATE   TAXATION    SYSTEM — NEW   YORK. 

in  their  business,  that  are  not  held  for  longer  than  eight  months; 
otherwise  there  is  no  deduction  for  debts  allowed  in  the  payment  of 
this  tax.  If  the  tax  is  not  paid  before  the  assessment  day,  the  property 
will  be  subject  to  the  general  tax  at  the  residence  of  the  owner,  at  the 
local  rate  and  without  the  benefit  of  debt  deduction.  A  further  penalty 
Is  provided  by  which,  if  securities  are  found  in  decedent's  estate  upon 
which  tax  has  not  been  paid,  an  additional  inheritance  tax  of  5  per 
cent  is  imposed.  Provision  is  made  for  an  apportionment  of  value  of 
an  investment  secured  by  mortgage  on  property  situated  partly  within 
and  partly  without  the  State,  so  that  the  tax  may  be  paid  upon  that  por- 
tion not  represented  by  property  within  the  State.  Investment  tax 
must  be  paid  before  assessment  day  to  obtain  exemption  for  property 
tax. 

MORTGAGE  TAX. — Under  the  mortgage  recording  tax  law  there  is  a 
recording  tax  of  fifty  cents  for  each  mortgage,  up  to  $100;  and  above 
that,  fifty  cents  for  each  $100  and  remaining  major  fraction  thereof  of 
principal  debt,  which  under  any  contingency  may  be  secured  by  a 
mortgage  on  real  property  situated  within  the  State;  and  on  such  pay- 
ment, the  mortgage  is  thereafter  exempted  from  other  taxation  to  the 
extent  that  it  represents  real  property  situated  in  the  State. 

Mortgages  for  indefinite  amounts  are  taxable  on  value  of  property 
secured  thereby.  A  mortgage  on  real  property  is  defined  as  including 
any  mortgage  which  creates  a  lien  upon,  or  a  lien  over,  or  affects  the 
title  to  real  property,  even  though  personal  or  other  property  may  be 
acquired  as  part  of  the  security.  One-half  of  the  yield  of  this  tax 
goes  to  the  State,  and  one-half  to  the  locality. 

STOCK  TRANSFER. — By  the  stock  transfer  tax  all  sales  of  stock 
are  subject  to  a  tax  of  two  cents  on  each  share  of  $100,  and  a  transfer 
of  the  stock  without  such  payment  is  a  misdemeanor. 

INHERITANCE  TAX. — ^What  is  elsewhere  known  as  an  inheritance 
tax  is  known  in  New  York  as  a  transfer  tax;  and  it  is  imposed  upon 
inheritances  of  more  than  $500,  and  on  more  than  $5000  when  the  es- 
tate passes  to  father  or  mother,  husband,  wife,  child,  adopted  child, 
or  any  lineal  descendant,  the  rates  being  graded  according  to  the  de- 
gree of  inheritance. 

Bequests  for  religious,  benevolent  and  educational  purposes  and  for 
religious  observances,  or  to  a  municipal  corporation  for  a  specific  pub- 
lic purpose,  are  exempted. 

The  term  "resident"  is  defined  so  as  to  include  persons  who  have 
dwelt  or  lodged  in  the  State,  whether  for  the  greater  part  of  any 


STATE   TAXATION    SYSTEM NEW   YORK.  879 

period)  of  twelve  consecutive  months  in  the  twenty-four  months  next 
preceding  death,  and  also  to  include  those  who  by  formal  written  in- 
strument, executed  within  one  year  prior  to  death,  declared  themselves 
residents  of  the  State. 

TAXATION  OF  NON-RESIDENTS.— The  property  subject  to  assesa- 
ment  includes  the  personal  property  of  non-residents  situated  within 
the  State,  except  negotiable  securities  deposited  as  collateral,  or  money 
deposited  by,  or  debts  owing  to  non-residents. 

The  capital  invested  in  business  by  non-residents  is  taxable  to  the 
same  extent  as  that  owned  by  a  resident.  The  practical  enforcement, 
however,  of  this  tax  against  a  non-resident,  is  said  to  be  limited  to 
household  furniture. 

The  capital  of  non-residents  employed  in  business  in  the  State,  is 
made  taxable.  Where  the  deceased  is  a  resident,  the  tax  is  imposed 
upon  personal  property  within  the  State  only  and  upon  all  intangible 
property,  wherever  located  or  kept;  and,  in  case  of  non-resident,  the 
tax  is  imposed  upon  tangible  personal  property  located  within  the 
State,  but  not  upon  intangible  personal  property,  with  certain  specified 
exceptions. 

EXEMPTIONS. — The  legislative  power  in  exempting  from  taxation 
is  not  limited  by  the  Constitution.  Exemptions  include  not  only  public 
property  >and  bonds  of  the  State,  or  any  civil  division  thereof,  but  also 
historical  and  art  buildings,  property  owned  by  and  exclusively  used 
for  corporations  organized  for  religious,  educational,  charitable  and 
benevolent  purposes,  and  large  and  varied  classes  of  property,  includ- 
ing property  bought  by  pension  money  by  Civil  War  veterans  and 
owned  by  him,  or  his  widow,  or  bought  by  a  clergyman,  or  his  widow 
(when  resident  of  the  State)  to  the  value  of  $1500;  also  vessels  en- 
gaged in  foreign  commerce,  bank  deposits  and  cemeteries.  The  total 
of  the  exempted  real  estate,  other  than  public  property,  was  said,  in 
1915,  to  amount  to  one-fifth  of  the  total  assessed  value  of  real  estate. 
(See  State  Tax  Bulletin  of  1916.) 

ASSESSMENTS. — Sec.  6,  Art.  I  of  the  Tax  Law,  Chapter  60  of  the 
Consolidated  Laws,  provides  that  all  real  and  personal  property  shall 
be  assessed  "at  full  value  thereof."  Assessments  may  be  reviewed 
by  court  under  writ  of  certiorari.  Parties  are  entitled  to  deduct 
from  their  total  assesment  of  personal  property  the  full  amount 
of  their  indebtedness.  All  real  property  within  the  State  and 
all    personal    property    situated    or   owned    in    the   State,    is    taxable 


880  STATE   TAXATION   SYSTEM — NORTH   CAROLINA. 

unless  specially  exempted  from  taxation  by  law.    Assessment  day  in 
New  York  City  is  October  1st,  and  in  towns,  July  1st. 

COLLECTION. — Taxes  on  personal  property  are  enforced  by  sale  of 
the  debtor's  personal  chattels  by  action  on  short  notice.  When  taxes 
on  real  property  are  not  paid  for  one  year  from  the  first  of  February 
following  the  day  on  which  the  tax  is  due,  the  property  is  forced  for 
sale  by  the  State  Comptroller,  the  purchaser  at  such  sale  receiving  a 
certificate;  and,  if  no  previous  redemption,  the  purchaser  is  entitled 
to  a  deed  after  the  expiration  of  one  year.  Lands  may  be  redeemed 
within  one  year  from  date  of  sale  on  payment  of  the  amount  paid 
by  purchaser  with  10  per  cent  interest.  This  applies  to  towns;  but 
cities  usually  have  special  charter  provisions  regulating  the  collection 
of  real  estate  taxes. 

The  City  of  New  York  has  a  unique  method  of  selling  its  lien  for 
unpaid  taxes  to  the  private  purchasers  who  bid  the  lowest  rate  of  in- 
terest. The  buyer  may  enforce  payment  by  foreclosure  in  the  same 
manner  as  that  in  which  a  mortgage  is  foreclosed;  but  he  must  hold 
this  lien  for  three  years  if  the  owner  of  the  land  pays  interest  on  the 
rate  bid. 

Provision  Is  made  for  the  refunding  of  taxes  paid  on  erroneous  or 
illegal  assessments.  (See  Tax  Law,  Chapter  62,  Laws  1909,  consti- 
tuting Chapter  60  of  the  Consolidated  Laws.) 

NORTH  CAROLINA 

Sec.  17.  (Declaratio  nof  Rights.)  No  person  ought  to  be  taken,  im- 
prisoned, or  disseized  of  his  freehold,  liberties,  or  privileges,  or  out- 
lawed or  exiled,  or  in  any  manner  deprived  of  his  life,  liberty  or  prop- 
erty, but  by  law  of  the  land. 

Art.  V,  Sec.  1.  The  General  Assembly  shall  levy  a  capitation  tax  on 
every  male  inhabitant  in  the  State  over  twenty-one  and  under  fifty 
years  of  age,  which  shall  be  equal  on  each  to  the  tax  on  property 
valued  at  $300  in  cash.  The  commissioners  of  the  several  counties 
may  exempt  from  capitation  tax  in  special  cases,  on  account  of  poverty 
and  infirmity,  and  the  State  and  county  capitation  tax  shall  never  ex- 
ceed two  dollars  on  the  head. 

Sec.  2.  (Provides  for  capitation  tax  on  every  male  inhabitant  over 
twenty-one  and  under  fifty  years  of  age,  equal  to  the  tax  on  property 
valued  at  $300  in  cash,  the  State  and  county  capitation  tax  not  to  ex- 
ceed two  dollars  on  the  head,  the  proceeds  to  be  devoted  to  education 
and  the  poor,  only  25  per  cent  to  go  to  the  latter  in  any  one  year. 

Sec.  3.  Laws  shall  be  passed  for  taxing  by  a  uniform  rule  all  moneys, 
credits,  investments  in  bonds,  stocks,  joint-stock  companies,  or  other- 
wise, and,  also,  all  real  and  personal  property,  according  to  its  true 


STATE   TAXATION   SYSTEM — NORTH   CAROLINA.  881 

value  in  money.  The  General  Assembly  shall  also  tax  trades,  profes- 
sions, franchises,  and  incomes,  provided  that  no  income  shall  be  taxed 
when  the  property  from  which  it  is  derived  is  taxed. 

Sec.  5.  (Public  property  is  exempted,  and  the  General  Assembly  Is 
empowered  to  exempt  cemeteries  and  property  held  for  educational, 
scientific,  literary,  charitable,  or  religious  purposes;  also  wearing  ap- 
parel, arms  for  muster,  household  and  kitchen  furniture,  the  mechanical 
and  agricultural  implements  of  mechanics  and  farmers,  libraries  and 
scientific  instruments,  or  any  other  personal  property,  to  a  value«not 
exceeding  $300.) 

Sec.  6.  (County  taxes  are  not  to  exceed  double  the  State  taxes,  ex- 
cept for  special  purposes  and  with  the  special  approval  of  the  General 
Assembly.) 

Sec.  7.  Every  act  of  the  General  Assembly  levying  a  tax  shall  state 
the  special  object  to  which  it  is  to  be  applied,  and  it  shall  be  applied 
to  no  other  purpose. 


ADMINISTRATION.— The  State  Tax  Commission,  formerly  known 
as  the  State  Corporation  Commission,  assesses  the  property  of  publio 
eervice  corporations,  the  corporate  excess  and  domestic  business  cor- 
porations, and  the  capital  stock  tax  on  both  domestic  and  foreign  cor- 
porations, and  has  general  supervision  of  the  administration  of  the  tax 
laws  of  the  State,  with  powers  of  investigation  and  recommendation. 
The  Board  of  County  Commissioners  appoints  the  local  list  takers  or 
assessors. 

RAILROADS,  STEAMBOAT  AND  CANAL  COMPANIES.— Domestic 
and  foreign  railroads,  steamboat  and  canal  companies  pay  to  the  State 
for  general  purposes,  and  locally  for  local  purposes,  a  general  property 
tax  on  all  property,  including  intangible  or  franchise  values.  In  addi- 
tion railroads  pay  to  the  State  for  State  purposes  a  mileage  tax  as  a 
privilege  or  license  tax;  and  steamboat  and  canal  companies  pay  the 
capital  stock  tax.  The  assessment  of  railroad  property  by  the  State 
Board  is  made  by  determining  the  aggregate  value  of  the  main  track 
mileage  in  the  State  as  apportioned  to  the  whole  main  track  mileage. 
The  value  of  the  property  locally  assessed  is  deducted,  and  the  re- 
mainder is  then  apportioned  to  counties  and  municipalities  where  the 
mileage  lies.  The  locally  assessed  property  Is  not  apportioned.  Steam- 
boat and  canal  companies  are  assessed  In  the  same  manner  as  far  as 
applicable. 

Telegraph,  telephone,  car  and  express  companies  pay  the  general 
property  tax  on  all  property,  Including  franchise  value;  and  telephone 
companies  also  pay  a  gross  receipt  tax,  express  companies  a  mileage 
tax,  and  car  companies  a  capital  stock  tax.    See  laws  of  1913,  ch.  201. 


882  STATE   TAXATION    SYSTEM NORTH    CAROLINA. 

STREET  RAILWAY  AND  OTHER  PUBLIC  UTILITIES— These 
companies  pay  the  general  property  tax  on  all  property,  Including 
franchise  value,  to  the  State  for  State  purposes,  and  locally  for  local 
purposes;  and  in  addition  they  pay  to  the  State  for  State  purposes  the 
capital  stock  tax.     (Laws  of  1913,  ch.  203,  Sec.  57.) 

BUSINESS  CORPORATIONS.^Domestic  business  corporations  pay 
to  the  State  for  State  purposes,  and  locally  for  local  purposes,  the  gen- 
eral property  tax  on  real  and  personal  property.  Foreign  business  cor- 
porations pay  locally  the  general  property  tax  on  real  and  personal 
property  in  the  same  manner  as  individuals.  In  addition,  both  domestic 
and  foreign  business  corporations  pay  to  the  State  for  State  purposes 
the  capital  stock  tax  of  1/25  of  1  per  cent  (but  the  tax  not  to  be  less 
than  $7.50).     (Laws  of  1913,  ch.  201,  Sees.  76,  82.) 

TAX  ON  CORPORATE  EXCESS. — An  exceptional  feature  of  the  tax 
system  of  North  Carolina,  is  the  tax  of  "corporate  excess"  of  domestic, 
manufacturing,  mercantile  and  miscellaneous  corporations  by  the  State 
Tax  Commission  for  the  purpose  of  local  assessment.  The  commission 
deducts  the  value  of  real  and  personal  property  as  assessed  locally, 
and  certifies  the  remainder  or  "corporate"  excess  to  the  county  where 
the  corporation  has  its  principal  office  or  place  of  business.  The  re- 
sult is  to  tax  domestic  business  corporations  on  the  entire  value  of 
their  capital  stock. 

BANK  STOCKS. — Bank  stocks  are  assessed  on  the  value  of  the 
capital  stock  and  surplus  and  undivided  profits,  less  the  assessed 
value  of  real  and  personal  property  listed  for  taxation.  An  allowance 
of  not  exceeding  5  per  cent  of  bills  receivable,  is  authorized  to  cover 
insolvent  debts. 

INCOME  TAX. — There  is  an  income  tax  of  1  per  cent  on  gross  in- 
comes over  $1250.  In  obedience  to  the  State  Constitution,  this  income 
tax  is  from  property  not  taxed,  that  is,  salaries,  annuities,  trades  and 
professions;  and  the  proceeds  are  paid  to  the  State. 

INHERITANCE  TAX. — An  inheritance  tax  is  levied  on  the  property 
passing  by  will  or  intestacy,  that  is,  on  the  property  located  in  the 
State  of  the  decedent,  whether  domiciled  or  not  within  the  State,  and 
also,  if  the  deceased  was  a  non-resident,  on  any  part  of  such  property 
within  the  State,  widows  being  entitled  to  exemption  of  $10,000  and 
each  child  to  an  exemption  of  $5000,  and  the  rates  being  graduated 
according  to  relationship  and  amount.  There  is  an  exemption  of  this 
tax  on  legacies  to  religious,  educational,  or  charitable  institutions  in 


STATE   TAXATION    SYSTEM — NORTH    DAKOTA.  883 

the  State,  and  the  tax  applies  to  all  legacies  of  property  passing  by  will 
or  intestacy  since  March  12,  1913.     (See  Act  of  1915.) 

POLL  TAX.— There  is  a  poll  tax  on  each  taxable  person  from  21  to 
50  years  of  age,  applied  to  education,  support  of  the  government,  pen- 
sions and  schools.  There  is  also  a  county  poll  tax,  but  the  State  and 
county  combined  are  not  to  exceed  two  dollars  per  capita.  Municipali- 
ties may  also  levy  a  tax  on  polls  for  State  purposes,  not  to  exceed  two 
dollars. 

LICENSES. — There  is  an  extensive  system  of  licenses  for  the  privi- 
lege of  carrying  on  business;  and  where  a  specific  license  is  levied  by 
the  State,  the  counties  may  levy  the  same  tax,  and  no  more,  and 
municipalities  may  also  tax  such  privileges  not  to  exceed  twenty-five 
dollars. 

EXEMPTIONS. — Property  held  for  religious  purposes,  including  min- 
isters' residences,  educational  purposes,  property  belonging  to  the  Y. 
M.  C.  A.  and  similar  associations,  property  of  Indians  not  citizens,  ex- 
cept lands  held  by  purchase,  wearing  apparel,  private  libraries,  kitchen 
and  household  furniture  not  exceeding  in  value  $'25.00,  are  exempt. 
All  the  tax  exemptions  to  corporations  are  repealed,  except  as  to 
property  held  for  religious,  charitable,  educational,  literary  and  benevo- 
lent purposes  and  cemeteries. 

No  city  or  municipality  can  impose  on  property  a  greater  tax  than 
1  per  cent,  except  by  special  authority  of  the  General  Assembly. 

COLLECTIONS.— Taxes  are  collected  by  the  sheriffs  of  the  counties. 
Taxes  are  a  lien  on  real  estate  from  the  time  the  lists  are  given,  as  on 
the  1st  day  of  May.  Lands  may  be  sold  for  taxes  after  notice  pub- 
lished once  a  week  for  four  weeks.  The  delinquent  may  redeem 
within  a  year  by  paying  the  amount  bid  by  the  purchaser  and  all  other 
taxes  on  the  land  and  20  per  cent  per  annum. 

NORTH  DAKOTA 

Constitution  of  1890,  Art.  XI,  Sec.  175.  (To  the  same  effect  as  Iowa 
Const.,  Art.  VII,  Sec.  7.) 

Sec.  177.  All  improvements  on  land  shall  be  assessed  in  the  man- 
ner prescribed  by  law,  but  plowing  shall  not  be  considered  as  an  im- 
provement or  add  to  the  value  of  land  for  the  purpose  of  assessment. 

Sec.  178.  The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  or  any  county  or 
other  municipal  corporation  shall  be  a  party. 

Sec.  180.     (Authorizes  a  poll  tax.) 


884  STATE   TAXATION    SYSTEM — NORTH    DAKOTA. 

"Constitutional  Provisions:  Sees.  176  and  179  as  amended  November 
3,  1914: 

"Sec.  176.  Taxes  shall  be  uniform  upon  the  same  class  of  property, 
including  franchises,  within  the  territorial  limits  of  the  authority- 
levying  the  tax,  and  shall  be  levied  and  collected  for  public  purposes 
only,  but  the  property  of  the  United  States,  and  of  the  State,  county 
and  municipal  corporations,  shall  be  exempt  from  taxation;  and  the 
Legislative  Assembly  shall  by  a  general  law  exempt  from  taxation 
property  used  exclusively  for  school,  religious,  cemetery,  charitable, 
or  other  public  purposes,  and  personal  property  to  any  amount  not 
exceeding  in  value  two  hundred  dollars  for  each  individual  liable  to 
taxation:  Provided,  That  all  taxes  and  exemptions  in  force  when  this 
amendment  is  adopted  shall  remain  in  force,  in  the  same  manner  and 
to  the  same  extent,  until  otherwise  provided  by  statute. 

"Sec.  179.  All  taxable  property,  except  as  hereinafter  in  this  section 
provided,  shall  be  assessed  in  the  county,  city,  township,  village  or  dis- 
trict in  which  it  is  situated,  in  the  manner  prescribed  by  law.  The 
property,  including  franchises  of  all  railroads  operated  in  this  State, 
and  of  all  express  companies,  freight  line  companies,  dining-car  com- 
panies, sleeping-car  companies,  car  equipment  companies,  or  private 
car  line  companies,  telegraph  or  telephone  companies  operating  in  this 
State  and  used  directly  or  indirectly  in  the  carrying  of  persons,  prop- 
erty, or  messages,  shall  be  assessed  by  the  State  Board  of  Equaliza- 
tion in  a  manner  prescribed  by  such  State  board  or  commission  as  may 
be  provided  by  law.  But  should  any  railroad  allow  any  portion  of  its 
railway  to  be  used  for  any  purpose  other  than  the  operation  of  a  rail- 
road thereon  such  portion  of  its  roadway,  while  so  used,  shall  be  as- 
sessed in  the  manner  provided  for  the  assessment  of  other  real  prop- 
erty." 


ADMINISTRATION.— The  State  Board  of  Equalization  is  composed 
of  the  Governor,  State  Auditor,  State  Treasurer,  Attorney-General  and 
the  Commissioner  of  Agriculture  and  Labor,  and  equalizes  assessments 
between  the  several  counties  of  the  State,  and  may  not  reduce  the 
aggregate  valuation  more  than  1  per  cent.  It  also  levies  the  State 
tax  not  to  exceed  4  mills  on  the  dollar  on  the  amount  necessary  to 
meet  the  appropriation  of  the  General  Legislative  Assembly  in  the 
estimated  general  expenses  of  the  State. 

A  special  tax  of  one-half  of  1  per  cent  is  levied  for  the  "State  "Wolf 
Bounty  Fund"  and  a  tax  of  one  mill  may  be  levied  for  the  purpose  of 
maintaining  certain  State  educational  institutions. 

By  the  Laws  of  1911  (see  eh.' 303),  a  tax  commission  was  created, 
three  members  appointed  by  the  Governor,  to  exercise  general  super- 
vision of  the  administration  over  the  tax  laws  of  the  State  and  over 
the  assessors,  Boards  of  Review  and  Boards  of  Equalization;  and  it  Is 
empowered  to  assess  all  light,  heat  and  power  companies  doing  busi- 


STATE   TAXATION    SYSTEM — NORTH   DAKOTA.  885 

ness  in  the  State.  The  powers  of  the  commission  were  substantially 
enlarged  by  Act  of  1917. 

The  County  Board  of  Review  and  Equalization  is  composed  of  a 
County  Board  of  Commissioners.  It  equalizes  the  work  of  the  local 
assessors. 

There  is  but  one  assessment  for  State,  county  and  city  purposes. 

RAILROADS. — The  State  Board  of  Equalization  assesses  the  value 
of  the  franchise,  roadway,  roadbed,  rails  and  rolling  stock  of  all  rail- 
roads, and  also  the  property  and  franchise  of  other  public  carriers. 

CORPORATIONS. — Corporations  are  in  general  assessed  as  indivi- 
duals, except  railways,  including  street  railways  and  certain  other  pub- 
lic service  corporations,  which  are  assessed  by  the  State  Board  of 
Equalization. 

BANKS. — Banks  are  taxed  on  real  estate  and  the  assessed  value  is 
deducted  from  assessed  value  of  shares,  but  are  not  allowed  to  deduct 
for  such  real  estate  from  value  of  shares  assessed  to  stockholders  more 
than  sixty  per  cent  of  par  value  of  shares  and  surplus,  and  only  can 
deduct  for  land  located  in  the  State. 

POLL  TAX. — There  is  no  State  poll  tax,  but  there  is  a  county  and 
city  poll  tax  for  the  support  of  the  common  schools  and  for  roads.  The 
latter  may  be  paid  in  labor  as  well  as  in  money. 

INHERITANCE  TAX. — The  Inheritance  Tax  Law  of  1913  applies  to 
property,  transferred  by  will  or  under  intestate  laws,  of  any  deceased 
resident,  and  also  when  such  transfer  is  from  a  non-resident  and  the 
property  is  within  the  jurisdiction  of  the  State,  whether  the  ownership 
of,  or  interest  in  such  property  be  evidenced  by  certificates  of  stock 
or  bonds  in  domestic  or  foreign  corporations.  It  also  applies  when 
transfers  are  made  in  contemplation  of  death.  The  law  exempts  prop- 
erty without  the  State  subject  to  inheritance  tax  in  the  State  where 
located,  provided  such  State  has  a  similar  exemption  for  property 
located  in  North  Dakota  belonging  to  a  resident  of  such  State. 

The  tax  rates  are  graded  according  to  the  degree  of  relationship  and 
amount  of  inheritance.  There  is  an  exemption  up  to  $20,000  in  the 
case  of  husband  and  wife,  and  $10,000  in  case  of  father  and  mother, 
lineal  descendant,  adopted  child  or  lineal  descendant  of  adopted  child. 
There  is  no  tax  when  the  transfer  is  for  charity.  Important  changes 
were  made  by  Act  of  1917,  making  a  normal  rate  for  estates  not  ex- 
ceeding $2,5,000  in  value,  and  a  graduated  additional  rate  upon  all  the 
amount  of  estates  exceeding  $25,000.    The  exemptions  are  reduced. 


886  STATE    TAXATION    SYSTEM — NORTH    DAKOTA. 

EXEMPTIONS. — Exempted  property  includes  property  held  for  edu- 
cational and  religious  purposes,  the  money  and  credits  of  each  such  in- 
stitution, and  the  personal  property  of  each  individual  to  the  amount 
of  $50.00.  Property  of  organizations  and  agricultural  fair  associations 
not  conducted  for  profit  also  exempted. 

CLASSIFICATION. — Important  changes  were  made  in  the  tax  sys- 
tem in  1917,  under  the  constitutional  amendment  of  1914,  authorizing 
classification.  Money  and  credits  other  than  that  of  incorporated 
banks  or  otherwise  exempted,  were  subjected  to  an  annual  tax  of  three 
mills  on  each  dollar  of  their  fair  cash  value,  and  exempted  from  other 
taxation.  Parties  failing  to  make  return  to  the  assessor  are  subject  to 
a  penalty  of  50  per  cent.  The  proceeds  of  this  taxation  were  appor- 
tioned one-sixth  to  the  State,  one-sixth  to  the  county  revenue,  one-third 
to  the  city,  village,  or  town,  and  one-third  to  the  school  district  wherein 
the  property  was  assessed. 

Property  is  classified  for  taxation  as  follows: 

Class  1.  All  land,  town  and  city  lots,  railroad  property  and  bank 
stocks  are  valued  and  assessed  at  30  per  cent  of  their  true  value. 

Class  2.  Live  stock,  agricultural  and  other  tools  and  machinery,  au- 
tomobiles and  other  vehicles,  boats  and  water  crafts,  flour  mills,  store 
buildings,  stocks  and  merchandise,  electric  and  gas  plants,  water 
works  systems,  improvements  upon  town  and  city  lots  are  valued  and 
assessed  at  20  per  cent  of  their  true  value. 

Class  3.  Household  goods,  house  equipment  and  wearing  apparel, 
farm  improvements,  stocks  other  than  banks,  and  money  and  credits 
not  otherwise  assessed  are  valued  and  assessed  at  5  per  cent  of  their 
true  value. 

ASSESSMENT. — The  property  included  and  the  methods  of  assess- 
ment and  of  equalization  are  the  same  for  all  county,  township,  city 
and  school  taxes  as  for  the  State. 

By  Act  of  1917,  all  personal  property  is  listed  and  assessed  every 
year,  according  to  value,  on  the  first  day  of  April;  while  real  property 
is  listed  every  odd  numbered  year,  according  to  its  value,  on  the  first 
day  of  April  preceding  the  assessment. 

COLLECTIONS. — All  taxes  become  due  on  the  1st  day  of  December, 
and  delinquent  on  the  1st  day  of  March,  after  which  date  the  penalty 
of  5  per  cent  attaches  to  both  real  and  personal  taxes,  and  on  the  1st 
day  of  June  following,  an  additional  penalty  of  2  per  cent,  and  on  the 
1st  day  of  November  a  third  penalty  of  3  per  cent  on  the  original 
taxes  against  the  real  estate  is  charged.    After  the  1st  day  of  March 


STATE   TAXATION    SYSTEM OHIO.  887 

interest  at  the  rate  of  1  per  cent  per  month  on  the  original  amount 
taxed  on  personal  property  is  charged  until  the  tax  is  paid.  The  col- 
lection of  personal  taxes  is  enforced  by  distress  and  sale  of  such  prop- 
erty. They  become  a  lien  upon  the  property  at  the  time  the  assess- 
ment is  made.  Taxes  on  real  property  are  made  a  perpetual  lien  upon 
the  property  assessed,  and  the  collection  is  enforced  by  sale. 

All  real  estate  is  sold  for  non-payment  of  taxes  on  the  first  Tuesday 
of  December  of  each  year.  Redemption  from  tax  sale  may  be  made 
within  three  years,  with  interest  at  the  rate  bid  by  the  purchaser  and 
a  penalty  of  5  per  cent,  together  with  all  subsequent  taxes  that  may 
have  been  paid  by  the  purchaser  up  to  the  time  of  redemption.  All 
taxes  as  between  vendor  and  purchaser  become  a  lien  upon  real  prop- 
erty on  and  after  the  1st  of  December  of  each  year. 

OHIO 

(Constitution.) 

Art.  II,  Sec.  1.  (The  restraint  upon  the  legislative  power  by  the 
reservation  of  the  initiative  and  referendum  under  the  amendment  of 
1912  is  qualified  as  follows:) 

Sec.  le.  The  powers  defined  herein  as  the  "initiative"  and  "referen- 
dum" shall  not  be  used  to  pass  a  law  authorizing  any  classification  of 
property  for  the  purpose  of  levying  different  rates  of  taxation  thereon 
or  of  authorizing  the  levy  of  any  single  tax  on  land  or  land  values  or 
land  sites  at  a  higher  rate  or  by  a  different  rule  than  is  or  may  be  ap- 
plied to  improvements  thereon  or  to  personal  property.  (Adopted 
September  3,  1912.) 

Art.  XII,  Sec.  1.  No  poll  tax  shall  ever  be  levied  in  this  State,  or 
service  required,  which  may  be  commuted  in  money  or  other  thing  of 
value.     (As  amended  September  3,  1912.) 

Sec.  2.  Laws  shall  be  passed,  taxing  by  uniform  rule,  all  moneys, 
credits,  investments  in  bonds,  stocks,  joint  stock  companies,  or  other- 
wise; and  also  all  real  and  personal  property  according  to  its  true 
value  in  money,  excepting  all  bonds  at  present  outstanding  of  the  State 
of  Ohio  or  of  any  city,  village,  hamlet,  county  or  township  in  this 
State  or  which  have  been  issued  in  behalf  of  the  public  schools  in 
Ohio  and  the  means  of  instruction  in  connection  therewith,  which 
bonds  so  at  present  outstanding  shall  be  exempt  from  taxation;  but 
burying  grounds,  public  school  houses,  houses  used  exclusively  for 
public  worship,  institutions  used  exclusively  for  charitable  purposes, 
public  property  used  exclusively  for  any  public  purpose,  and  personal 
property,  to  an  amount  not  exceeding  in  value  five  hundred  dollars, 
for  each  individual,  may,  by  general  laws,  be  exempted  from  taxation; 
but  all  such  laws  shall  be  subject  to  alteration  or  repeal;  and  the 
value  of  all  property,  so  exempted,  shall,  from  time  to  time,  be  ascer- 
tained and  published  as  may  be  directed  by  law.  (As  amended  Sep- 
tember 3,  1912.) 


888  STATE   TAXATION   SYSTEM — OHIO. 

Sec.  3.  The  General  Assembly  shall  provide,  by  law,  for  taxing  the 
notes  and  bills  discounted  or  purchased,  moneys  loaned  and  all  other 
property,  effects,  or  dues,  of  every  description  (without  deduction) 
of  all  banks,  now  existing,  or  hereafter  created,  and  of  all  bankers, 
so  that  all  property  employed  in  banking  shall  always  bear  a  burden 
of  taxation  equal  to  that  imposed  on  the  property  of  individuals. 

Sec.  4.  The  General  Assembly  shall  provide  for  raising  revenue 
sufficient  to  defray  the  expenses  of  the  State  for  each  year,  and  also 
a  sufficient  sum,  to  pay  the  interest  on  the  State  debt. 

Sec.  5.  No  tax  shall  be  levied,  except  in  pursuance  of  law;  and 
every  law  imposing  a  tax  shall  state  distinctly  the  object  of  the  same, 
to  which  only  it  shall  be  applied. 

Sec.  6.  Except  as  otherwise  provided  in  this  Constitution  the  State 
shall  never  contract  any  debt  for  purposes  of  internal  improvement. 
(As  amended  September  3,  1912.) 

Sec.  7.  Laws  may  be  passed  providing  for  the  taxation  of  the  right 
to  receive,  or  to  succeed  to,  estates,  and  such  taxation  may  be  uniform 
or  it  may  be  so  graduated  as  to  tax  at  a  higher  rate  the  right  to 
receive,  or  to  succeed  to,  estates  of  larger  value  than  to  estates  of 
smaller  value.  Such  tax  may  also  be  levied  at  different  rates  upon 
collateral  and  direct  inheritance,  and  a  portion  of  each  estate  not 
exceeding  twenty  thousand  dollars  may  be  exempt  from  such  taxa- 
tion.    (Adopted  September  3,  1912.) 

Sec.  8.  Laws  may  be  passed  providing  for  the  taxation  of  incomes, 
and  such  taxation  may  be  either  uniform  or  graduated,  and  may  be 
to  such  incomes  as  may  be  designated  by  law;  but  a  part  of  each 
annual  income  not  exceeding  three  thousand  dollars  may  be  exempt 
from  such  taxation.     (Adopted  September  3,  1912.) 

Sec.  9.  Not  less  than  50  per  centum  of  the  income  and  inheritance 
taxes  that  may  be  collected  by  the  State  shall  be  returned  to  the 
city,  village  or  township  in  which  said  income  and  inheritance  tax 
originate.     (Adopted  September  3,  1912.) 

Sec.  10.  Laws  may  be  passed  providing  for  excise  and  franchise 
taxes  and  for  the  imposition  of  taxes  upon  the  production  of  coal, 
oil,  gas  and  other  minerals.      (Adopted   September   3,   1912.) 

Sec.  11.  No  bonded  indebtedness  of  the  State,  or  any  political  sub- 
division thereof,  shall  be  incurred  or  renewed  unless,  in  the  legisla- 
tion under  which  such  indebtedness  is  incurred  or  renewed,  provision 
is  made  for  levying  and  collecting  annually  by  taxation  an  amount 
sufficient  to  pay  the  interest  on  said  bonds,  and  to  provide  a  sinking 
fund  for  their  final  redemption  at  maturity.  (Adopted  September  3, 
1912.) 

Art.  XIII,  Sec.  4.  The  property  of  corporations,  now  existing  or 
hereafter  created,  shall  forever  be  subject  to  taxation,  the  same  as  the 
property  of  individuals. 

Sec.  6.  The  General  Assembly  shall  provide  for  the  organization 
of  cities  and  incorporated  villages  by  general  laws,  and  restrict  their 
power  of  taxation,  assessment,  borrowing  money,  contracting  debts 
and  loaning  their  credit,  so  as  to  prevent  the  abuse  of  such  power. 


STATE   TAXATION"   SYSTEM — OHIO.  889 

ADMINISTRATION.— The  Tax  Commission  of  Ohio  is  composed  of 
three  commissioners,  not  more  than  two  of  the  same  political  party, 
who  are  in  continuous  session  during  business  hours  excepting  Sun- 
days and  legal  holidays,  and  all  sessions  are  open  to  the  public.  The 
commission  has  comprehensive  powers  of  supervision  over  the  county 
boards  of  review  and  the  local  assessors. 

The  State  Board  also  hears  appeals  from  county  boards,  equalizes 
county  assessments  of  classes  of  property,  and  may  order  a  re- 
assessment of  any  class.  Special  excise  taxes  upon  corporations  are 
also  assessed  by  the  Tax  Commission,  with  whom  the  annual  reports 
of  such  companies  are  filed.  A  distinct  feature  of  the  tax  system  of 
the  State  is  the  limitation  of  a  tax  rate  both  State  and  local  by  what 
is  known  as  the  maximum  rate  law.  (See  report  of  State  Tax  Com- 
mission, 1911-12.) 

RAILROADS. — Corporations  are  taxed  like  individuals  upon  their 
real  and  personal  property,  but  in  addition  are  assessed  through  the 
State  Tax  Commission  a  special  tax  as  follows:  Railroad  companies 
4  per  cent  on  the  gross  receipts  of  such  companies  for  business  done 
within  the  State  for  the  year  next  preceding  the  30th  day  of  June 
of  each  year. 

PUBLIC  UTILITIES. — Sleeping  car,  freight  line  and  equipment 
companies  and  carriers  not  otherwise  listed  for  taxation  1 2/10  per 
cent  of  the  value  of  the  proportion  of  the  capital  stock  of  such  com- 
panies representing  by  property  owned  or  used  in  Ohio;  express  and 
telegraph  companies  2  per  cent  of  the  gross  earnings  of  such  com- 
panies for  business  done  within  the  State  for  the  year  next  preceding 
the  first  day  of  May  in  each  year,  electric  light  companies,  gas,  water- 
works, telephone,  union  depot  1  2/10  per  cent  of  the  gross  receipts  of 
such  companies  for  business  done  within  the  State  for  the  year  next 
preceding  the  first  day  of  May  of  each  year,  street,  suburban  and 
interurban  railroad  companies  1  2/10  per  cent  of  the  gross  receipts 
of  such  companies  for  business  done  within  the  State  for  the  year 
next  preceding  the  first  day  of  May  of  each  year,  pipe  line  companies 
4  per  cent  of  the  gross  receipts  of  such  companies  for  business  done 
with  the  State  for  the  year  next  preceding  the  first  day  of  May  in 
each  year. 

(The  railroad  tax  in  this  classification  of  gross  earnings  was  sus- 
tained by  Supreme  Court  of  U.   S.     See  supra,  Sec.  254.) 

FOREIGN  INSURANCEi— Foreign  insurance  companies  pay  2% 
per  cent   on    the    gross   amount    of   premiums    received    from    policies 


890  STATE   TAXATION    SYSTEM OHIO. 

covering   risks   within   the   State,   the   term   "gross   premiums"   being 
specifically  defined  in  the  case  of  mutual  companies. 

BANKS. — The  assessment  of  the  shares  of  incorporated  banks  is 
made  by  the  valuation  at  true  value  in  money  (real  estate  being 
deducted),  and  this  valuation  is  equalized  by  the  State  Commission, 
so  that  such  shares  "shall  be  assessed  equally  and  uniformly  through- 
out the  State  at  the  true  value  in  money." 

CORPORATIONS. — Corporations  other  than  public  utilities,  both 
domestic  and  foreign,  pay  an  annual  excise  tax  of  3/20  of  1  per  cent 
upon  its  subscribed  and  outstanding  capital  stock.  In  the  case  of 
foreign  companies  this  tax  is  levied  upon  that  proportion  of.  the 
authorized  capital  stock  represented  by  the  property  owned  and  used 
in  the  State.  This  does  not  apply  to  insurance  corporations,  fraternal 
and  beneficiary  associations  or  building  and  loan  associations  required 
by  law  to  report  to  the  superintendent  of  insurance,  nor  does  this 
general  corporation  tax  apply  to  the  public  utility  corporations  upon 
which  the  specific  excise  taxes  above  named   are  levied. 

ASSESSMENTS. — For  statutory  definition  of  "taxable  personal 
property"  see  Sec.  5399,  Compiled  Tax  Laws  of  Ohio,  1916;  of  "domi- 
cile" see  Sec.  5373;  of  "credits"  see  Sec.  5370. 

Assessments  of  real  estate  are  made  quadrennially,  but  an  assess- 
ment may  be  made  by  order  of  Tax  Commission  in  any  district  at  any 
time.     Personal  property  is  assessed  annually. 

MERCHANTS. — Merchants  are  taxed  upon  their  general  average 
value  of  stock  of  merchandise  during  previous  year  (prior  to  April 
1st)  as  personal  property,  and  manufacturers  in  same  manner  upon 
their  average  value  of  all  raw  material  or  product. 

EXEMPTIONS.— The  exemptions  include  bonds  of  the  State  and 
municipalities  of  the  State  which  were  outstanding  at  the  time  of 
the  adoption  of  the  Constitution  of  1912.  Exemptions  also  include 
prehistoric  earth  works  or  historic  buildings,  the  property  of  the 
Grand  Army,  Masons,  lodges,  and  also  of  the  Indiana  Meeting  of 
Friends  or  the  religious  society  known  as  the  Grand  Baptists  or 
Dunkers  in  the  State  where  the  income  was  exclusively  used  for  the 
support  of  the  poor  of  the  denomination.  $100  is  exempted  to  each 
individual.      (See  also  Constitution,  supra.  Art.  XII,  Sec.   2.) 

INHERITANCE  TAX.— A  collateral  inheritance  tax  of  5  per  cent  is 
levied   upon   all   inheritances   or   transfers   to   take   effect   after   death 


STATE    TAXATION    SYSTEM OKLAHOMA.  891 

when  made  to  other  than  the  parent,  husband  or  wife,  brother  and 
sister,  nephew,  niece  and  adopted  children  or  lineal  descendant  where 
in  excess  of  the  value  of  $200.  Bequests  to  certain  charities  and 
public    institutions   within   the   State   of  Ohio   are   exempt. 

The  tax  applies  to  all  the  property  sp  transferred  within  the  juris- 
diction of  the  State  and  any  interest  therein,  whether  belonging  to  an 
inhabitant  of  the  State  or  not,  and  whether  tangible  or  intangible. 

COLLECTIONS. — Taxes  on  real  estate  become  a  lien  on  second 
Monday  of  April,  and  are  payable  to  the  County  Treasurer  between 
October  1st  and  December  20th  of  each  year,  the  owner  having  the 
option  of  paying  the  full  amount  on  or  before  December  20th  or  one- 
half  then  and  the  remainder  between  April  1st  and  June  20th  follow- 
ing. A  penalty  of  15  per  cent  is  added  to  the  semi-annual  installment. 
Property  is  advertised  by  the  County  Treasurer  if  the  tax  for  the 
previous  year  and  one-half  of  the  current  year's  tax  is  not  paid  before 
December  20th,  and  advertised  for  sale  on  the  third  Tuesday  of  Janu- 
ary following,  and  then  sold  for  the  taxes  and  penalties.  Redemption 
may  be  made  by  the  owner  by  payment  of  the  taxes,  penalty  of  15 
per  cent  with  interest  if  reedeemed  within  one  year  and  25  per  cent 
if  redeemed  after  first  year.  In  default  of  such  redemption  the  pur- 
chaser at  such  tax  sale  is  entitled  to  a  deed.  The  State  may  fore- 
close its  lien  for  taxes  by  plenary  proceeding  in  court.  Returns  are 
made  for  special  excise  taxes  by  railroads  on  or  before  the  first  day 
of  October  in  each  year  by  sleeping  car,  freight  line  and  equipment 
companies  between  the  1st  and  31st  days  of  May,  by  domestic  corpora- 
tions for  profit  during  the  month  of  May  in  each  year,  and  by  foreign 
corporations  during  the  month  of  July. 

The  collection  of  personal  taxes  may  be  enforced  by  distraint  or 
personal  action. 

OKLAHOMA 

(Constitution  Adopted  in  1907.) 

(Art.  X,  Sees.  1  to  4  provides  that  the  fiscal  year  shall  commence  on 
the  first  day  of  July  unless  otherwise  provided  by  law.  The  legislature 
shall  provide  by  law  for  an  annual  tax  sufficient  with  other  resources 
to  defray  the  estimated  ordinary  expenses;  and  for  the  purpose  of  pay- 
ing a  State  debt,  the  legislature  shall  provide  a  tax  sufficient  to  pay 
the  annual  interest  and  the  principal  within  twenty-five  years.) 

Sec.  5.  The  power  of  taxation  shall  never  be  surrendered,  sus- 
pended, or  contracted  away.  The  taxes  shall  be  uniform  upon  the 
same  class  of  subjects. 

Sec.  6.  All  property  used  for  free  public  libraries,  free  museums, 
public  cemeteries,  property  used  exclusively  for  schools,  colleges  and 


892  STATE   TAXATION    SYSTEM OKLAHOMA. 

all  property  used  exclusively  for  religious  and  charitable  purposes,  and 
all  property  of  the  United  States  and  of  this  State,  and  counties  and 
municipalities  of  this  State,  household  goods  of  the  heads  of  families, 
tools,  implements  and  live  stock  employed  in  support  of -the  family, 
not  exceeding  $100  in  value,  and  all  growing  crops  shall  be  exempt 
from  taxation:  provided  that  all  property  not  herein  specified,  now 
exempt  from  taxation  under  the  laws  of  the  Territory  of  Oklahoma, 
shall  be  exempt  from  taxation  unless  otherwise  provided  by  law;  and 
provided  further  taxation  all  ex-Union  and  ex-Confederate  soldiers 
bona  fide  residents  of  this  State,  and  all  widows  of  ex-Union  and  ex- 
Confederate  soldiers  who  are  heads  of  families  and  bona  fide  residents 
of  this  State,  and  personal  property  not  exceeding  $200  in  value  shall 
be  exempt. 

(Exemption  is  also  made  of  property  of  specified  institutions  for 
orphan  children  and  all  fraternal  orphan  homes,  together  with  all  their 
charitable  funds  and  property  exempted  by  treaty,  stipulation  between 
the  Indians  and  the  Federal  Government.) 

The  legislature  may  authorize  any  incorporated  city  or  town,  by  a 
majority  vote  of  its  electors  voting  thereon,  to  exempt  manufacturing 
establishments  and  public  utilities  from  municipal  taxation,  for  a 
period  not  exceeding  five  years,  as  an  inducement  for  their  location. 

Sec.  7.  The  legislature  may  authorize  county  and  municipal  cor- 
porations to  levy  and  collect  assessments  for  local  improvements  on 
property  benefited  thereby,  homesteads  included,  without  regard  to 
cash  value. 

Sec.  8.  All  property  which  may  be  taxed  ad  valorem,  shall  be  as- 
sessed for  taxation  at  its  fair  cash  value,  estimated  at  the  price  it 
would  bring  at  a  fair  voluntary  sale,  and  any  officer  or  other  person 
authorized  to  assess  values  or  subjects  for  taxation,  who  shall  commit 
any  willful  error  in  the  performance  of  his  duty,  shall  be  deemed 
guilty  of  malfeasance;  and  upon  conviction  thereof,  shall  forfeit  his 
office  and  be  otherwise  punished  as  provided  by  law. 

Sec.  9.  Rates  for  all  purposes.  State  and  local,  not  to  exceed  in  any 
one  year  31 1/^  mills  on  the  dollar,  apportioned  to  State,  county  and 
school  purposes,  provision  being  made  for  the  increase  of  the  school 
rate  by  popular  vote  of  the  locality. 

Sec.  10.  Provision  is  made  for  increase  of  the  tax  rate  for  erecting 
of  public  buildings  by  popular  vote. 

Sec.  11.  The  receiving  by  any  public  officer  of  any  profit  from  public 
monies,  made  an  offense,  punishable  also  by  a  disqualification  to  hold 
office. 

Sec.  12.  The  legislature  shall  have  power  to  provide  for  the  levy 
and  collection  of  license,  franchise,  gross  revenue,  excise,  income,  col- 
lateral and  direct  inheritance,  legacy  and  succession  taxes;  also  grad- 
uated income  taxes,  graduated  collateral  and  direct  inheritance  taxes, 
graduated  legacy  and  succession  taxes;  also  stamp,  registration,  pro- 
duction or  other  specific  taxes. 

Sec.  13.    The  State  may  select  its  subjects  of  taxation,  and  levy  and 


STATE   TAXATION    SYSTEM OKLAHOMA.  893 

collect  its  revenues  independent  of  the  counties,  cities  or  other  muni- 
cipal subdivisions. 

Sec.  14.  Taxes  shall  be  levied  and  collected  by  general  laws,  and  for 
public  purposes  only,  except  that  taxes  may  be  levied  when  necessary 
to  carry  into  effect  Sec.  31  of  the  Bill  of  Rights.  Except  as  required 
by  the  Enabling  Act,  the  State  shall  not  assume  the  debt  of  any 
county,  municipal  corporation  or  political  subdivision  of  the  State,  un- 
less such  debt  shall  have  been  contracted  to  defend  itself  in  time  of 
war,  to  repel  invasion,  or  to  suppress  insurrection. 

Sec.  15.  The  credit  of  the  State  shall  not  be  given,  pledged,  or 
loaned  to  any  individual,  company,  corporation,  or  association,  munici- 
pality, or  political  subdivision  of  the  State;  nor  shall  the  State  become 
an  owner  or  stockholder  in,  nor  make  donation  by  gift,  subscription  to 
stock,  by  tax  or  otherwise,  to  any  company,  association,  or  corporation. 

Sec.  16.  All  laws  authorizing  the  borrowing  of  money  by  and  on 
behalf  of  the  State,  county,  or  other  political  subdivision  of  the  State, 
shall  specify  the  purpose  for  which  the  money  is  to  be  used,  and  the 
money  so  borrowed  shall  be  used  for  no  other  purpose. 

Sec.  17.  The  legislature  shall  not  authorize  any  county  or  subdi- 
vision thereof,  city,  town,  or  incorporated  district,  to  become  a  stock- 
holder in  any  company,  association,  or  corporation,  or  to  obtain  or 
appropriate  money  for,  or  levy  any  tax,  or  to  loan  its  credit  to  any 
corporation,  association,  or  individual. 

Sec.  18.  The  legislature  may  authorize  the  levy  and  collection  of  a 
poll  tax  on  all  electors  of  this  State,  under  sixty  years  of  age,  not  ex- 
ceeding two  dollars  per  capita,  per  annum,  and  may  provide  a  penalty 
for  the  non-payment  thereof. 

Sec.  19.  Every  act  enacted  by  the  legislature  and  every  ordinance 
and  resolution  passed  by  any  county,  city,  town,  or  municipal  board  or 
local  legislative  body,  levying  a  tax,  shall  specify  distinctly  the  pur- 
pose for  which  said  tax  is  levied,  and  no  tax  levied  and  collected  for 
one  purpose  shall  ever  be  devoted  to  another  purpose. 

Sec.  20.  The  legislature  shall  not  impose  taxes  for  the  purpose  of 
any  county,  city,  town,  or  other  municipal  corporation,  but  may,  by  gen- 
eral laws,  confer  on  the  proper  authorities  thereof,  respectively,  the 
power  to  assess  and  collect  such  taxes. 

Sec.  21.  There  shall  be  a  State  Board  of  Equalization  consisting  of 
the  Governor,  State  Auditor,  State  Treasurer,  Secretary  of  State,  At- 
torney-General, State  Inspector  and  Examiner,  and  President  of  the 
Board  of  Agriculture.  The  duty  of  said  board  shall  be  to  adjust  and 
equalize  the  valuation  of  real  and  personal  property  of  the  several 
counties  in  the  State,  and  it  shall  perform  such  other  duties  as  may  be 
prescribed  by  law,  and  they  shall  assess  all  railroad  and  public  service 
corporation  property. 

Sec.  22.  Nothing  in  this  Constitution  shall  be  held,  or  construed,  to 
prevent  the  classification  of  property  for  purposes  of  taxation;  and  the 
valuation  of  different  classes  by  different  means  or  methods. 


894  STATE    TAXATION    SYSTEM — OKLAHOMA. 

ADMINISTRATION.— The  powers  of  the  State  Board  of  Equalization 
are  set  forth  in  the  Constitution,  Sec.  21. 

The  County  Board  of  Equalization  is  composed  of  the  County  Com- 
missions of  which  the  assessor  is  the  secretary.  The  general  prop- 
erty tax  applies  to  all  property  both  of  corporations  and  individuals 
and  is  supplemented  with  respect  to  certain  classes  of  corporations 
by  gross  receipt  and  license  taxes. 

RAILROADS. — Railroads  are  assessed  upon  all  their  operating  prop- 
erty under  the  general  property  tax  by  the  State  Board.  Street  rail- 
way and  interurban  car  companies  are  assessed  and  taxed  in  prac- 
tically the  same  manner. 

PUBLIC  UTILITY  COMPANIES.— Sleeping  car  companies,  express 
companies,  telegraph  and  telephone  companies  and  other  public  utility 
companies  pay  locally  the  general  property  tax  for  the  State  and  local 
purposes,  and  in  addition  are  subject  to  tax  on  gross  receipts.  This 
tax  in  case  of  an  interstate  express  company  was  adjudged  invalid  as 
being  in  effect  a  tax  on  property  in  addition  to  an  ad  valorem  tax  on 
the  property  and  therefore  an  interference  with  interstate  commerce. 
(Meyer  v.  Wells  Fargo  &  Co.,  223  U.  S.  297,  Sec.  254,  supra.) 

CORPORATIONS. — Property  of  corporations  is  taxed  as  that  of  in- 
dividuals under  the  general  property  tax.  The  cost  of  filing  articles 
of  incorporation  for  business  companies  is  one-tenth  of  1  per  cent  of 
the  authorized  capital  stock,  but  not  in  any  case  less  than  $3.00.  Cor- 
porations except  public  service,  oil,  natural  gas  and  mining  corpora- 
tions pay  to  the  State  for  State  purposes  an  annual  license  fee  of  fifty 
cents  upon  each  $1000  of  authorized  capital  stock  and  for  foreign  cor- 
porations $1.00  upon  each  $1000  of  capital  stock  employed  in  business 
in  the  State.  (Revised  Laws,  Sees.  7538  to  7549.)  The  registration 
fee  paid  for  incorporation  or  upon  entering  the  State  to  do  business  is 
in  lieu  of  this  tax  for  the  first  fiscal  year.     (Revised  Laws,  Sec.  7540.) 

BANKS. — National  bank  stock  is  assessed  to  holders  at  place  where 
bank  is  located  at  its  par  value  on  February  1st.  The  bank  pays  the 
tax  for  its  shareholders.  Tangible  property  of  the  banks  is  assessed 
as  other  property  and  deducted  from  valuation  of  shares. 

Private  banks  are  assessed  upon  their  property  where  business  is 
carried  on. 

EXEMPTIONS. — In  addition  to  the  property  named  as  exempt  in 
the  Constitution,  there  is  also  exempt  all  property  of  scientific,  educa- 
tional and  benevolent  institutions  and  the  property  of  students  in  such 
Institutions  used  solely  for  the  purpose  of  their  education.    Oil  wells 


STATE   TAXATION    SYSTEM OKLAHOMA.  895 

on  lands  upon  which  final  proof  has  not  been  made,  family  portraits, 
food  and  fuel  not  to  exceed  provisions  for  one  year,  and  all  grain  and 
forage  necessary  to  maintain  for  one  year  the  live  stock  used  for  the 
support  of  the  family;  all  pensions  from  the  United  States  or  from 
any  of  the  States  until  paid  into  the  hands  of  the  pensioner;  the  notes 
and  mortgages  of  building  and  loan  associations,  given  upon  real  es- 
tate located  in  the  State,  personal  property  used  in  the  operation  and 
development  of  waters  known  as  "underflow  water"  are  exempted  for 
a  period  of  five  years;  and  any  incorporated  city  or  town  may  likewise 
exempt,  by  ordinance,  from  municipal  taxation,  such  property  in  order 
to  encourage  and  induce  the  development  of  gravity  of  underflow 
water  plants. 

GRADUATED  LAND  TAX.— A  graduated  land  tax  is  levied  on  land 
of  taxable  value  in  excess  of  640  acres  of  average  taxable  value,  which 
pay  an  annual  tax  on  the  average  value  of  excess  at  rates  graduated  ac- 
cording to  the  amount  of  the  excess  fixed  by  the  statute.  For  the  pur- 
pose of  this  tax,  land  in  Oklahoma  is  assumed  to  have  an  average 
value  of  $20.00  per  acre.  Three  hundred  and  twenty  acres  of  land  is 
exempt  from  this  tax,  regardless  of  the  value  of  the  land,  and  the 
taxation  is  in  addition  to  the  regular  ad  valorem  tax.  There  is  also  a 
tax  imposed  on  persons  holding  land  under  lease  or  contract  less  than 
fee  simple  In  excess  of  340  acres. 

INHERITANCE  TAX.— There  is  a  graduated  inheritance  tax  depend- 
ing upon  the  degree  of  relationship  of  the  inheritor  to  the  decedent. 
This  tax  is  collected  according  to  rules  and  regulations  promulgated 
by  the  State  Auditor.  The  tax  is  imposed  when  the  transfer  is  of 
tangible  property  in  the  State  made  by  any  person,  or  of  intangible 
property  made  by  a  resident  of  the  State  at  the  time  of  transfer. 
Tangible  property  includes  many  forms  of  indebtedness,  including 
bonds  and  shares  of  stock  in  domestic  and  foreign  corporations. 

THE  INCOME  TAX. — An  income  tax  is  levied  upon  any  income,  sal- 
aries, fees,  trades,  professions,  or  property  upon  which  a  gross  receipt 
or  excess  tax  has  not  been  paid.  The  tax  is  three-fourths  of  1  per  cent 
on  the  first  $10,000  of  taxable  income;  l^^  on  the  next  $15,000,  and  2 
per  cent  on  all  above  that. 

POLL  TAX. — Every  male  person  aged  between  twenty-one  and  fifty 
years,  having  resided  in  the  State  for  thirty  days,  who  is  not  a  public 
charge,  and  who  has  not  performed  road  duty,  is  subject  to  road  duty 
for  four  days  of  eight  hours  each  year.  He  may  furnish  a  satisfactory 
substitue,  or  he  may  become  exempt  by  paying  $1.25  for  each  day  so 


896  STATE    TAXATION    SYSTEM OKLAHOMA. 

exempted.     Cities  have  power  to  impose  a  poll  tax  of  not  exceeding 
$1  on  all  able-bodied  males  over  twenty-one  and  under  fifty. 

ASSESSMENTS.— The  property  included  and  the  method  of  assess- 
ment and  equalization  are  the  same  for  municipal  as  for  State  and 
county  taxes.  As  the  total  rate  is  limited  to  31 1^  mills,  and  the  State 
may  levy  S^/^  mills,  and  the  county  8  mills,  the  local  rates  are  re- 
stricted to  20  mills,  plus  any  portion  of  the  State  or  county  limits  not 
used. 

LICENSES. — There  is  an  extended  system  of  business  taxes,  licenses 
and  fees. 

MORTGAGES. — There  is  a  registration  tax  on  mortgages,  under  Act 
of  1913  on  all  mortgages  recorded  on  and  after  July  1st,  1913;  and  the 
record  owner  of  any  mortgage  may  elect  to  pay  this  registration  tax  of 
fifty  cents  for  each  $100  and  for  each  remaining  fraction  over  $100 
when  the  mortgage  is  for  five  years  or  more,  and  thirty  cents  for  each 
$100  when  the  mortgage  is  for  less  than  five  and  not  more  than  three 
years;  and  twenty  cents  when  it  is  less  than  three  years.  This  tax  is 
in  lieu  of  the  general  property  tax. 

COLLECTIONS. — The  assessment  refers  to  the  first  day  of  January 
and  is  to  be  completed  and  report  transmitted  to  the  State  Board  of 
Equalization  not  later  than  the  Saturday  before  the  third  Monday  in 
June. 

Taxes  on  real  property  are  a  perpetual  lien  on  such  property  and 
taxes  on  personal  property  constitute  a  lien  for  two  years  on  all  real 
property  in  the  county  in  which 'such  tax  for  personal  property  is 
levied.  Taxes  on  personal  property  may  constitute  a  lien  in  any 
county  in  the  State  provided  such  taxes  are  certified  to  the  county 
in  which  said  real  estate  is  situated. 

County  Commissioners  may  contract  with  any  person  to  assist  the 
proper  officers  in  the  discovery  of  property  not  listed  or  assessed,  and 
may  fix  the  compensation  of  such  person  not  over  15  per  cent  of  the 
taxes  recovered. 

One-half  of  all  taxes  levied  upon  an  ad  valorem  bases  becomes  due  on 
the  first  day  of  November;  and  if  not  paid  on  the  first  day  of  January, 
the  entire  tax  levy  becomes  delinquent.  If  the  first  half  is  paid  by 
the  first  day  of  December,  the  second  half  becomes  delinquent  on  the 
15th  day  of  June  thereafter.  All  delinquent  taxes,  as  a  penalty,  bear 
interest  at  the  rate  of  18  per  cent  per  annum.  The  County  Treasurer 
is  required  to  notify  each  taxpayer  of  the  amount  of  his  taxes  and  when 
the  same  become  due  and  delinquent. 


STATE  TiVXATION    SYSTEM OREGON.  897 

OREGON 

Art.  I,  Sec.  32.  Taxes  and  Duties. — No  tax  or  duty  shall  be  imposed 
without  the  consent  of  the  people  or  their  representatives  in  the 
Legislative  Assembly;   and  all  taxation  shall  be  equal  and  uniform. 

Art.  IV,  Sec.  23,  Special  and  Local  Laics  lor  Collection  and  As- 
sessment of  Taxes,  Prohibited.— The  Legislative  Assembly  shall  not 
pass  special  or  local  laws  in  any  of  the  following  enumerated  cases, 
that  is  to  say: 


10.  For  the  assessment  and  collection  of  taxes  for  State,  county, 
township,  or  road  purposes. 

Art.  IX,  Sec.  1.  Assessment  and  Taxation. — The  Legislative  As- 
sembly shall  provide  by  law  for  uniform  and  equal  rate  of  assessment 
and  taxation;  and  shall  prescribe  such  regulations  as  shall  secure  a 
just  valuation  for  taxation  of  all  property,  both  real  and  personal, 
excepting  such  only  for  municipal,  educational,  literary,  scientific, 
religious,  or  charitable  purposes,  as  may  be  specially  exempted  by  law. 

Sec.  la.  No  poll  or  head  tax  shall  be  levied  or  collected  in  Oregon. 
The  Legislative  Assembly  shall  not  declare  an  emergency  in  any  act 
regulating  taxation   or  exemption. 

Sec.  3.  2Vo  Tax  Levied,  Except  in  Compliance  With  Law,  Etc. — No 
tax  shall  be  levied  except  in  pursuance  of  law,  and  every  law  impos- 
ing a  tax  shall  state  distinctly  the  object  of  the  same,  to  which  only 
it  shall  be  applied. 

Sec.  6.  Beficiency,  When  and  Hoiv  Levied  For. — ^Whenever  the  ex- 
penses of  any  fiscal  year  shall  exceed  the  income,  the  Legislative  As- 
sembly shall  provide  for  levying  a  tax  for  the  ensuing  fiscal  year, 
sufl^cient  with  other  sources  of  income,  to  pay  the  deficiency,  as  well 
as  the  estimated  expense  of  the  ensuing  fiscal  year. 

(Amendment  of  1916.) 

Sec.  1  (b)  of  Art.  IX.  All  ships  and  vessels  of  fifty  tons  or  more 
capacity  engaged  in  either  passenger  or  freight  coasting  or  foreign 
trade,  whose  home  ports  of  registration  are  in  the  State  of  Oregon, 
shall  be  and  are  hereby  exempted  from  all  taxes  of  every  kind  what- 
soever, excepting  taxes  for  State  purposes,  until  the  first  day  of 
January,  1935. 

Art.  XI,  Sec.  11.  (The  specific  authorization  of  a  majority  of  legal 
voters  was  made  necessary  for  either  the  State,  county,  municipality 
or  district  to  levy  a  tax  for  a  greater  amount  of  revenue  other  than 
the  payment  of  bonded  indebtedness  or  interest  thereon  than  the  like 
amount  for  the  year  previous  plus  6  per  cent,  provision  being  made 
for  the  case  of  new  counties  ©r  municipalities  being  created  and  for 
determining  the  amount  of  the  prior  revenue  in  such  cases.  The  pro- 
hibition against  the  creation  of  debts  by  counties  prescribed  in  Sec- 
tion 10  of  Article  XI  of  the  Constitution  was  made  to  apply  to  debts 
hereafter  created  in  the  performance  of  any  duties  or  obligations 
imposed  upon  counties  by  the  Constitution  and  laws  of  the  State,  and 


898  STATE  TAXATION    SYSTEM OREGON. 

any  indebtedness  created  by  any  county  in  violation  of  such  prohibi- 
tion, and  any  levy  of  taxes  made  therefor  was  prohibited  and  was 
made  void.) 

Amendment  submitted  on  June  4,  1917,  was  adopted,  authorizing 
classification  and  for  the  control  by  the  General  Assembly  and  the 
people  through  initiative  of  rules  of  assessment  and  taxation. 


ADMINISTRATION.— The  Board  of  State  Tax  Commissioners  is 
composed  of  the  Governor,  Secretary  of  State  and  State  Treasurer 
and  two  appointed  commissioners,  and  assesses  all  public  service  and 
public  utility  corporations.  It  has  general  supervision  of  the  system 
of  taxation  and  collection  of  taxes  with  power  to  equalize  assessments 
as  between  counties  but  not  as  between  individuals.  County  commis- 
sioners value  and  assess  all  property  other  than  that  assessed  by  the 
State  Board  of  Tax  Commissioners  at  its  fair  cash  value.  The  County 
Board  of  Equalization  hears  appeals  and  adjusts  and  equalizes  taxes. 
This  is  composed  of  the  County  Judge,  County  Clerk  and  County 
Assessor.  Appeals  of  individual  assessments  may  be  taken  from  this 
board  to  the  Circuit  Court  of  the  county. 

RAILROADS  AND  PUBLIC  UTILITIES.— The  operating  property 
of  railroads  is  assessed  by  the  State  Board  at  a  valuation  apportioned 
to  the  tax  district  upon  the  basis  of  mileage.  Express,  telegraph  and 
telephone  companies  are  taxed  in  addition  one-half  of  1  per  cent  upon 
their  gross  receipts.  Railroads  also  pay  the  corporation  license  tax. 
(See  Licenses,  infra.) 

INSURANCE  COMPANIES. — Foreign  insurance  companies,  includ- 
ing surety  companies,  are  taxed  2  per  cent  upon  the  total  gross 
premiums  for  one  year.  The  amount  of  the  gross  premiums  is  de- 
ducted from  the  total  losses  paid  within  the  State.  The  payment  of 
this  2  per  cent  is  in  lieu  of  all  taxes  on  personal  property  of  the  cor- 
poration and  its  capital  stock,  and  each  company  is  compelled  to 
report  its  gross  earnings  for  State  taxation  on  or  before  the  first  day 
of  March  of  each  year. 

CORPORATIONS.— Real  estate  of  corporations  is  assessed  in  the 
county  in  which  it  is  located.  The  personal  property  of  corporations 
is  assessed  where  the  principal  office  of  the  corporation  is  located. 
Railroad  and  boat  companies  are  assessed  at  their  principal  terminals. 
The  method  of  enforcing  corporate  taxes  is  the  same  as  that  for  en- 
forcing the  collection  of  individual  taxes. 


STATE  TAXATION    SYSTEM OREGON.  899 

EXEMPTIONS. — Property  exempt  from  taxation  includes  real  and 
personal  property  held  for  public  use,  personal  property  of  literary, 
benevolent  and  scientific  institutions,  incorporated  within  the  State, 
property  of  Indians  who  have  not  severed  tribal  relations,  personal 
property  of  all  persons  who  by  reason  of  age,  infirmity  or  poverty 
in  the  opinion  of  the  assessor,  are  unable  to  contribute  to  the  public 
charges,  and  also  furniture  and  domestic  fixtures  actually  in  use  in 
dwellings,  and  wearing  apparel  and  jewelry  and  personal  effects 
actually  in  use.  Horses  and  accoutrements  of  national  guardsmen  are 
also  exempt  from  execution  or  sale  for  debt  for  the  payment  of  taxes. 
All  land  used  for  public  roads.  Shares  of  capital  stock  of  national 
hanks  not  located  in  Oregon  are  exempt  from  taxation. 

BANKS. — The  shares  of  the  stock  of  national  banks  are  assessed 
to  the  individual  shareholders  at  the  place  where  the  bank  is  located. 
Stockholders  of  all  banks  are  assessed  and  taxed  on  the  value  of  their 
shares  of  stock  in  such  banks. 

The  value  of  real  estate  assessed  against  the  banks  is  deducted. 

LICENSES. — Domestic  corporations  pay  an  annual  license  fee  in 
accordance  with  the  value  of  their  capital  stock.  Certain  exemptions 
are  made  for  corporations  solely  engaged  in  mining  and  which  have 
a  limited  output.  These  corporations  are  taxed  a  uniform  fee  of  $10 
annually,  regardless  of  the  amount  of  their  capital  stock.  Every 
foreign  corporation  must  pay  a  license  fee  annually  of  $100,  except 
insurance  companies  of  all  kinds. 

There  is  no  poll  tax.  All  laws  regulating  taxation  or  exemption 
are  subject  to  review  by  popular  vote  on  referendum. 

INHERITANCE  TAX.— The  inheritance  tax  extends  to  all  property 
within  the  jurisdiction  of  the  State,  whether  belonging  to  the  inhab- 
itants thereof  or  not,  both  tangible  and  intangible.  Property  passing 
to  benevolent,  charitable  or  educational  institutions  within  the  State 
is  exempt.  The  rate  varies  according  to  the  degree  of  relationship 
and  the  amount  in  the  case  of  estates  of  the  first  class,  including 
ancestors,  descendants,  parents,  brother  and  sister.  The  estates  valued 
at  less  than  $10,000  are  exempt  and  the  tax  is  levied  on  the  excess 
over  $5,000. 

In  the  next  degree  the  limit  is  $5,000  as  to  the  estate  and  the  tax  is 
levied  on  excess  of  $2,000  received  by  each.  In  all  other  cases  the 
tax  is  at  the  rate  of  3  per  cent  on  all  amounts  received  not  exceeding 
$10,000,  and  over  $10  and  not  exceeding  $20,000  4  per  cent;  over  $20, 


900  STATE  T.VXATION    SYSTEM PENNSYLVANIA. 

and  not  exceeding  $50,000  5  per  cent,  and  on  the  whole  of  all  amounts 
received  over  $50,000  6  per  cent. 

COLLECTIONS. — Property  is  assessed  as  of  the  first  day  of  March 
of  each  year  and  all  taxes  legally  levied  in  any  year  are  payable 
before  the  first  day  of  April  following,  and  penalties  are  thereupon 
attached  of  1  per  cent  if  not  paid  before  the  first  day  of  May,  2  per 
cent  if  not  paid  before  the  first  day  of  June,  3  per  cent  if  not  paid 
before  the  first  day  of  July,  4  per  cent  if  not  paid  before  the  first  day 
of  August  and  5  per  cent  if  not  paid  before  the  first  day  of  September. 
One-half  of  the  taxes  may  be  paid  before  the  first  day  of  April,  in 
which  event  the  penalties  prescribed  attach  to  the  remaining  one-half 
payable  before  the  first  of  September.  On  taxes  delinquent  after  the 
first  of  September  there  is  a  penalty  of  10  per  cent  and  interest  at  the 
rate  of  12  per  cent.  After  October  5th  the  tax  collector  is  directed  to 
proceed  with  the  collection  of  taxes  upon  personal  property  with  in- 
terest and  penalties,  and  collects  the  same  by  distraint  and  sale. 

The  personal  property  of  non-residents  is  assessed  where  found. 

All  taxes  lawfully  imposed,  including  taxes  on  personal  property 
and  those  charged  upon  real  property,  become  a  lien  upon  real  and 
personal  property.  After  the  expiration  of  three  months  after  the 
taxes  on  real  estate  are  delinquent,  the  sheriff  has  a  right  to  issue 
certificates  of  delinquency  which  are  assignable,  and  bear  interest 
until  redeemed  at  the  rate  of  12  per  cent  per  annum,  and  these  cer- 
tificates may  be  foreclosed  by  plenary  judicial  action,  due  publication 
being  made,  which  must  be  commenced  within  six  years  after  the 
date  of  delinquency.  Property  may  be  redeemed  by  payment  of  12 
per  cent  interest  at  any  time  before  the  issuance  of  tax  deed  and  suit 
for  foreclosure.  The  form  of  the  deed  in  foreclosure  is  prescribed  by 
statute  and  is  declared  to  pass  a  good  title  to  the  lands  assessed. 
Where  the  county  bids  in  the  lands  it  may  sell  the  same  at  public  or 
private  sale. 

PENNSYLVANIA 

Art.  IX,  Sec.  1.  All  taxes  shall  be  uniform  within  the  territorial 
limits  of  the  authority  levying  the  tax,  and  shall  be  levied  and  col- 
lected under  general  laws,  but  the  General  Assembly  may,  by  general 
laws,  exempt  from  taxation  public  property  used  for  public  purposes, 
actual  places  of  religious  worship,  places  of  burial  not  used  or  held 
for  private  or  corporate  profit  and  institutions  of  purely  public  charity. 

Sec.  2.  All  laws  exempting  property  from  taxation,  other  than  the 
property   above  enumerated,   shall   be  void. 


STATE  TAXATION    SYSTEM— PENNSYLVANIA.  901 

Sec.  178.  The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  or  any  county  or 
other  nxunicipal  corporation  shall  be  a  party. 

See.  180.     (Authorizes  a  poll  tax.) 


ADMINISTRATION. — The  Auditor,  State  Treasurer  and  Secretary 
of  State  constitute  a  Board  of  Revenue  Commissioners,  with  power 
to  equalize  the  assessment  and  taxes  for  the  use  of  the  State  among 
the  several  cities  and  counties  in  proportion  to  actual  value.  Any 
county  may  appeal  as  to  the  valuation  of  personal  property  and 
taxes  due  to  the  Court  of  Common  Pleas  of  Dauphin  county.  The 
State  Board  also  assesses  taxes  on  the  capital  stock  of  corporations, 
on  gross  receipts  of  transportation  and  other  public  service  utilities, 
on  the  stock  of  banks,  on  gross  premiums  of  domestic  insurance  com- 
panies having  capital  stock,  on  the  net  earnings  and  income  of 
brokers  and  private  bankers,  incorporated  banks  and  savings  insti- 
tutions. Property  not  exempted  is  subject  to  assessment  by  local  as- 
sessors, who  are  subject  to  the  supervision  of  the  Board  of  Revision, 
composed  of  County  Commissioners.  General  assessments  are  made 
triennially.     Corporate   reports   are   made   to   the  Auditor-General. 

SEPARATION    OF    SOURCES    OF    TAXATION.— In    Pennsylvania 

the  burden  of  taxation  for  State  purposes  is  substantially  placed  on 
corporations  and  insurance  companies.  Since  1887  there  has  been  no 
State  tax  on  real  estate,  but  real  estate  is  taxed  for  local  purposes. 

RAILROADS. — Railroads  arid  car  companies  are  subject  to  a  capital 
stock  tax.  An  annual  tax  of  five  mills  on  each  dollar  of  the  actual 
value  of  the  capital  stock,  that  is,  assets  less  indebtedness  employed 
in  business  within  the  State.  Railroads  are  also  subject  to  a  tax  of 
four  mills  on  the  dollar  on  the  face  value  of  their  scrip  and  bonds  and 
certificates  of  indebtedness,  except  on  bonds  not  owned  in-  Pennsyl- 
vania. This  tax  is  in  theory  deducted  by  the  company  from  the 
interest  on  the  obligation  and  paid  to  the  State.  In  practice,  how- 
ever, it  is  usually  borne  by  the  corporation.         , 

Railroads  and  public  utility  corporations  pay,  in  addition  to  the 
capital  stock  tax,  a  State  tax  of  eight  mills  upon  each  dollar  of 
gross  receipts.  This  does  not  apply,  however,  to  receipts  derived 
from  interstate  transportation. 

Railroads  and  public  service  corporations  are  exempt  from  local 
taxation  on  their  operating  property,  but  this  exemption  does  not  ex- 
tend to  local  property  in  Philadelphia  and  Pittsburgh. 


902  STATE  TAXATION    SYSTEM — PENNSYLVANIA. 

PUBLIC  SERVICE  CORPORATIONS.— These  corporations  are 
taxed  on  the  same  system  as  railroad  companies,  the  tax  being  col- 
lected by  the  State  for  State  purposes,  and  their  property  being  ex- 
empted to  the  same  extent  as  that  of  local  companies  from  local  taxa- 
tion. 

FOREIGN  CORPORATIONS.— Foreign  corporations  other  than  in- 
surance companies  pay  to  the  State  Treasurer  a  bonus  of  one-third 
of  one  per  cent  upon  the  amount  of  capital  actually  employed  within 
the  State  of  Pennsylvania,  and  a  like  bonus  upon  each  subsequent  in- 
crease of  capital  so  employed. 

CORPORATIONS. — Manufacturing  corporations  pay  no  State  tax  on 
property  actually  used  for  manufacturing  purposes  in  the  State. 
Other  corporations  except  banks,  savings  institutions,  foreign  insur- 
ance companies  and  distilling  companies  pay  five  mills  on  the  dol- 
lar of  appraised  value  of  capital  stock.  All  corporations,  including 
manufacturing  corporations,  pay  local  taxes  on  real  estate.  All  cor- 
porations are  required  to  retain  out  of  interest  paid  on  their  indebt- 
edness, if  held  in  the  State,  four  mills  on  ^  each  dollar  of  such  indebt- 
edness and  pay  the  same  to  the  State.  (See  Foreign  Held  Bond  case, 
supra,  Sec.  456.) 

FOREIGN  CORPORATIONS.— Foreign  corporations  doing  business 
in  Pennsylvania  are  taxable  like  domestic  corporations  on  so  much 
of  their  capital  as  is  invested  in  the  State. 

INSURANCE  COMPANIES.— Domestic  and  foreign  insurance  com- 
panies pay  eight  mills  upon  each  dollar  of  gross  premiums. 

BANKS. — State  and  national  banks  and  savings  institutions  pay 
the  State  four  mills  on  each  dollar  of  the  actual  value  of  their  stock, 
including  the  real  estate  separately  assessed. 

POLL  TAXES.— There  is  no  State  poll  tax,  but  in  cities  of  the  sec- 
ond and  third  classes,  a  tax  of  one  dollar  upon  each  resident  may  be 
levied  in  lieu  of  the  former  tax  on  trades  and  professions  and  occupa- 
tions. In  townships,  the  supervisors  may  levy  a  tax  upon  every  one 
subject  to  taxation  of  one  dollar,  one-half  at  least  to  be  paid  in  money 
and  the  balance  in  work. 

EXEMPTIONS.— The  property  exempted  from  county  taxation, 
mortgages,  judgments  and  moneys  owing  upon  articles  of  agreement 
for  the  sale  of  real  estate,  except  those  of  corporations,  are  exempt 
from  all  taxation  except  for  State  purposes.     Exemptions  also  include 


STATE  TAXATION    SYSTEM — PENNSYLVANIA.  903 

property    held    for   religious,    educational    or    charitable    uses,    public 
libraries  and  art  galleries,  which  are  exempt  from  all  taxation. 

INHERITANCE  TAX. — This  tax  applies  to  all  inheritances  of  not 
less  than  $250,  whether  the  decedent  was  domiciled  within  or  without 
the  State,  as  to  property  within  the  State;  and  all  estate  situated  out 
of  the  State,  when  the  decedent  had  his  domicile  within  the  State. 
The  tax  is  5  per  cent  where  the  inheritance  is  to  any  other  than  the 
father,  mother,  husband,  wife  or  children  and  their  lineal  descend- 
ants. The  tax  is  for  the  use  of  the  State,  and  a  discount  of  5  per 
cent  is  allowed  if  the  tax  is  paid  within  three  months  after  the  death 
of  the  decedent.  But  if  it  is  not  paid  at  the  end  of  one  year,  interest 
is  charged  at  the  rate  of  12  per  cent  per  annum. 

MORTGAGES. — Mortgages,  choses  in  action  and  other  securities 
are  taxable  for  State  purposes  at  the  rate  of  four  mills  on  each 
dollar.  By  Act  of  May  15,  1913,  mortgages  and  securities  were  au- 
thorized to  be  taxed  for  county  purposes,  and  in  cities  co-existent 
with  counties,  at  the  rate  of  four  mills  on  the  dollar.  It  is  provided, 
however,  that  property  taxable  under  this  act  should  not  be  taxable 
for  any  other  local  or  State  purpose. 

TAX  ON  COAL.— By  Act  of  1913,  a  tax  of  2%  per  cent  was  placed 
on  the  market  value  of  each  ton  of  anthracite  coal  produced  in  the 
State,  which  was  distributed  one-half  to  the  State  and  one-half  to 
the  counties  in  which  the  coal  was  produced. 

LICENSE  FEES. — There  is  an  extended  system  of  State  licenses 
on  occupations  applied  to  liquor  dealers,  auctioneers,  brokers  and 
others,  and  also  a  system  of  licenses  authorized  by  the  cities  of  the 
State. 

COUNTY  AND  MUNICIPAL  ASSESSMENTS.— The  county  assess- 
ment is  made  triennially  between  the  second  Monday  of  December 
and  the  31st  day  of  December  and  relates  to  the  date  first  named. 
Timber  lands  are  assessed  separately  from  cleared  lands.  No  deduc- 
tion from  the  value  of  real  estate  is  made  for  ground  rent,  dower  or 
mortgage.  In  the  various  municipalities,  the  property  included  as 
exempt  is  the  same  as  for  county  taxation.  The  cities  of  Philadelphia 
and  Pittsburgh,  however,  are  specially  authorized  to  tax  for  local 
taxation  on  the  property  subject  to  county  and  municipal  taxes. 
Three-fourths  of  the  State  tax  on  personal  property  is  refunded  to  the 
counties  where  collected. 


904  STATE  TAXATION   SYSTEM — RHODE   ISLAND. 

COLLECTIONS. — Counties  are  responsible  for  collection  and  settle- 
ment is  to  be  computed  with  the  State  Treasurer  by  the  second  Mon- 
day of  November,  or  in  default  thereof,  10  per  cent  penalty  is  added 
for  taxes  remaining  unpaid.  Local  taxes  are  collected  by  the  local 
tax  collectors.  On  receipt  of  the  tax  duplicate,  the  collector  gives  no- 
tice and  all  persons  who  make  payment  within  sixty  days  are  en- 
titled to  a  reduction  of  5  per  cent.  Warrants  for  collection  are  in 
effect  for  two  years.  Collectors  have  power  to  levy  by  distress  and 
sale  of  chattels,  or  if  necessary,  by  arrest.  Land  may  be  sold  for 
county  and  township  taxes  two  years  due.  Taxes  on  "unseated"  land, 
that  is  lands  lacking  either  residents  or  cultivation,  are  to  be  paid 
within  one  year.  All  taxes,  county  or  municipal,  except  in  cities  of 
the  first  and  second  classes,  are  a  lien  on  the  real  estate  from  the 
day  of  the  levy,  and  if  recorded,  for  three  years. 

RHODE  ISLAND 

(The  Constitution.) 

Art.  I,  Sec.  2.    .    .    . 

"All  laws  shall  be  made  for  the  good  of  the  whole;  and  the  burdens 
of  the  State  ought  to  be  fairly  distributed  among  the  different  citi- 
zens." 

"Art.  IV,  Sec.  15.  The  General  Assembly  shall  from  time  to  time, 
provide  for  making  new  valuations  of  property  for  the  assessment  of 
taxes  in  such  manner  as  they  deem  best." 


ADMINISTRATION.— The  Board  of  State  Tax  Commissioners,  con- 
sisting of  three  members,  not  all  of  the  same  party,  has  general 
charge  of  taxes  paid  to  the  State,  and  represents  the  State  in  any 
litigation  where  the  validity  of  a  tax  statute  or  of  any  assessment  is 
in  question.  (See  Tax  Laws  of  1912  and  subsequent  amendments.) 
Hearings  with  respect  to  valuation  are  granted  by  the  board,  and 
from  the  board's  decision  appeal  lies  to  the  Superior  Court  at  Provi- 
dence. 

BUSINESS  CORPORATIONS.— Manufacturing,  mercantile  and  mis- 
cellaneous corporations  doing  business  for  profit  in  the  State  pay  an 
annual  tax  in  addition  to  the  tax  on  real  estate  and  tangible  per- 
sonal property  and  upon  the  value  of  that  portion  of  the  intangible 
property  called  its  "corporate  excess."  The  Board  of  Tax  Commis- 
sioners determines  from  the  returns  filed  by  the  corporation  and 
levies  a  tax  at  the  rate  of  40  cents  on  each  $100  of  the  amount  of  the 
corporate  excess. 


STATE  TAXATION    SYSTEM — RHODE   ISLAND.  905 

BANKS. — Banks  and  trust  companies  are  taxed  at  40  cents  on  the 
$100  of  the  fair  cash  value,  less  the  value  of  the  real  estate  or  bonds 
issued  by  the  United  States  or  of  the  State,  this  being  the  same  rate 
as  other  moneyed  capital  in  the  hands  of  the  individual  citizens  of 
the  State. 

RAILROAD  AND  PUBLIC  SERVICE  CORPORATIONS.— Public 
service  corporations  doing  business  for  profit  in  the  State  are  taxed 
on  gross  earnings  at  1  per  cent  on  operation  within  the  State,  which 
in  the  case  of  corporations  also  carrying  on  business  outside  of  the 
State  are  apportioned  upon  the  mileage  basis  to  the  State.  This  is  in 
lieu  of  all  other  taxes  on  intangible  personal  property  of  the  corpora- 
tion, or  on  the  corporation's  securities  in  the  hands  of  holders.  (Laws 
of  1912,  Ch.  769.)  The  same  rule  is  applied  in  the  case  of  telegraph 
and  telephone  companies  and  other  public  utilities,  but  the  rate  is  2 
per  cent  in  case  of  the  two  named,  3  per  cent  in  case  of  express  com- 
panies. This  is  in  addition  to  the  State  and  local  tax  on  real  and 
taxable  personal  property. 

TOWNS. — The  towns  of  the  State  pay  the  State  a  tax  of  9  cents  on 
each  $100  on  the  ratable  property  of  the  town. 

EXEMPTIONS. — The  exemptions  include  not  only  public  property 
and  bonds  of  the  United  States  or  of  the  State,  but  also,  among  other 
things,  the  estate  of  any  person  who  in  the  judgment  of  the  taxing 
authority  is  "unable  from  infirmity  or  poverty  to  pay  the  tax," 
household  property  books  and  family  stores  to  the  sum  of  $300;  and 
also  the  estates  of  persons  and  families  of  the  president  and  profes- 
sors for  the  time  being  of  Brown  University  of  not  more  than  $10,000 
for  each  such  person  or  officer,  of  the  person  or  family  included. 

INTANGIBLES. — The  intangible  personal  property,  including  money 
on   hand,   money   on   interest   or   money   on    deposit,   or   securities,   is 

taxable  at  the  uniform  rate  of  40  cents  for  each  $100. 

DEDUCTIONS  FOR  DEBTS.— Money  or  credits  is  taxable  only 
upon  the  surplus  of  such  property  over  actual  indebtedness.  (Laws 
of  1912,  Ch.  769,  Sec.  39,  Sub.  10.)  Only  residents  of  the  State,  in- 
dividual and  corporate,  are  entitled  to  this  deduction. 

TAX  ON  OYSTERS.— A  tax  equal  to  10  per  cent  of  the  rental  pay- 
able by  the  lessees  of  oyster  grounds  is  paid  by  the  lessee  to  the  State 
Treasurer.     (Laws  of  1912,  Ch.  769.) 

INHERITANCE  TAX.— An  inheritance  tax  is  imposed  upon  the  net 
estate  of  every  resident  decedent,  and  upon  the  net  estate  of  every 


906  STATE  TAXATION   SYSTEM — SOUTH   CAROLINA. 

non-resident  decedent  consisting  of  real  and  tangible  property  lo- 
cated within  the  State  at  the  rate  of  one-half  of  one  per  cent  upon  the 
excess  value  of  each  estate  over  $5000.  (See  Act  of  1916.)  In  the 
case  of  a  non-resident,  such  proportion  of  such  exemption  is  allowed 
as  the  value  of  the  real  property  located  in  Rhode  Island  or  an  in- 
terest within  bears  to  the  value  of  the  estate  wherever  located. 

'  COLLECTIONS.— All  taxes  assessed  against  any  person  in  any 
town,  for  either  personal  or  real  estate,  constitute  a  lien  on  his  real 
estate  therefor  for  two  years,  and  if  the  estate  be  not  aliened  until 
collected.  The  real  estate  liable  for  taxes,  or  so  much  thereof  as  is 
necessary,  may  be  sold  by  the  collector  at  public  auction  after  due 
publication  of  notice.  The  deed  of  any  real  estate  sold  for  taxes 
vests  in  the  purchaser  subject  to  the  right  of  redemption,  and  the  re- 
citals in  the  deed  are  prima  facie  evidence  of  the  facts  stated.  Re- 
demption may  be  made  within  one  year  after  the  sale  on  payment  of 
the  amount  with  20  per  cent  in  addition,  or  such  redemption  may  be 
made  within  six  months  after  iinal  judgment  has  been  rendered  in 
any  suit  in  which  the  validity  of  the  sale  is  in  question,  provided  the 
suit  is  commenced  one  year  after  such  sale. 

SOUTH  CAROLINA 

Art.  I,  Sec.  36.  All  property  subject  to  taxation  shall  be  taxed  in 
proportion  to  its  value. 

Art.  IX,  Sec.  1.  The  General  Assembly  shall  provide  by  law  for  a 
uniform  and  equal  rate  of  assessment  and  taxation  and  shall  pre- 
scribe such  regulations  as  shall  secure  a  just  valuation  for  taxation 
of  all  property,  real,  personal  and  possessory,  except  mines  and  min- 
ing claims,  the  proceeds  of  which  alone  shall  be  taxed,  and  also  ex- 
cepting such  property  as  may  be  exempted  by  law  for  municipal,  edu- 
cational, literary,  scientific,  religious  or   charitable  purposes. 

Sec.  4 It  shall  be  the  duty  of  the  General  Assembly  to 

enact  laws  for  the  exemption  from  taxation  of  all  public  schools,  col- 
leges and  institutions  of  learning,  all  charitable  institutions  in  the 
nature  of  asylums  for  the  infirm,  deaf  and  dumb,  blind,  idiotic  and 
indigent  persons,  all  public  libraries,  churches  and  burying  grounds; 
but  property  of  associations  and  societies,  although  connected  with 
charitable  objects,  shall  not  be  exempt  from  State,  county  or  muni- 
cipal taxation:  Provided,  that  this  exemption  shall  not  extend  be- 
yond the  buildings  and  premises  actually  occupied  by  such  schools, 
colleges,  institutions  of  learning,  asylums,  libraries,  churches  and 
burial  grounds,  although  connected  with  charitable  objects. 

Sec.  5.  (Counties,  townships,  etc.,  may  be  vested  with  power  to 
assess  and  collect  taxes  for  corporate  purposes,  taxes  to  be  uniform 


STATE   TAXATION    SYSTEM — SOUTH    CAROLINA.  907 

within  the  jurisdiction;  also  for  the  taxation  of  shareholders  and 
banks  at  the  true  value  in  money  of  shares.) 

Sec.  13.  (Provides  that  there  shall  be  one  assessment  for  State 
taxes  in  the  subdivisions  of  the  State.) 

Art.  XI,  Sec.  6.  (  .  .  .  Provides  for  an  assessment  on  the  tax- 
able polls  between  21  and  60  years  of  age,  except  Confederate  soldiers 
above  the  age  of  50  years,  and  an  annual  tax  of  $1.00  for  each  poll, 
the  proceeds  to  go  for  school  purposes.  Provides  for  determining  the 
amount  of  the  poll  tax  in  subsequent  years.) 

Sec.  12.  (Provides  that  the  net  income  from  the  sale  of  liquor 
licenses  shall  be  applied  in  aid  of  supplementary  tax  system  for  pub- 
lic  school   purposes.) 

Art.  VIIT,  Sec.  6.  (Provides  that  municipalities  levy  taxes  for  cor- 
porate purposes  uniform  on  persons  and  property,  and  to  levy  license 
and  privilege  taxes  so  as  to  secure  a  just  imposition  of  such  tax 
upon  the  classes  subject  thereto.) 

Sec.  8.  (That  cities  and  towns  may  exempt  except  for  school  pur- 
poses manufactories  for  a  term  of  five  years,  by  popular  vote.) 

Art.  II,  Sec.  4.  (Payment  of  all  taxes,  including  poll  tax,  pre- 
requisite to  voting.) 

Art.  Ill,  Sec.  29.  (All  taxes  to  be  laid  upon  actual  value  of  prop- 
erty taxed.) 


ADMINISTRATION. — The  State  Board  of  Equalization,  composed 
of  members  elected  by  the  County  Boards  of  Commissioners,  meets 
every  fourth  year  for  the  equalization  of  assessments  of  real  property 
among  the  several  counties,  towns,  cities  and  villages,  and  also 
equalizes  the  assessment  of  textile  industries,  canals  providing  power 
for  rent  or  hire,  and  fertilizer  companies,  in  order  to  obtain  uni- 
formity of  taxation  upon  the  property  of  such   industries. 

The  State  Board  of  Assessors,  composed  of  the  Treasurer,  Secre- 
tary of  State,  Comptroller,  and  Attorney-General,  and  the  Chairman 
of  Railroad  Commissioners,  assesses  the  railroad  property  used  in 
operation  and  also  other  public  utilities. 

Township  boards  of  assessors  are  appointed  by  the  Gorernor;  also 
In  cities  and  towns,  and  special  boards  in  Charleston  and  Columbia. 

RAILROADS. — Railroad  property  used  in  operation  is  assessed  by 
the  State  Board  of  Assessors,  and  the  value  of  the  right  of  way  and 
track  is  apportioned,  pro  rata,  to  each  mile  of  main  track. 

GROSS  RECEIPTS  TAX. — Domestic  and  foreign  railroads,  street 
railroads,  telegraph,  tc'lephone,  express,  passenger  car.  navigation, 
waterworks,  power  and  light  companies  pay  the  State  for  State  pur- 
poses a  gross  receipts  tax  of  three-tenths  of  1  per  rent  on  their  gross 


908  STATE   TAXATION    SYSTEM SOUTH    CAROLINA. 

income  from  intra-State  business.     (See  Civil  Code,   Sec.   369.)     This 
tax  is  assessed  by  the  State  Board  of  Assessors. 

CAPITAL  STOCK  TAX. — Domestic  corporations  of  all  classes,  other 
than  those  just  named,  pay  to  the  State  for  State  purposes,  a  tax 
of  one-half  of  1  mill  upon  each  dollar  of  paid-up  capital  stock.  The 
minimum  is  five  dollars.  This  is  termed  an  annual  license  fee. 
(Civil  Code,  Sec.  364.)  Similar  foreign  corporations  pay  a  tax  based 
upon  the  value  of  corporate  property  used  in  the  conduct  of  their 
business  within  the  State.  The  rate  of  this  tax  is  one-half  of  one 
mill  on  each  dollar  of  value  of  such  property,  with  a  minimum  fee  of 
five  dollars. 

All  of  these  corporations,  including  railroad  companies,  pay  a  local 
general  property  tax  for  State  and  local  purposes.  They  pay  to  the 
State  for  State  purposes  the  gross  receipts  tax,  and  locally,  the  tax 
for  the  support  of  the  Railroad  Commission. 

BANKS. — Shares  of  stock  in  national  and  State  banks  are  assessed 
where  bank  is  located  at  true  value  in  money.  Real  estate  is  taxed 
to  the  bank  and  deducted  from  valuation  of  shares. 

Unincorporated  banks  are  assessed  on  average  monthly  assets  for  the 
year. 

EXEMPTIONS. — Exemptions  include  property  held  for  religious  and 
educational  purposes,  Y.  M.  C.  A.  property  not  exceeding  three  acres 
of  land,  all  bonds  and  stocks  of  the  State  and  municipality,  county 
and  school  district  bonds,  all  rents  accruing  from  real  estate  which 
shall  not  become  due  within  two  months  after  the  first  day  of  Jan- 
uary in  the  year  in  which  taxes  are  to  be  assessed  thereon,  all  of  any 
annuity  not  payable  on  or  before  August  1st  of  the  year  for  which 
taxes  are  to  be  assessed,  all  wearing  apparel  of  the  taxpayer  and  his 
family,  and  articles  for  the  present  subsistence  of  the  family  up  to 
$100. 

POLL  TAX. — ^An  annual  poll  tax  of  one  dollar  is  levied  upon  all 
males  between  21  and  60  years  of  age,  and  the  proceeds  applied  to  edu- 
cational purposes.  Those  incapable  of  earning  a  living  are  exempt. 
There  is  also  a  poll  tax  levied  in  the  various  counties  for  special  im- 
provement purposes,  the  rate  and  age  varying  in  the  different  coun- 
ties. 

INCOME  TAX. — A  graduated  tax  is  levied  on  incomes  above  $2500 
derived  from  any  source,  deduction  being  allowed  for  necessary  ex- 
pense of  carrying  on  the  business,  the   rate  being  1   per   cent   from 


STATE  T^VXATION  '  SYSTEM — SOUTH    DAKOTA.  909 

$2500  to  $5000;  IVz  per  cent  from  $5000  to  $7500;  2  per  cent  from 
$7500  to  $10,000;  2^^  per  cent  from  $10,000  to  $15,000,  and  3  per  cent 
for  any  amount  above  that.  Incomes  under  $2500  are  exempt.  Coun- 
ties do  not  share  in  the  income  tax. 

COLLECTIONS. — The  time  of  payment  of  taxes  is  from  the  15th  of 
October  to  the  31st  of  December,  when  penalties  accrue.  Delinquent 
taxes  are  collected  by  distress  or  warrant  executed  after  March  15th. 
All  personal  property  is  liable  to  distress  and  sale,  and  real  property 
on  which  taxes  are  delinquent  may  be  seized  and  sold.  All  taxes  are 
a  lien  upon  the  property  taxed  which  attaches  at  the  beginning  of  the 
fiscal  year  and  expires  in  ten  years. 

SOUTH  DAKOTA 

(Constitution.     Art.  XI.) 

Sec.  1.  (Provides  that  the  legislature  shall  levy  an  annual  tax 
suflScient  to  pay  the  ordinary  expenses  of  the  State  and  not  to  exceed 
in  any  one  year  two  mills  on  each  dollar  as  ascertained  by  the  last 
assessment.) 

Sec.  2.  All  taxes  shall  "be  uniform  on  all  property  and  shall  be 
levied  and  collected  for  public  purposes  only.  The  value  of  each 
subject  of  taxation  shall  be  so  fixed  in  money  that  every  person  and 
corporation  shall  pay  a  tax  in  proportion  to  the  value  of  his,  her  or 
its  property.  Franchises  and  licenses  to  do  business  in  the  State, 
gross  earnings  and  net  income,  shall  be  considered  in  taxing  cor- 
porations and  the  power  to  tax  corporate  property  shall  not  be  sur- 
rendered or  suspended  by  any  contract  or  grant  to  which  the  State 
shall  be  a  party.  The  legislature  shall  provide  by  general  law  for 
the  assessing  and  levying  of  taxes  on  all  corporate  property,  as  near 
as  may  be,  by  the  same  methods  as  are  provided  for  assessing  and 
levying  of  taxes  on  individual  property,     (Amended  November,  1912.) 

Sec.  3.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  any  contract  or  grant  to  which 
the  State  shall  be  a  party. 

Sec.  4.  The  legislature  shall  provide  for  taxing  all  moneys,  credits, 
investment  in  bonds,  stocks,  joint  stock  companies,  or  otherwise; 
and  also  for  taxing  the  notes  and  bills  discounted  or  purchased, 
moneys  loaned  and  all  other  property,  effects  or  dues  of  every  de- 
scription, of  all  banks  and  of  all  bankers,  so  that  all  property  em- 
ployed in  banking  shall  always  be  subject  to  a  taxation  equal  to  that 
imposed  on  the  property  of  individuals. 

Sec.  5.  The  property  of  the  United  States  and  of  the  State,  county 
and  municipal  corporations,  both  real  and  personal  shall  be  exempt 
from  taxation. 

Sec.  6.  The  legislature  shall,  by  general  law,  exempt  from  taxation, 
property  used  exclusively  for  agricultural  and  horticultural  societies, 


910  STATE  TAXATION    SYSTEM — SOUTH    DAKOTA. 

for  school,  religious,  cemetery  and  charitable  purposes,  and  personal 
property  to  any  amount  not  exceeding  in  value  two  hundred  dollars 
for  each  individual  liable  to  taxation. 

Sec.  7.  All  laws  exempting  property  from  taxation,  other  than  that 
enumerated  in  Sees.  5  and  6  of  this  article,  shall  be  void. 

Sec.  8.  No  tax  shall  be  levied  except  in  pursuance  of  a  law,  which 
shall  distinctly  state  the  object  of  the  same,  to  which  the  tax  only 
shall  be  applied. 

Sec.  9.  All  taxes  levied  and  collected  for  State  purposes  shall  be 
paid  into  the  State  Treasury.  No  indebtedness  shall  be  incurred  or 
money  expended  by  the  State,  and  no  warrant  shall  be  drawn  upon 
the  State  Treasurer  except  in  pursuance  of  an  appropriation  for  the 
specific  purpose  first  made.  The  legislature  shall  provide  by  suitable 
enactment  for  carrying  this  section  into  effect. 

Sec.  10.  The  legislature  may  vest  the  corporate  authority  of  cities, 
towns  and  villages,  with  power  to  make  local  improvements  by  special 
taxation  of  contiguous  property  or  otherwise.  For  all  corporate  pur- 
poses, all  municipal  corporations  may  be  vested  with  authority  to 
assess  and  collect  taxes;  but  such  tax  shall  be  uniform  in  respect  to 
persons  and  property  within  the  jurisdiction  of  the  body  levying  the 
same. 

Sec.  11.  (Prohibits  making  of  any  unlawful  profit  out  of  public 
monies.) 

(An  amendment  allowing  classification  in  taxation  was  defeated  at 
the  election  of  November,  1916.) 


ADMINISTRATION.— A  tax  commission  was  created  by  Act  of 
1913.  consisting  of  three  members  appointed  by  the  Governor,  which 
has  general  supervision  over  the  administration  of  the  assessment  and 
tax  laws  of  the  State  and  all  assessing  oflBcers  succeeding  to  and  tak- 
ing the  place  and  inheriting  the  powers  of  the  State  Board  of  Equaliza- 
tion, and  also  has  the  power  of  assessment  of  railroads,  not  including 
street  railways,  and  other  public  utilities  and  has  also  the  power  to 
order  re-assessments. 

RAILROADS. — Domestic  and  foreign  railroads  pay  the  general  prop- 
erty tax  locally,  and  assessment  of  operating  property  is  made  by  the 
State  Board.  By  Act  of  1917  provision  was  made  for  the  appraisal 
and  taxation  of  express,  railroad,  telegraph  and  sleeping  car  com- 
panies on  the  unit  plan  with  formulas  for  determining  the  valuation 
set  out  in  the  law.  These  values  are  certified  to  the  various  counties 
"Where  property  is  located  and  taxes  extended  according  to  local 
levies. 

CORPORATIONS. — The  assessment  of  public  utility  corporations 
by  the  State  Board  is  at  the  average  of  State  and  county  local  rates. 


STATE  TAXATION    SYSTEM — SOUTH    DAKOTA.  911 

ASSESSMENTS. — After  each  individual  has  made  his  return  for 
the  total  amount  of  his  property,  both  personal  and  real,  the  county- 
auditor  deducts  therefrom  $25.00  in  value  in  household  furniture  and 
provisions,  and  levies  taxes  upon  the  remainder.  All  property,  per- 
sonal and  real,  must  be  listed  and  assessed  with  reference  to  its  value 
on  the  first  day  of  May.  Property  must  be  listed  in  the  county,  town, 
or  district  where  the  owner  or  agent  resides,  except  in  the  case  of 
livestock,  which  shall  be  listed  in  the  county  in  which  the  home 
"range"  is  situated,  or  where  such  livestock  are  pastured  or  ranged. 
Livestock  may  be  assessed  in  the  county  where  found  ranging  any 
time  during  the  months  from  June  to  November,  inclusive. 

The  abatement  and  refunding  of  assessments  and  taxes  may  be 
made  by  the  Board  of  County  Commissioners  on  due  showing;  and 
the  statutory  provision  therefor  was  amended  and  enlarged  by  Act 
of  1917. 

TIMBER  CULTURE.— Trees  planted  under  the  Timber  Culture  Act 
of  commerce,  are  not  to  be  considered  as  an  "improvement"  on  the 
land,  nor  are  artesian  wells  to  be  considered  in  the  assessment. 

BANKS.— Shares  of  stock  in  national  banks  are  assessed  to  the  in- 
dividual stockholders  at  the  place  where  the  bank  is  located. 

Shares  of  stock  of  State  banks  shall  be  assessed  to  such  banks  and 
not  to  the  individual  stockholders.  Officers  of  national  banks  are  re- 
quired to  retain  so  much  of  any  dividend  belonging  to  stockholders 
as  shall  be  necessary  to  pay  taxes  levied  on  their  shares  of  stock, 
until  it  shall  be  made  to  appear  to  such  bank  that  such  taxes  have 
been  paid.  Real  estate  of  banks  and  improvements  thereon  are  valued 
separately  and  assessed  separately,  and  such  assessment  is  deducted 
from  valuation  of  shares. 

COUNTY  TAXATION. — An  assessor  is  elected  in  each  county  or 
assessment  district.  Property  is  required  to  be  assessed  at  its  true 
value  in  money.  Each  county  has  a  board  of  equalization  which 
meets  on  the  fourth  Monday  in  June. 

County  and  municipal  taxes  are  levied  upon  the  same  assessment 
as  that  for  State  taxation.  A  road  tax  of  two  dollars  per  annum  is 
authorized  by  the  counties,  which  may  be  paid  for  in  labor. 

INHERITANCE  TAX.— The  inheritance  tax  (see  Laws  of  1915.  Ch. 
217)  is  impo.sed  upon  every  transfer  by  will  or  intestacy,  and  is  ap- 
plicable whenever  the  property  so  transferred  is  within  the  jurisdic- 
tion of  the  State  whether  the  decedent  is  a  resident  or  a  non-resident. 


912  STATE  TAXATION    SYSTEM — TENNESSEE. 

The  rates  are  based  upon  the  amount  involved  and  upon  the  relation- 
ship of  the  recipient  .to  the  deceased,  the  exemption  being  $10,000  in 
the  case  of  a  widow  or  child  whether  natural  or  adopted,  and  $3000 
in  case  of  lineal  ancestors;  $1000  in  case  of  brother  or  sister,  $250  in 
case  of  collaterals  and  $100  in  care  of  strangers,  while  the  property 
of  a  clear  value  of  $2500  is  exempt  when  transferred  to  a  religious 
or  educational  purpose.  Where  parties  inherit,  living  outside  the 
State,  they  are  entitled  to  any  such  part  of  the  exemption  provided 
as  the  exemption  exceeds  the  value  of  the  property  outside  the  juris- 
diction received  by  him  through  such  transfer.  The  rates  vary  from 
IV2  per  cent  in  case  of  wife  or  lineal  issue  under  $15,000  to  three  times 
the  primary  rate  where  in  excess  of  $100,000. 

The  Tax  Commission  may  stipulate  as  to  the  value  of  property 
subject  to   inheritance  tax. 

COLLECTION. — All  taxes  are  payable  on  the  first  day  of  January 
and  are  delinquent  on  the  first  day  of  April  following.  Delinquent 
taxes  draw  1  per  cent  interest.  Property  upon  which  taxes  are  de- 
linquent may  be  sold  after  three  weeks'  published  notice.  After  the 
sale  of  property  for  taxes,  it  is  redeemable  at  any  time  within  two 
years  by  paying  the  amount  of  purchase  price  plus  12  per  cent  per 
annum  from  the  date  of  the  sale,  together  with  all  taxes  which  are  a 
lien  at  the  time  of  redemption  with  interest  thereon.  Taxes  on  real 
property  are  a  lien  thereon. 

Under  Act  of  1917,  notice  is  given  by  the  County  Treasurer  of  de- 
linquency in  the  payment  of  personal  taxes,  thirty  days  before  the 
certification  of  the  same  to  the  sheriff;  and  a  warrant  to  the  sheriff 
for  collection  is  in  the  form  of  a  separate  warrant  for  certificates  cov- 
ering all  delinquent  taxes  of  the  individual  debtor. 

TENNESSEE 

Art.  II,  Sec.  28.  (In  addition  to  other  property,  this  section  au- 
thorizes the  legislature  to  exempt  "one  thousand  dollars'  worth  of 
personal  property  in  the  hands  of  each  taxpayer,  and  the  direct  pro- 
duct of  the  soil  in  the  hands  of  the  producer  and  his  immediate  ven- 
dee.") All  property  shall  be  taxed  according  to  its  value,  that  value 
to  be  ascertained  in  such  manner  as  the  legislature  shall  direct,  so 
that  taxes  shall  be  equal  and  uniform  throughout  the  State.  No  one 
species  of  property  from  which  a  tax  may  be  collected  shall  be  taxed 
higher  than  any  other  species  of  property  of  the  same  value.  But  the 
legislature  shall  have  power  to  tax  merchants,  peddlers  and  privileges 
in  such  manner  as  they  may  from  time  to  time  direct. 

The  portion  of  a  merchant's  capital  used  in  the  purchase  of  mer- 
chandise sold   by  him  to   non-residents   and   sent   beyond   the   State, 


STATE  TAXATION   SYSTEM — TENNESSEE.  913 

shall  not  be  taxed  at  a  rate  higher  than  the  ad  valorem  tax  on  prop- 
erty. 

The  legislature  shall  have  the  power  to  levy  a  tax  upon  incomes 
derived  from  stocks  and  bonds  that  are  not  taxed  ad  valorem.  (This 
section  also  authorizes  a  poll  tax.) 

Sec.  30.  No  article  manufactured  of  the  produce  of  this  State  shall 
be  taxed  otherwise  than  by  inspection  fees. 


SPEJCIAL  FEATURES.— The  prominent  feature  of  the  taxing  sys- 
tem of  Tennessee  is  the  system  of  privilege  or  license  taxes  upon  the 
exercise  of  various  occupations  which  is  supplemental  to  the  general 
property  tax.  There  are  also  special  corporation  taxes  and  State, 
poll  and  inheritance  taxes  as  well  as  specific  taxes  on  land  transfers 
and  on  litigation. 

ADMINISTRATION.— The  State  Board  of  Equalization  is  composed 
of  the  Secretary  of  State,  Treasurer  and  Comptroller,  which  biennially 
equalizes  the- assessment  of  all  properties  in  the  State. 

The  County  Board  of  Equalizers,  composed  of  five  freeholdelrs 
elected  by  the  quarterly  court  of  each  county,  equalizes  assessments 
in  the  counties. 

The  State  Board  of  Equalization  of  railroad  assessments  is  com- 
posed of  the  Governor,  Treasurer  and  Secretary  of  State.  The  County 
Board  of  Equalizers  compares  and  equalizes  the  county  assessments. 

GENERAL  PROPERTY  TAX.— All  property  is  subject  to  the  gen- 
eral  property  tax,  corporate  as  well  as  individual. 

RAILROADS.— Domestic  and  foreign,  steam  and  street  railroads, 
telegraph  and  telephone  companies  pay  the  State  for  State  purposes 
and  locally  for  local  purposes  the  general  property  tax  on  all  prop- 
erty of  railroads  and  on  the  local  property  of  telegraph  and  telephone 
companies.  The  Railroad  Commission  is  directed  by  statute  to  con- 
sider the  value  of  capital  stock,  the  franchise,  the  corporate  property, 
the  amount  of  gross  receipts  and  the  market  value  of  both  stocks  and 
bonds.  Railroads  as  well  as  telegraph  and  telephone  companies,  as- 
sessed in  the  same  manner,  pay  to  the  State  for  State  purposes  the 
annual  capital  stock  tax.  See  Laws  of  1907,  Ch.  434,  as  amended  by 
laws  of  1913. 

The  valuation  of  localized  railroad  property,  though  assessed  by 
Railroad  Commission,  is  not  apportioned  on  the  mileage  basis,  but  is 
certified  for  local  taxation  to  counties  and  incorporated  cities  wherein 


914  STATE  TAXATION   SYSTEM — TENNESSEE. 

the  different  items  of  the  property  are  located.  The  localized  prop- 
erty of  street  and  interurban  railroads  are  assessed  in  practically  the 
same  manner. 

EXPRESS  COMPANIES. — Express  companies,  domestic  and  foreign, 
are  subject  to  a  State  privilege  tax  ranging  from  $1000  to  $2500  per 
annum  according  to  the  length  of  route  in  the  State.  They  also  pay 
the  general  property  tax  assessed  and  collected  locally  for  both  State 
and  local  purposes  and  the  capital  or  annual  charter  tax  for  State 
purposes. 

CAR  COMPANIES. — Sleeping  car  companies  pay  the  State  for  State 
purposes  an  annual  privilege  tax  of  $3000  and  the  capital  stock  or  an- 
nual charter  tax.  Freight  car  companies  pay  the  annual  capital  stock 
tax  and  are  subject  also  to  the  general  property  tax. 

PUBLIC  UTILITY  COMPANIES.— Electric  light  and  other  public 
utility  companies  pay  locally  the  general  property  tax  for  State  and 
local  purposes  and  also  the  capital  stock  or  annual  charter  tax  and 
privilege  taxes.  The  county  and  municipality  is  authorized  to  levy 
privilege  taxes  not  exceeding  the  amount  levied  for  State  purposes. 
See  Laws  of  1907,  pages  206,  209. 

BUSINESS  CORPORATIONS.— General  business  corporations  pay 
locally  the  general  property  tax  and  pay  also  the  capital  stock  tax. 
(Laws  of  1907,  Ch,  434.)  And  certain  classes  pay  locally  privilege 
taxes. 

BANKS. — Bank  stock  is  assessed  in  name  of  shareholders  at  its  cash 
value,  less  proportionate  share  of  realty  and  tangible  personalty  as- 
sessed to  the  bank.  The  corporation  is  held  liable  for  payment  of  the 
tax.  y 

POLL  TAX.— A  poll  tax  of  $1.00  per  annum  is  imposed  on  every 
male  inhabitant  between  the  ages  of  21  and  50  years,  except  those 
who  are  deaf,  dumb,  blind  or  incapable  of  earning  a  livelihood,  and 
this  tax  is  distributed  between  the  school  districts  in  proportion  to 
the  number  of  school  children.  The  pasonent  of  taxes  is  prerequisite 
to  voting.     The  municipal  poll  tax  is  limited  to  $1.00. 

EXEMPTIONS. — Exemptions  in  addition  to  public  property  include 
all  property  belonging  to  any  religious,  charitable,  scientific,  or  edu- 
cational institution  not  used  in  secular  business,  also  leaseholders 
holding  under  institutions  of  learning,  whose  rents  are  used  for  edu- 


STATE  TAXATION    SYSTEM — TENNESSEE.  915 

cational  purposes,  cemeteries  and  monuments,  growing  crops,  the  di- 
rect produce  of  the  soil  in  the  hands  of  the  producer  or  his  im- 
mediate vendee,  manufactured  articles  of  the  State  in  the  hands  of 
the  manufacturer;  personal  property  of  the  value  of  $1,000  in  the 
hands  of  each  taxpayer. 

INHERITANCE  TAX.— The  inheritance  tax  is  paid  to  the  State  on 
all  inheritances  of  $5000  and  over.  Husband,  wife  and  lineal  ances- 
tors and  descendants  on  $5000  and  over  and  less  than  $20,000  are 
taxed  at  1  per  cent  of  clear  market  value,  while  inheritances  of  $20,000 
and  over  are  subject  to  a  tax  of  IM  per  cent.  Where  inheritance  is 
to  any  other  than  the  above  class  and  is  of  $250  and  over,  the  tax  is 
5  per  cent. 

All  estates  situated  within  the  State,  whether  the  parties  die  seized 
thereof  are  domiciled  within  or  without  the  State,  are  subject  to  the 
tax. 

ASSESSMENT. — Personal  property  is  assessed  annually,  real  es- 
tate every  even-numbered  year.  The  taxpayer  must  return  all  his 
property  without  regard  to  any  exemption.  Changes  to  the  extent  of 
$200  in  the  value  of  any  real  estate  are  to  be  noted  annually  by  the 
assessor  as  well  as  any  improvements  thereon.  Merchants  are  as- 
sessed on  the  average  capital  invested  in  the  business  during  the 
year,  manufacturers  on  the  raw  materials  and  articles  in  process  of 
manufacture,  but  the  value  of  articles  finished  from  the  produce  of 
the  State  in  the  hands  of  the  manufacturer  is  to  be  deducted  in  as- 
sessing property  or  capital  stock. 

COUNTY  AND  MUNICIPAL  TAXATION.— The  property  included  in 
the  assessment  and  equalization  are  the  same  for  county  and  cities 
as  for  the  State.  The  county  is  authorized  to  levy  a  privilege  tax 
upon  merchants  and  other  occupations  declared  to  be  privileges  not 
exceeding  an  amount  levied  by  the  State  for  State  purposes.  The 
municipal  poll  tax  is  not  to  exceed  $1.00  and  the  municipality  is  au- 
thorized to  levy  the  same  privilege  taxes  as  the  State  and  county. 

COLLECTIONS.— Taxes  are  a  lien  on  lands  as  of  January  10th 
of  each  year  and  are  due  on  the  first  Monday  in  October.  Fines  and 
penalties  are  not  affixed  until  the  month  of  February  following  the 
previous  year  of  assessment.  There  is  no  lien  for  taxes  against  per- 
sonalty without  issuance  of  distress  warrants,  as  provided  in  Thomp- 
son Shannon's  Code,  Sees.  876,  877.  (See  Edmundson  v.  Walker,  195 
S.  W.  168.) 


916  STATE  TAXATION   SYSTEM — TEXAS. 

TEXAS 

Art.  VII,  Sec.  1.  Taxation  shall  be  equal  and  uniform.  All  property 
in  this  State,  whether  owned  by  natural  persons  or  corporations, 
other  than  municipal,  shall  be  taxed  in  proportion  to  its  value,  which 
shall  be  ascertained  as  may  be  provided  by  law.  The  legislature  may 
impose  a  poll  tax.  It  may  also  impose  occupation  taxes,  both  upon 
natural  persons  and  upon  corporations,  other  than  municipal,  doing 
any  business  in  this  State.  It  may  also  tax  incomes  of  both  natural 
persons  and  corporations,  other  than  municipal,  except  that  persons 
engaged  in  mechanical  and  agricultural  pursuits  shall  never  be  re- 
quired to  pay  an  occupation  tax:  Provided,  that  two  hundred  and 
fifty  dollars'  worth  of  householfl  and  kitchen  furniture,  belonging  to 
each  family  in  the  State,  shall  be  exempt  from  taxation,  and,  provided 
further,  that  the  occupation  tax  levied  by  any  county,  city  or  town, 
for  any  year,  on  persons  or  corporations  pursuing  any  profession  or 
business,  shall  not  exceed  one-half  of  the  tax  levied  by  the  State  for 
the  same  period  on  such  profession  or  business. 

Sec.  2.  All  occupation  taxes  shall  be  equal  and  uniform  upon  the 
same  class  of  subjects  within  the  limits  of  the  authority  levying  the 
tax;  but  the  legislature  may,  by  general  laws,  exempt  from  taxation 
public  property  used  for  public  purposes;  actual  places  of  religious 
worship;  places  of  burial  not  held  for  private  or  corporate  profit;  all 
buildings  used  exclusively  and  owned  by  persons  or  associations  of 
persons  for  school  purposes  (and  the  necessary  furniture  of  all 
schools),  and  institutions  of  purely  public  charity;  and  all  laws  ex- 
empting property  from  taxation,  other  than  the  property  above  men- 
tioned, shall  be  void. 

Sec.  4.  The  power  to  tax  corporations  and  corporate  property  shall 
not  be  surrendered  or  suspended  by  act  of  the  legislature,  by  any  con- 
tract or  grant  to  which  the  State  shall  be  a  party. 

Sec.  8.  All  property  of  railroad  companies  shall  be  assessed,  and 
the  taxes  collected  in  the  several  counties  in  which  said  property  is 
situated,  including  so  much  of  the  road-bed  and  fixtures  as  shall  be  in 
each  county.  The  rolling  stock  may  be  assessed  in  gross  in  the 
county  where  the  principal  office  of  the  company  is  located,  and  the 
county  tax  paid  upon  it  shall  be  apportioned  by  the  Comptroller  in 
proportion  to  the  distance  such  road  may  run  through  such  county, 
among  the  several  counties  through  which  the  road  passes,  as  a  part 
of  their  tax  assets. 

Sec.  10.  The  legislature  shall  have  no  power  to  release  the  inhabit- 
ants of,  or  property  in,  any  county,  city  or  town,  from  the  payment  of 
taxes  levied  for  State  or  county  purposes,  unless  in  case  of  great  pub- 
lic calamity  in  any  such  county,  city  or  town,  when  such  release  may 
be  made  by  a  vote  of  two-thirds  of  each  House  of  the  legislature. 

Sec.  17.  The  specifications  of  the  objects  and  subjects  of  taxation 
shall  not  deprive  the  legislature  of  the  power  to  require  other  subjects 
or  objects  to  be  taxed,  in  such  manner  as  may  be  consistent  with  the 
principles  of  taxation  fixed  in  this  Constitution. 

Sec.  19.     Farm  products  in  the  hands  of  the  producer  and  family 


STATE  TAXATION  SYSTEM — TEXAS.  917 

supplies  for  family  and  home  use  are  exempt  from  all  taxation  until 
otherwise  directed  by  a  two-thirds  vote  of  all  the  members  elected  to 
both  Houses  of  the  legislature.  Rev.  Stats.  1895,  p.  142,  Ch.  9,  Sec. 
544,  545. 


ADMINISTRATION.— A  State  Tax  Board  consists  of  a  State  Tax 
Commission,  Comptroller  of  Public  Accounts  and  Secretary  of  State. 
This  board  values  the  intangible  assets  of  railroad,  ferry  and  bridge 
companies,  with  powers  of  investigation  and  of  supervision  of  the 
enforcement  of  the  revenue  laws  of  the  State.  A  State  Revenue 
Agent  also  acts  in  this  supervision.     (See  R.  S.,  Sec.  7366.) 

The  essential  features  of  the  tax  system  of  the  State  are: 

First — The  taxation  of  all  property,  corporate  and  individual,  real 
and  personal,  except  that  of  car  companies,  under  the  General  Prop- 
erty Tax  for  State  and  local  purposes. 

Second — A  system  of  annual  franchise  taxes,  for  State  purposes, 
upon  foreign  and  domestic  corporations,  based  on  the  full  amount 
of  authorized  capital  stock,  plus  surplus  and  undivided  profits.  This 
is  applied  to  all  corporations,  except  transportation  companies,  sub- 
ject to  occupation  taxes  on  gross  receipts  and  certain  financial  com- 
panies and  agricultural  fair  associations.  (See  Revised  Stat.,  Art. 
7393-7406.     Laws  of  1911  and  Laws  of  1913.) 

Third — An  extensive  system  of  license  or  privilege  taxes  on  a  great 
variety  of  occupations  both  corporate  and  individual.  (See  Rev. 
Stat,  Art.  7355-7366.) 

LICENSES. — Occupation  taxes  based  on  gross  receipts  of  certain 
classes  of  corporations  may  not  be  levied  for  local  purposes.  Privi- 
lege taxes  of  specific  amounts  may,  however,  be  levied  by  counties, 
cities  and  towns,  but  only  at  one-half  of  the  amount  respectively 
levied  for  State  purposes.      (R.  S.,  Art.  7357.) 

(When  the  legislature  has  declared  that  a  named  occupation  shall 
be  taxed  for  the  benefit  of  the  State,  and  has  fixed  the  amount  of  the 
tax,  then  a  county,  city  or  town  has  the  power  to  tax  that  occupation. 
Hoelfling  v.  San  Antonio,  85  Tex.  228,  1892.) 

RAILROADS.— Railroad,  bridge  and  ferry  companies,  domestic  and 
foreign,  in  addition  to  the  general  property  tax  locally  for  State  and 
local  purposes  on  all  property.  Including  Intangible  value  (excepting 
companies  operating  under  a  Federal  charter),  pay  the  graduated  cap- 
ital stock  tax  to  the  State  for  State  purposes.  Intangible  property  of 
such  companies  Is  assessed  by  the  State  Tax  Board,  and  this  is  done 


918  STATE  TAXATION   SYSTEM — TEXAS. 

by  first  obtaining  the  aggregate  value  of  the  entire  system,  and  then 
deducting  the  value  of  real  and  personal  property  not  used  in  the 
railroad  business.  The  portion  of  the  remainder  representing  the 
taxable  value  of  the  railroad  property  in  Texas,  is  then  determined 
on  the  land  track  mileage  business,  and  from  this  portion  is  de- 
ducted the  value  of  the  tangible  property  as  determined  by  the  State 
Board.     (R.  S.,  Art.  7420.) 

All  tangible  property  of  railroads,  except  rolling  stock,  is  assessed 
by  the  County  Assessor  of  each  county  through  which  the  road  passes, 
and  rolling  stock  is  listed  with  the  County  Assessor  of  the  county 
wherein  the  principal  office  of  the  railroad  is  located.  A  distribution 
of  the  taxable  value  of  the  intangible  property  of  bridge  and  ferry 
companies  is  based  on  the  percentage  of  business  done  in  each  county. 
Counties  doing  exclusively  a  railroad  terminal  business,  pay  the  gen- 
eral property  tax  locally  for  State  and  local  purposes,  and,  in  addi- 
tion, pay  the  State  for  State  purposes  1  per  cent  on  total  gross  re- 
ceipts. 

TELEGRAPH,  TELEPHONE,  ETC.— Telegraph,  telephone  and  ex- 
press companies  pay  the  general  property  tax  for  State  and  local  pur- 
poses, and,  in  addition,  pay  a  gross  receipts  tax  to  the  State  as  fixed 
by  the  statute.     (R.  S.,  Art.  7370.) 

CAR  COMPANIES. — Sleeping  and  other  car  companies  do  not  pay 
the  general  property  tax,  but  pay  a  gross  receipts  tax  in  lieu  thereof 
for  State  purposes,  and  a  tax  of  25  cents  on  each  $100  on  the  capital 
stock  employed  in  Texas. 

OIL  COMPANIES. — Oil,  well  and  pipe  line  companies,  light,  water 
and  gas  companies  all  pay  the  State  tax,  graduated  franchise  tax,  and 
the  gross  receipt  tax  in  addition  to  the  general  property  tax. 

ASSESSMENT. — Personal  property  temporarily  removed  from  the 
city  or  county,  is  assessed  at  the  principal  office  of  the  owner.  In- 
debtedness bearing  interest  may  be  deducted  from  credits  bearing  in- 
terest. 

CORPORATE  SHARES.— Shares  of  capital  stock  of  corporations 
which  returned  their  capital  or  property  for  taxation,  are  not  taxed 
to  the  resident  holders.  When  corporate  property  is  not  assessed  in 
the  State,  resident  stockholders  are  subject  to  the  general  property 
tax  on  their  stock.     (R.  S.,  Art.  7503-7532.) 

BANKS. — The  property  of  a  State  bank  is  assessed  against  the  bank. 
National  banks   are   taxed   on   their   real   estate,   and   the   shares   are 


STATE  TAXATION    SYSTEM UTAH.  919 

assessed  to  the  individual  holders,  less  the  assessed  value  of  the  bank's 
real  estate,  that  is,  a  proportionate  part  against  each  shareholder. 
The  taxes,  if  not  paid  by  the  shareholder,  become  a  lien  upon  the 
property  of  the  banking  corporation.  Deposits  are  deducted  from 
assets. 

INHERITANCE  TAX. — The  inheritance  tax  exempts  property  pass- 
ing to  father,  mother  or  child,  or  direct  lineal  descendant,  or  to 
charitable,  educational,  or  religious  institutions.  When  property  ex- 
ceeds the  minimum  of  $500  and  passes  to  other  persons,  the  tax  is 
varied  according  to  the  relationship  of  the  deceased.  (See  R.  S.,  Art. 
7487-7502.) 

The  tax  is  levied  upon  all  property  thus  transferred,  within  the 
jurisdiction  of  the  State,  whether  belonging  to  the  inhabitants  of 
the  State  or  not. 

POLL  TAX. — There  is  a  poll  tax  for  State  purposes  of  one  dollar 
and  counties  may  impose  a  poll  tax  of  50  cents. 

COLLECTION. — Taxes  are  payable  on  all  property  owned  on  the 
first  day  of  January  in  the  county  where  situated.  Taxes  may  be  paid 
at  any  time  after  October  1st,  and  become  delinquent  on  the  first  day 
of  January,  after  which  the  Tax  Collector  may  seize  and  sell  the 
property  of  the  delinquent  to  satisfy  his  taxes,  subject  in  the  case 
of  real  estate,  to  redemption  by  the  owner  within  two  years.  Suit 
may  be  brought  after  July  1st  by  the  District  or  County  Attorney 
for  the  recovery  of  State  and  county  taxes,  and  a  lien  enforced  on  real 
property  for  taxes  due.  In  such  case  the  suit  proceeds  as  other  law 
suits,  and  real  property  is  sold  under  an  order  of  sale  issued  out  of 
court. 

The  State  tax  rate  is  limited  to  fifty-five  cents;  county  or  city  rate 
to  forty  cents,  except  for  the  payment  of  debts  or  for  the  erection  of 
public  buildings,  not  to  exceed  twenty-five  cents  on  the  $100,  except  as 
provided  in  the  Constitution. 

(References  are  to  Vernon-Saylor  Rev.  Stat.) 

UTAH 

Art.  XIII,  Sec.  2.  All  property  in  the  State,  not  exempt  under  the 
laws  of  the  United  States,  or  under  this  Constitution,  shall  be  taxed  in 
proportion  to  its  value,  to  be  ascertained  as  provided  by  law.  The 
word  property,  as  used  In  this  article,  is  hereby  declared  to  include 
moneys,  credits,  bonds,  stocks,  franchises  and  all  matters  and  things 
(real,  personal  and  mixed)  capable  of  private  ownership;  but  this 
shall  not  be  so  construed  as  to  authorize  the  taxation  of  stocks  of  any 


920  STATE  TAXATION    SYSTEM UTAH. 

company  or  corporation  when  the  property  of  such  company  or  cor- 
poration, represented  by  such  stocks,  has  been  taxed. 

Sec.  3.  The  legislature  shall  provide  by  law  a  uniform  and  equal 
rate  of  assessment  and  taxation  on  all  property  in  the  State,  accord- 
ing to  its  value  in  money,  and  shall  prescribe  by  general  law  such 
regulations  as  shall  secure  a  just  valuation  for  taxation  of  all  prop- 
erty; so  that  every  person  and  corporation  shall  pay  a  tax  in  propor- 
tion to  the  value  of  his,  her  or  its  property.  Provided,  that  a  deduc- 
tion of  debts  from  credits  may  be  authorized.  Provided,  further,  that 
the  property  of  the  United  States,  of  the  State,  counties,  cities,  towns, 
school  districts,  municipal  corporations  and  public  libraries,  lots  with 
buildings  thereon  used  exclusively  for  either  religious  worship  or 
charitable  purposes,  and  places  of  burial  not  held  or  used  for  private 
or  corporate  benefit,  shall  be  exempt  from  taxation.  Ditches,  canals 
and  flumes  owned  and  used  by  individuals  or  corporations  for  irri- 
gating lands  owned  by  such  individuals  or  corporations,  or  the  indi- 
vidual members  thereof,  shall  not  be  separately  taxed  so  long  as  they 
shall  be  owned  and  used  exclusively  for  such  purpose. 
Sec.  4.  (Same  as  Montana  Const,  Art.  XII,  Sec,  17.) 
Sec.  10.  All  corporations  or  persons  in  the  State,  or  doing  business 
therein,  shall  be  subject  to  taxation  for  State,  county,  school,  muni- 
cipal or  other  purposes,  on  the  real  and  personal  property  owned  or 
used  by  them  within  the  territorial  limits  of  the  authority  levying  the 
tax. 

Sec.  12.  Nothing  in  this  Constitution  shall  be  construed  to  prevent 
the  legislature  from  providing  a  stamp  tax,  or  a  tax  based  on  income, 
occupation,  licenses  or  franchises.     (Amended  1906.) 


ADMINISTRATION. — The  State  Board  of  Equalization  of  four  mem- 
bers appointed  by  the  Governor  equalizes  the  assessed  value  of 
property  between  the  different  counties  and  between  the  different 
classes  of  property  throughout  the  State.  The  County  Board  of 
Equalization  equalizes  between  individuals  and  may  abate  the  taxes 
of  insane,  infirm  or  indigent  persons  not  exceeding  $10.00,  may  enter 
omitted  property  and  correct  false  and   incomplete  assessments. 

RAILROADS. — All  property  and  franchises  except  those  derived 
from  the  United  States  owned  by  railroad  and  other  public  utility 
corporations  operating  in  more  than  one  county  are  assessed  by  the 
State  Board  of  Equalization  and  apportioned  to  each  county  in  which 
they  are  located,  rolling  stock  and  railroad  franchises  according  to 
mileage  by  the  unit  rule.  These  corporations  also  pay  the  annual 
license  fee  (infra). 

The  County  Board  apportions  the  assessments  to  the  several  cities 
and  towns  or  other  taxing  districts.     The  State  Board  of  Equalization 


STATE   TAXATION    SYSTEM UTAH.  921 

determines  the  rate  of  tax  due,  after  allowing  10  per  cent  on  the 
proceeds  for  delinquents  and  in  case  of  collection  must  be  sufficient 
to  raise  the  revenue  required,  subject  to  the  limitations  of  the  Con- 
stitution of  eight  mills  on  each  dollar  of  valuation. 

CORPORATIONS. — Corporations  are  taxed  under  the  General  Prop- 
erty Tax,  there  being  an  annual  license  fee  to  be  paid  the  State  in 
addition  to  the  property  taxed  based  on  the  amount  of  the  capital 
stock. 

Corporations  organized  for  religious  and  charitable  purposes,  or  pri- 
vate water  corporations  for  culinary  purposes  and  for  furnishing 
water  to  its  own  members,  and  all  canal  and  irrigation  corporations 
are  exempted  from  the  payment  of  this  tax. 

Insurance  companies  are  required  to  pay  1%  per  cent  of  the  gross 
premiums  received,  less  the  amount  of  premiums  returned. 

Property  taxes  paid  are  deducted  from  the  insurance  gross  receipt 
tax. 

BANKS. — Real  estate  and  the  improvements  are  separately  assessed. 
Bank  stock  is  assessed  against  the  shareholders  and  paid  by  the 
bank,  the  bank  having  a  lien  on  the  stock  for  the  payment  of  the 
taxes.  Shares  of  a  national  bank  located  without  the  State,  owned 
by  a  resident  of  the  State,  are  not  subject  to  taxation. 

Private  bankers,  brokers  and  foreign  bankers  are  assessed  on  the 
average  balance  of  credits  over  liabilities  for  the  ninety  days  pre- 
ceding the  verified  statement  of  the  conditions  of  the  business  re- 
quired. 

MINES. — Mines  are  valued  on  their  net  proceeds.  Buildings,  im- 
provements and  machinery  of  mines  are  assessed  independently  of 
production.  The  valuation  is  made  by  the  State  Board  of  Equaliza- 
tion. By  Act  of  1917,  in  addition  to  an  ad  valorem  tax  on  the  net 
proceeds,  3  per  cent  of  the  net  proceeds  was  added  as  an  occupation 
tax. 

(A  constitutional  amendment  was  submitted  to  be  voted  on,  taking 
effect,  if  adopted,  January  1st,  1919,  providing  specifically  for  the 
valuation  of  metalliferous  mines  and  mining  claims  at  five  dollars 
per  acre,  and  in  addition  thereto  at  a  value  based  on  some  multiple  or 
sub-multiple  of  the  annual  proceeds  thereof  and  for  the  assessment 
of  other  mining  property,  machinery,  etc.,  at  full  value.) 

TRANSIT  LIVE  STOCK.— Transit  live  stock  Is  assessed  which  re- 
mains in  the  State  over  twenty  days. 


922  STATE  TAXATION   SYSTEM — UTAH. 

EXEMPTIONS.— In  addition  to  all  public  property,  public  libraries, 
churches,  cemeteries  not  held  for  private  benefit,  property  used  for 
charitable  purposes,  ditches,  canals  and  other  property  used  for  irri- 
gation and  mortgages  on  both  real  and  personal  property  are  exempted. 

POLL  TAX.— There  is  no  State  poll  tax  but  a  county  poll  tax  of 
$3.00  for  the  use  of  roads  and  highways  which  may  be  paid  by  per- 
sonal service  of  two  days'  work  on  a  highway. 

INHERITANCE  TAX. — There  is  a  graded  inheritance  tax  on  all 
property  passing,  on  account  of  the  death  of  the  owner  to  any  in- 
heritor, above  the  market  value  of  $10,000.  There  are  no  exemptions, 
and  the  relation  of  the  decedent  to  the  inheritor  is  immaterial. 

The  county  court  determines  the  amount  to  be  paid  by  the  heirs. 
The  entire  tax  is  paid  to  the  State. 

The  tax  applies  to  all  property  within  the  jurisdiction  of  the  State, 
whether  belonging  to  a  resident  or  non-resident,  and  whether  tangible 
or  intangible.  "When  any  property  belonging  to  a  foreign  estate  is 
subject  to  the  payment  of  the  tax,  it  is  assessed  upon  the  market  value 
of  the  property  remaining  after  the  payment  of  just  debts,  and  ex- 
penses are  chargeable   to  the   property  under  the  laws  of  the  State. 

Shares  of  stock  in  Utah  corporations  are  held  subject  to  the  tax, 
whether  owned  by  residents  or  non-residents. 

COUNTY  TAXATION.— The  State  Road  Commission  may  require 
counties  of  an  assessed  valuation  under  two  million  dollars,  to  dupli- 
cate one-quarter  of  the  amount  of  the  State  Road  Fund  available  for 
use  in  said  counties.  Counties  whose  assessed  valuation  is  between  two 
million  and  four  million  dollars,  may  be  required  to  duplicate  one- 
half  the  amount  the  State  has  made  available  for  the  use  of  such 
counties. 

Each  person  holding  taxable  property  in  the  county  is  required  to 
list  the  property  for  taxation  with  the  County  Assessor.  Any  person, 
after  demand  by  the  Assessor,  refusing  to  make  a  sworn  statement 
as  to  his  property,  or  to  appear  and  be  examined,  forfeits  to  the  county 
$100  for  each  refusal,  and  loses  his  standing  before  the  County  Com- 
missioners to  secure  a  reduction  of  his  assessment. 

ASSESSMENTS. — Property  is  assessed  at  its  full  cash  value,  the 
amount  of  which  is  determined  by  what  the  property  would  be  taken 
in  payment  of  a  just  debt  from  a  solvent  debtor. 

Taxpayers  are  allowed  to  deduct  from  the  gross  amount  of  credits 
bona  fide  debts  owing  by  them,  except  unpaid  subscriptions  to  capital 


STATE  TAXATION    SYSTEM — VERMONT.  923 

stock   of   corporations,    obligations   of    suretyship    and    insurance   pre- 
mium notes. 

COLLECTION. — Taxes  are  collected  by  the  County  Treasurer  and 
are  a  lien  on  personal  and  real  property.  Taxes  on  personal  property 
are  a  lien  on  real  property.  Taxes  on  improvements  are  a  lien  on  the 
land  and  improvements.  Liens  attach  the  first  day  of  January. 
Taxes  are  due  the  first  Monday  of  September  and  are  delinquent 
on  the  15th  of  November.  Personal  property  may  be  seized  for  taxes, 
except  when  real  estate  is  liable  therefor. 

After  the  publication  of  the  delinquent  tax  list  on  the  first  Monday 
of  December,  real  property  may  be  sold  on  the  third  Monday  of  De- 
cember for  the  payment  of  taxes.  Such  property  may  be  redeemed 
within  four  years  upon  the  payment  to  the  County  Treasurer  of  the 
amount  of  the  purchase  price  and  costs  and  IV2  per  cent  monthly  in- 
terest on  the  amount  of  said  purchase  price,  together  with  all  taxes 
paid  by  purchaser. 

VERMONT 

Chapter  1,  Art.  IX.  Every  member  of  society  has  a  right  to  be  pro- 
tected in  the  enjoyment  of  life,  liberty  and  property,  and  therefore  is 
bound  to  contribute  his  proportion  towards  the  expense  of  that  protec- 
tion, and  yield  his  personal  service,  when  necessary,  or  an  equivalent 
thereto,  but  no  part  of  any  person's  property  can  be  justly  taken  from 
him,  or  applied  to  public  uses  without  his  consent,  or  that  of  the  repre- 
sentative body  of  the  freemen  .  .  .  ;  and  previous  to  any  law  being 
made  to  raise  a  tax,  the  purpose  for  which  it  is  to  be  raised  ought  to 
appear  evident  to  the  legislature  to  be  of  more  service  to  the  common- 
wealth than  the  money  would  be  if  not  collected. 

In  Sprague  v.  Fletcher,  69  Vt.  69,  37  L.  R.  A.  840,  a  State  tax  allow- 
ing to  residents  the  deduction  of  debts  without  allowing  such  deduc- 
tion to  non-residents  was  held  a  denial  of  the  equal  privileges  and 
immunities  of  citizens  guaranteed  by  the  United  States  Constitution, 
Article  IV,  Section  2.     See  Sec.  527,  supra. 


ADMINISTRATION. — A  State  Tax  Commissioner  has  general  power 
of  supervision  of  tax  administration,  and  also  acts  with  the  Secretary 
of  State  as   Commissioner   of  Foreign   Corporations. 

There  is  a  practical  separation  of  the  sources  of  State  and  local 
revenues,  as  the  administration  of  the  State  Government  has  been 
practically  supported   in   recent  years  by  corporation   fees  and   taxes. 

RAILROADS. — Vermont  has  an  exceptional  feature  of  railroad  tax- 
ation in  that  railroads  have  the  option  of  paying  one-seventh  of  1  per 
cent  of  their  appraised  value,  or  2^2  per  cent  of  the  gross  earnings 


924  STATE  TAXATION    SYSTEM — VERMONT. 

on  their  mileage  in  the  State.     It  is  said  that  the  railroads  all  but 
invariably   choose   the  latter  alternative. 

The  real  estate  of  railroads  not  used  in  the  actual  operation  of  the 
road  is  taxed  as  other  real  estate. 

PUBLIC  UTILITY  CORPORATIONS.— Telephone  companies  pay 
3  per  cent  on  their  gross  earnings  in  the  State;  telegraph  companies 
60  cents  per  mile  for  one  wire  and  40  cents  per  mile  for  each  additional 
wire,  or  3  per  cent  on  business  in  the  State.  Sleeping  car  and  palace 
car  companies  pay  5  per  cent  on  gross  earnings  in  the  State,  express 
companies  4  per  cent  on  gross  receipts  of  business  in  the  State.  Steam- 
boat, car  and  transportation  companies  pay  seven-tenths  of  1  per  cent 
on  appraised  value  of  property  and   franchises. 

CORPORATIONS.— There  is  a  license  tax  on  corporations,  foreign 
and  domestic,  doing  business  in  the  State,  having  capital  stock  or 
deposits  of  $50,000  or  less,  $10;  for  each  additional  $50,000  or  less, 
$5  more,  but  no  tax  exceeding  $50.  The  real  and  personal  property 
of  such  corporations  is  taxed  in  the  town  where  located.  All  domestic 
and  foreign  corporations  doing  business  in  Vermont  are  required  to 
file  with  the  Commissioner  of  Taxes  a  sworn  statement  showing  the 
residence  in  the  State  of  each  shareholder  and  the  par  value  of 
shares. 

BANKING  INSTITUTIONS.— The  real  estate  of  banks  and  savings 
institutions  is  taxed  as  other  real  estate  and  the  stock  in  banks  is 
taxed  to  the  holder.  In  the  valuation  of  the  stock  deduction  is  made 
of  the  real  estate  of  the  bank  taxed  in  Vermont  or  elsewhere. 

There  is  also  a  tax  upon  deposits  paying  interest  of  2  per  cent  orig- 
inally taxed  against  the  depositor,  but  in  State  financial  institutions 
it  is  assumed  and  paid  by  the  institution  at  a  rate  of  seven-tenths  of 
1  per  cent  computed  upon  the  average  amount  of  such  deposits.  A  tax 
of  seven-twentieths  of  1  per  cent  on  the  "interest  paying  deposits  in  na- 
tional banks,  which  was  assumed  by  the  bank  was  held  valid  both 
by  the  State  Supreme  Court,  84  Vt.  167,  and  also  by  the  Supreme  Court 
of  the  United  States,  231  U.  S.  120,  supra,  Sec.  307,  the  courts  holding 
that  there  was  no  unjust  discrimination  in  favor  of  State  institutions, 
though  depositors  in  the  latter  were  exempt  from  taxation  on  their 
deposits  up  to  $2,000,  such  institutions  paying  a  franchise  tax  of 
seven-tenths  of  1  per  cent  upon  the  average  amount  of  deposits,  after 
deducting  the  deposits  in  excess  of  $2,000,  nor  because  persons  whose 
deposits  did  not  bear  interest  in  excess  of  2  per  cent  per  annum  were 
also  exempted  in  the  State  institutions. 


STATE  TAXATION    SYSTEM VERMONT.  925 

MANUFACTURING  AND  MERCANTILE  COMPANIES.— Manu- 
facturing and  mercantile  companies  are  subject  to  an  annual  license 
tax  for  State  purposes;  and  their  real  and  personal  property  is  taxed 
in  the  town  where  located.  Insurance  and  guaranty  companies  pay 
2  per  cent  on  the  gross  amount  of  premiums  or  assessments  in  the 
State,  with  special  provision  as  to  domestic  life  insurance  companies, 
and  savings  banks  seven-tenths  of  1  per  cent  on  the  average  amount 
of  deposits  and  accumulations. 

POLL  TAX, — A  poll  tax  of  two  dollars  on  all  male  inhabitants, 
citizens  and  aliens  over  twenty-one  and  under  seventy  years  of  age, 
is  imposed.  Those  honorably  discharged  in  the  army  and  navy  in  the 
Civil  War  and  members  of  State  militia  and  fire  companies  are 
exempt. 

EXEMPTIONS. — Exemptons  include  household  furniture  up  to 
$500,  wearing  apparel,  private  and  professional  libraries,  mechanic's 
and  farmer's  tools,  provisions  necessary  for  the  consumption  of  a 
family  for  one  year,  certain  cattle,  and  hay  and  produce  sufficient 
for  wintering  out  of  stock,  and  for  each  person  one  wagon,  one  sleigh 
and  one  harness,  but  no  pleasure  wagon  or  vehicle  exceeding  $100  in 
value  is  exempt.  Exemptions  also  include  property  used  for  public, 
pious  and  charitable  purposes.  There  is  also  a  limited  exemption  of 
uncultivated  lands  planted  with  timber  or  forest  trees.  Towns  are 
authorized  to  exempt  for  a  term  not  exceeding  ten  years,  manufactur- 
ing establishments  and  hotels  for  not  exceeding  five  years.  As  to  local 
exemptions,  see  Caverly  Gould  Co.  y.  Springfield,  83  Vermont  396. 
Automobiles  are  exempted  from  taxation  and  motor  boats  (not  valued 
in  excess  of  $100).  Deposits  in  bank  whereon  interest  in  excess  of 
2  per  cent  is  paid  are  exempt.  Homesteads  may  be  exempted  for  a 
term  of  five  years  by  vote  of  the  town.  Notes  secured  by  real  estate 
mortgages  bearing  5  per  cent  interest  or  under  are  exempt  when  loan 
is  made  in  Vermont  and  the  real  estate  is  there  situated.  Provision 
is  made   for  off-set   of  debts  up  to   $1,000. 

INHEIRITANCB  TAX— An  inheritance  tax  of  5  per  cent  is  levied 
upon  all  property,  and  interest  thereon  within  the  jurisdiction  of  the 
State,  whether  tangible  or  intangible,  where  the  devise  is  to  any 
person  other  than  father,  mother,  husband,  child  or  adopted  child, 
son-in-law  or  daughter-in-law,  or  for  charitable,  religious  or  educa- 
tional Institutions,  property  of  which  is  exempt  from  this  tax. 

Vermont  has  a  tax  of  5  per  cent  on  all  property  found  within  the 
State,  whether  of  resident  or  non-resident,  but  allows  a  non-resident 


926  STATE  TAX.\TION    SYSTEM — ^VIRGINIA. 

to  deduct  amount  of  taxes  paid  in  the  State  of  the  inheritor's  domicile 
to  the  amount  of  5  per  cent,  and  if  the  non-resident  has  paid  less  than 
5  per  cent  at  his  residence  he  will  be  required  to  pay  the  difference 
to  the  State  of  Vermont.  This  reciprocity  statute  excludes  the  Fed- 
eral  government. 

ASSESSMENT. — Real  estate  was  assessed  in  1914  and  is  assessable 
quadrennially  thereafter.  Personal  property  and  also  improvements 
on  or  additions  to  or  depreciations  on  real  estate  are  assessed  annu- 
ally on  April   1st. 

In  the  assessment  of  personal  property  the  taxpayer  is  allowed  an 
offset,  the  amount  of  which  is  determined  by  deducting  from  the 
amount  of  his  personal  property  exerhpted  by  law  the  amount  of  his 
indebtedness,  duly  itemized,  owing  by  him  on  the  first  day^  of  April 
whereon  no  interest  or  a  rate  less  than  6  per  cent  is  payable;  50  per 
cent  of  this  remainder,  if  any,  is  deducted  from  his  taxable  personal 
estate,  provided  that  such  deduction  is  in  no  case  to  exceed  $1,000. 

COLLECTIONS. — Taxes  are  paid  in  the  month  of  February  to  the 
Commissioner  of  State  Taxes. 

Taxes  are  payable  on  or  before  September  15th,  or  semi-annually 
on  or  before  the  15th  day  of  March  and  September;  the  semi-annual 
period  terminating  the  last  day  of  June  or  December  next  preceding. 

Lands  are  sold  for  taxes  by  the  first  constable  of  the  town,  and 
lists  are  filed  with  him  before  the  first  day  of  August;  and  lands  are 
advertised  for  sale  on  the  15th  of  August.  Lands  may  be  redeemed 
within  one  year  from  date  of  sale  by  paying  such  costs  and  12  per  cent 
interest. 

(For  exposition  of  the  Vermont  system  for  schools,  see  "Woodruff's 
New  Book  of  Vermont  Taxes  and  Partial  Payments,  Ginn  &  Co., 
Boston.) 

VIRGINIA 

(Constitution  of  1902.) 

Bill  of  Rights,  Sec.  11.  No  person  shall  be  deprived  of  his  property 
without  due  process  of  law. 

Art.  II,  Sec.  21.  (The  payment  of  State  poll  taxes  at  least  six 
months  prior  to  election  during  three  years  preceding  the  offer  to 
vote  is  made  a  prerequisite  of  the  right  to  vote  after  January  1,  1904.) 

Art.  Ill,  Sec.  50.  Every  law  imposing,  continuing  or  reviving  a 
tax  shall  specifically  state  such  tax  and  no  law  shall  be  construed  as 
so  stating  such  tax,  which  requires  reference  to  any  other  law  or  to 
any    other    tax. 

Art.   VIII,   Sec.   128.     In   cities   and   towns  the   assessment    of   real 


STATE  TAXATION    SYSTEM — VIRGINIA.  927 

estate  and  personal  property  for  the  purposes  of  municipal  taxation 
shall  be  the  same  as  the  assessment  thereof  for  the  purposes  of  State 
taxation,  whenever  there  shall  be  a  State  assessment  for  such  property. 
Art.  XII,  Sec.  157.  (Annual  registration  fees  are  required  of  every 
domestic  corporation  and  foreign  corporation  doing  business  in  the 
State,  of  not  less  than  $5  nor  more  than  $25,  which  shall  be  irrespec- 
tive of  any  specific  license  or  other  tax  imposed  by  law  upon  such 
company  for  the  privilege  of  carrying  on  business  in  the  State,  or 
upon  its  franchise  or  property;  provision  to  be  made  therefor  by 
general   laws.) 

Art.  XIII,  Sec.  168.  All  property,  except  as  hereinafter  provided, 
shall  be  taxed;  all  taxes,  whether  State,  local  or  municipal,  shall  be 
uniform  upon  the  same  class  of  subjects  within  the  territorial  limits 
of  the  authority  levying  the  tax,  and  shall  be  levied  and  collected 
under  general  laws. 

See.  169.  Except  as  hereinafter  provided,  all  assessments  of  real 
estate  and  tangible  personal  property  shall  be  at  their  fair  market 
value,  to  be  ascertained  as  prescribed  by  law.  The  General  Assembly 
may  allow  a  lower  rate  of  taxation  to  be  imposed  for  a  period  of  years 
by  a  city  or  town  upon  land  added  to  its  corporate  limits,  than  is 
imposed  on  similar  property  within  its  limits  at  the  time  such  land  is 
added.  Nothing  in  this  Constitution  shall  prevent  the  General  As- 
sembly, after  the  first  day  of  January,  nineteen  hundred  and  thirteen, 
from  segregating  for  the  purposes  of  taxation,  the  several  kinds  or 
classes  of  property,  so  as  to  specify  and  determine  upon  what  subjects. 
State  taxes,  and  upon  what  subjects,  local  taxes  may  be  levied. 

Sec.  170.  The  General  Assembly  may  levy  a  tax  on  incomes  in  ex- 
cess of  $600  per  annum;  may  levy  a  license  tax  upon  any  business 
which  cannot  be  reached  by  the  ad  valorem  system;  and  may  impose 
State  franchise  taxes,  and  in  imposing  a  franchise  tax,  may,  in  its  dis- 
cretion, make  the  same  in  lieu  of  taxes  upon  other  property,  in  whole 
or  in  part,  of  a  transportation,  industrial,  or  commercial  corporation. 
Whenever  a  franchise  tax  shall  be  imposed  upon  a  corporation  doing 
business  in  this  State  or  whenever  all  the  capital,  however  invested,  of  a 
corporation  chartered  under  the  laws  of  this  State,  shall  be  taxed, 
the  shares  of  stock  issued  by  any  such  corporation  shall  not  be  further 
taxed.  No  city  or  town  shall  impose  any  tax  or  assessment  upon 
abutting  land  owners  for  street  or  other  public  local  improvements, 
except  for  making  and  improving  the  walkways  upon  then  existing 
streets,  and  improving  and  paving  then  existing  alleys,  and  for  either 
the  construction,  or  for  the  use  of  sewers;  and  the  same  when  im- 
posed, shall  not  be  in  excess  of  the  peculiar  benefits  resulting  there- 
from to  such  abutting  land  owners.  Except  in  cities  and  towns,  no 
such  taxes  or  assessments  for  local  public  improvements  shall  be  im- 
posed  on   abutting  land   owners. 

Sec.  171.  The  General  Assembly  shall  provide  for  a  reassessment  of 
real  estate.  In  the  year  nineteen  hundred  and' five,  and  every  fifth  year 
thereafter,  except  that  of  railway  and  canal  corporations,  which, 
after  January  the  first,  nineteen  hundred  and  thirteen,  may  be  as- 
sessed as  the  General  Assembly  may  provide. 


928  STATE   TAXATION    SYSTEM — VIRGINIA. 

Sec.  172.  The  General  Assembly  shall  provide  for  the  special  and 
separate  assessment  of  all  coal  and  other  mineral  land;  but  until 
such  special  assessment  is  made  such  land  shall  be  assessed  under 
existing  laws. 

Sec.  173.  (Provides  for  the  levy  by  the  General  Assembly  of  a  State 
capitation  tax  not  exceeding  $1.50  per  annum  on  every  male  resident 
of  the  State  of  not  less  than  21  years  of  age,  except  those  pensioned 
by  the  State  for  military  services,  $1  thereof  for  the  schools  and  the 
residue  to  be  applied  for  county  or  State  purposes;  but  this  capitation 
tax  is  not  to  be  collected  from  any  exempt  property.  An  additional 
capitation  tax  may  be  authorized  by  the  General  Assembly  for  any 
county  or  city,  not  exceeding  $1  per  annum  on  every  resident,  to  be 
applied  in  aid  of  public  schools,  or  for  county  or  State  purposes.) 

Sec.  174.  After  this  Constitution  shall  be  in  force,  no  statute  of 
limitation  shall  run  against  any  claim  of  the  State  for  taxes  upon  any 
property;  nor  shall  the  failure  to  assess  property  for  taxation  defeat 
a  subsequent  assessment  for  and  collection  of  taxes  for  any  preceding 
year  or  years,  unless  such  property  shall  have  passed  to  a  bona  fide 
purchaser  for  value,  without  notice;  in  which  latter  case  the  property 
shall  be  assessed  for  taxation  against  such  purchaser  from  the  date 
of  his  purchase. 

Sec.  176.  (The  roadbed,  real  estate,  rolling  stock  and  all  personal 
property  of  railway  corporations,  the  canal  bed  and  other  real  estate 
of  canal  companies,  is  to  be  valued  by  the  State  Corporation  Commis- 
sion at  such  rates  of  taxation  as  may  be  imposed  by  them  respectively, 
for  State,  county,  city,  town  or  district  purposes,  upon  the  real  estate 
and  personal  property  of  natural  persons.  But  no  income  tax  is  to  be 
levied  upon  such  corporations.) 

Sees.  177  and  178.  (Provide  for  an  annual  State  franchise  tax 
upon  railway  and  canal  corporations,  including  those  exempt  from 
taxation  as  to  their  w^orks,  visible  property  or  profits,  equal  to  1  per 
cent  upon  gross  receipts  for  the  privilege  of  exercising  franchises  in 
the  State,  these  gross  receipts  in  the  case  of  interstate  lines  being 
computed  upon  the  mileage  basis,  a  reasonable  deduction  being  made 
"because  of  any  excess  of  value  of  terminal  facilities  or  other  similar 
advantages  in  other  States  over  similar  facilities  or  advantages  in  this 
State."  This  franchise  tax  with  the  property  taxed  in  Section  176 
being  in  lieu  of  all  other  taxes  or  licenses  upon  the  corporate  fran- 
chises or  shares  of  stock  in  property,  but  does  not  exempt  from  the 
annual  corporation  fee  under  Section  157,  nor  from  assessments  for 
street  and  other  public  local  improvements,  nor  does  it  affect  con- 
tracts made  with  municipalities  for  compensation  for  the  use  of  streets 
or  alleys.) 

(Under  Sections  179  and  180  provision  is  made  for  annual  reports  of 
property  subject  to  taxation  and  for  the  collection  of  taxes  and  a 
special  procedure  is  authorized  for  the  judicial  determination  of  com- 
plaints  of  tax  assessments.) 

Sec.  182.  Until  otherwise  prescribed  by  law,  the  shares  of  stock 
issued  by  trust  or  security  companies  chartered  by  this  State,  and  by 
incorporated  banks,  shall  be  taxed  in  the  same  manner  in  which  the 


STATE  TAXATION   SYSTEM — ^VIRGINIA.  929 

shares  of  stock  issued  by  incorporated  banks  were  taxed,  by  the  law 
in  force  January  the  first,  nineteen  hundred  and  two;  but  from  the 
total  assessed  value  the  shares  of  stock  of  any  such  company  or  bank, 
there  shall  be  deducted  the  assessed  value  of  its  real  estate  otherwise 
taxed  in  this  State,  and  the  value  of  each  share  of  stock  shall  be  its 
proportion  of  the  remainder. 

Sec.  183.  (This  section  contains  a  list  of  property  which,  and  which 
only,  shall  be  exempt  from  taxation.  State  and  local,  but  it  is  pro- 
vided that  the  General  Assembly  may  hereafter  tax  any  of  the  prop- 
erty exempted  except  property  directly  or  indirectly  owned  by  the 
State  or  its  subdivisions  and  obligations  issued  by  the  State  since 
February  14,  1882,  or  hereafter  exempted  by  law.  The  exempt  prop- 
erty, subject,  however,  to  be  taxed  by  the  General  Assembly,  includes 
buildings  and  furniture  and  furnishings  used  for  religious  worship 
or  for  the  residence  of  the  minister;  private  and  public  burying 
grounds;  property  held  for  educational  or  charitable  purposes,  when 
not  owned  by  corporations  having  shares  of  stock,  and  permanent 
endowment  funds  of  such  educational  or  charitable  institutions.  "But 
the  exemption  mentioned  in  this  sub-section  shall  not  apply  to  any 
industrial  school,  individual  or  corporate,  not  thB  property  of  the 
State,  which  does  work  for  compensation,  or  manufactures  and  sells 
articles,  in  the  community  in  which  such  school  is  located;  provided, 
that  nothing  herein  contained  shall  restrict  any  such  school  from 
doing  work  for  or  selling  its  own  products  or  any  other  article  to  any 
of  its  students  or  employees."  It  is  also  provided  that  no  inheritance 
tax  shall  be  charged  directly  or  indirectly  against  any  legacy,  when 
devised  to  any  institution  whose  property  is  exempt  from  taxation. 
Where  buildings  or  lots  are  leased  and  made  the  source  of  revenue, 
they  shall  be  subject  to  local  taxation.  "Obligations  issued  by  coun- 
ties, cities,  or  towns  may  be  exempted  by  the  authorities  of  such  local- 
ities from  local  taxation.") 

Sec.  188.  No  other  or  greater  amount  of  tax  or  revenue  shall,  at  any 
time,  be  levied  than  may  be  required  for  the  necessary  expenses  of  the 
government,  or  to  pay  the  indebtedness  of  the  State. 

Sec.  189.  (Limits  the  rate  of  taxation  on  all  lands  and  improve- 
ments and  on  all  tangible  personal  property  not  exempt  from  taxation 
by  the  provisiouns  of  this  article.  A  special  tax  for  pensions  is  also 
authorized  for  a  limited  time.) 


ADMINISTRATION.— The  State  Corporation  Commission,  now 
known  as  the  State  Tax  Board  has  the  powers  declared  in  the  Consti- 
tution, supra,  in  the  assessment  of  the  value  of  properties  of  railroad 
and  canal  companies.  The  Circuit  Court  of  the  City  of  Richmond  is 
given  jurisdiction  to  hear  and  determine  any  complaint  made  by  any 
corporation  as  to  its  assessment. 

The  general  property  tax  applies  to  nearly  all  classes  of  property, 


930  STATE  TAXATION    SYSTEM VIRGINIA. 

but  corporations  are  subject  to  supplemental  taxation  as  hereinafter 
stated. 

Railroad  and  canal  companies  are  not  only  subject  to  the  general 
property  tax  for  which  they  are  assessed  by  the  State  Board,  but  also 
to  what  is  termed  a  "charter  tax"  based  on  the  authorized  capital 
stock  and  to  a  gross  receipt  or  franchise  tax  of  1  per  cent  upon  the 
gross  transportation  receipts.  (See  Constitution,  Sees.  177,  178,  Code 
of  1904,  p.  2205.)  The  gross  receipts  of  interstate  transportation  com- 
panies are  ascertained  by  taking  the  average  gross  transportation 
receipts  per  mile  over  the  whole  extent  within  and  without  the  State, 
and  then  taking  the  proportion  due  to  the  mileage  within  the  State, 
and  due  regard  being  made  to  any  excess  of  value  of  the  terminal 
facilities  or  other  similar  advantages  of  other  States  over  those  in 
Virginia.     (Laws  of  1914,  Ch.  135.) 

The  rolling  stock  of  foreign  corporations  doing  business  in  the  State 
is  assessed  on  the  average  amount  of  property  habitually  used  in  the 
State. 

PUBLIC  UTILITY  COMPANIES.— This  class  of  corporations,  in- 
cluding domestic  and  foreign  telegraph  and  telephone  companies  and 
express  companies,  car  companies,  steamboat  companies,  water,  heat, 
light  and  power  companies,  are  assessed  by  the  State  Board  for  State 
purposes  and  locally  for  local  purposes  under  the  general  property 
tax.  In  addition  domestic  telephone  companies  with  an  authorized 
capital  stock  of  more  than  $5,000  and  all  domestic  telegraph  com- 
panies pay  the  State  for  State  purposes  the  capital  stock  or  annual 
State  franchise  tax.  (Laws  of  1910,  Ch.  58.)  And  ell  telegraph  and 
telephone  companies  pay  the  annual  charter  tax  or  State  registration 
fee.  (Laws  of  1908,  Ch.  227.)  And  certain  State  gross  receipts  and 
mileage  taxes  which  are  determined  by  the  State  Board.  Express 
companies  also  pay  the  general  property  tax  with  the  annual  charter 
tax  and  mileage  tax  and  the  same  is  the  case  with  domestic  and  for- 
eign passenger  car  companies. 

BUSINESS  CORPORATIONS.— Domestic  and  foreign  manufactur- 
ing, mercantile,  mining  and  miscellaneous  companies  pay  the  general 
property  tax  assessed  and  collected  locally  for  State  and  local  pur- 
poses on  real  estate  and  capital,  except  that  in  lieu  of  the  State  gen- 
eral property  tax  on  capital  of  mercantile  companies  there  is  im- 
posed an  annual  State  license  tax  for  State  purposes  based  on  the 
amount  of  annual  purchases.  In  addition  the  home  companies  pay 
to  the  State   for   State  purposes  the  capital   stock   or   annual   State 


STATE  TAXATION    SYSTEM — VIRGINIA.  931 

franchise  tax,  and  both  domestic  and  foreign  companies  pay  to  the 
State  for  State  purposes  the  annual  charter  tax  or  State  registration 
fee.     (Code,  Sec.  485,  Laws  of  1908,  Ch.  213,  Laws  of  1910,  Ch.  314.) 

FOREIGN  CORPORATIONS.— Foreign  corporations  are  taxed  in 
practically  the  same  manner  as  similar  domestic  corporations,  except 
that  foreign  corporations  are  not  required  to  pay  the  capital  stock 
or  annual  State  franchise  tax  which  is  imposed  on  certain  domestic 
corporations.     (Laws  of  1910,  Ch.  58.) 

MINING  PROPERTIES.— Mineral  lands  and  the  fixtures  and  ma- 
chinery thereon  are  separately  assessed  by  the  Commissioners  of 
Revenue,  who  may  be  assisted  by  special  assessors  employed  by  the 
State  Tax  Board.  Mineral  lands  developed  and  undeveloped  are  sep- 
arately shown  on  the  assessment  books.  Standing  merchantable  tim- 
ber is  also  separately  assessed. 

BANKS. — See  Constitution,   Sec.   182,   supra. 

PLANTED  OYSTERS.— Planted  oysters  are  assessed  as  personal 
property  by  the  inspectors  of  oysters  annually  on  the  first  day  of 
October. 

LICENSE  TAXES. — There  is  an  extensive  system  of  State  license 
taxes  which  supplement  the  general  property  tax  as  to  individuals  as 
well  as  corporations.  A  large  amount  of  license  taxes  upon  occupations 
and  transactions  is  imposed  for  State  purposes, 

POLL  TAX. — There  is  a  capitation  tax  of  $1.50  for  every  male  in- 
habitant over  twenty-one  years  of  age, 

E^XEIMPTIONS.- The  exemptions  from  taxation  as  fixed  by  the 
Constitution  are  public  property,  and,  unless  specially  taxed  by  the 
General  Assembly,  places  of  worship,  private  and  public  cemeteries, 
colleges  and  schools;  and  it  is  also  provided  that  no  inheritance  tax 
shall  be  charged  directly  or  indirectly  against  any  legacy  or  devise 
for  the  benefit  of  any  institution  whose  property  is  exempt  from  taxa- 
tion. 

Obligations  issued  by  counties,  cities  or  towns  may  be  exempted  by 
the   authorities   of  such   localities   from   taxation. 

Shares  of  stock  in  companies,  all  of  whose  capital  is  taxed  by  the 
State,  and  the  shares  of  companies  who  pay  a  franchise  tax  in  the 
State  are  exempt  from  taxation. 


932  STATE  TAXATION    SYSTEM — ^VIRGINIA. 

INHERITANCE  TAX.— By  Act  of  1916  (Ch.  484)  a  direct  and  col- 
lateral graduated  inheritance  tax  is  imposed  in  lieu  of  ttie  former 
collateral  inheritance  tax.  Direct  inheritances  in  excess  of  $15,000 
are  taxed,  and  the  tax  on  collateral  inheritances  in  excess  of  $50,000 
is  increased.     (See  also  Ch.  81,  Laws  of  1916.) 

All  property  thus  transferred  within  the  State,  whether  of  residents 
or  non-residents,  is  taxed. 

INCOME  TAX. — An  income  tax  for  State  purposes  is  imposed  on  net 
incomes  in  excess  of  $2,000  at  a  rate  of  1  per  cent,  subject  to  specified  de- 
ductions. By  Act  of  1916  this  individual  income  tax  was  extended  to  cor- 
porations, except  public  service  corporations  paying  the  State  franchise 
tax  upon  receipts  and  insurance  companies  paying  a  State  license  tax 
upon  both  premiums,  and  except  State  and  national  banks  and  trust  com- 
panies engaged  in  a  banking  business  ( Ch.  472 ) .  By  supplementary  act  it 
was  provided  that  no  income  tax  or  ad  valorem  taxes,  State  or  local, 
shall  be  imposed  upon  the  stocks,  bonds,  investments,  capital,  or  other 
tangible  property  owned  by  domestic  corporations  which  had  no  part  of 
their  business  within  the  State. 

CLASSIFICATION.— By  Act  of  1916  (Ch.  382,  Laws  of  1916)  changes 
were  made  in  the  classification  of  intangible  property  for  the  purpose 
of  taxation,  defining  capital,  and  gross,  and  net  assets,  as  the  terms 
are  used  in  the  act. 

ASSESSMENTS. — Once  in  every  five  years  real  estate  is  assessed 
for  taxation  by  commissioners  appointed  according  to  law.  These 
commissioners  report  the  assessments  in  triplicate  to  the  Clerk  of  the 
Circuit  Court,  to  the  Auditor  of  Public  Accounts,  and  to  the  Com- 
missioner  of  the   Revenue   of   the   County. 

County  and  municipal  taxes  are  based  upon  the  same  assessment 
as  that  for  State  purposes,  but  counties  and  municipalities  do  not 
share  in  the  inheritance  tax,  or  corporation  taxes,  and  the  State  li- 
censes, or  the  income  tax.  One-third  of  the  State  poll  tax  is  paid  into 
the  City  Treasury  when  collected,  and  fifty  cents  thereof  is  paid  into 
the  county  treasury  where  collected. 

COLLECTIONS.— From  July  1st  to  December  all  taxes  are  payable. 
Delinquent  taxes  are  penalized  5  per  cent  of  the  amount  of  the  assess- 
ment. Taxes  are  a  lien  on  all  real  estate.  The  State  also  has  a  lien 
on  all  land  derived  from  real  estate  for  the  taxes  of  the  current  year. 
Lands  which  become  delinquent  for  non-payment  of  taxes  may  be  sold 
on  the  subsequent  15th  day  of  December.     Reference  is  particularly 


STATE  TAXATION    SYSTEM — ^WASHINGTON.  933 

made  to  the  provisions  of  the  State  Constitution  and  statutes,  and  for 
further  information  application  should  be  made  to  the  State 
Board. 

WASHINGTON 

Art.  VII,  Sec.  2.  The  legislature  shall  provide  by  law  a  uniform 
and  equal  rate  of  assessment  and  taxation  on  all  property  in  the  State, 
according  to  its  value  in  money,  and  shall  prescribe  such  regulations 
by  general  law  as  shall  secure  a  just  valuation  for  taxation  of  all 
property,  so  that  every  person  and  corporation  shall  pay  a  tax  in  pro- 
portion to  the  value  of  his,  her  or  its  property:  Provided,  that  a 
deduction  of  debts  from  credits  may  be  authorized;  Provided,  further, 
that  the  property  of  the  United  States,  and  of  the  State,  counties,  school 
districts  and  other  municipal  corporations,  and  such  other  property 
as  the  legislature  may  by  general  laws  provide,  shall  be  exempt  from 
,  taxation. 

By  amendment  of  1890,  the  legislature  was  also  empowered  to 
exempt  personal  property  of  each  head  of  a  family  to  the  amount 
of   $300. 

Sec.  4.    (The  same  as  La.  Const.  1898,  Art.  228.) 

Sec.  5.    (The  same  as  Iowa  Const.  1857,  Art.  VII,,  Sec.  7.) 

Sec.  9.  The  legislature  may  vest  the  corporate  authorities  of  cities, 
towns  and  villages  with  power  to  make  local  improvements  by  special 
assessment,  or  by  special  taxation  of  property  benefited.  For  all  cor- 
porate purposes  all  municipal  corporations  may  be  vested  with  author- 
ity to  assess  and  collect  taxes,  and  such  taxes  shall  be  uniform  in 
respect  to  persons  and  property  within  the  jurisdiction  of  the  body 
levying  the  same. 

In  the  Organic  Act  organizing  the  territory  enacted  by  Congress 
in  1853,  it  is  provided: 

"And  all  taxes  shall  be  equal  and  uniform  and  no  distinction  shall 
be  made  in  the  assessments  between  the  different  kinds  of  property, 
but  the  assessment  shall  be  made  according  to  the  value  thereof." 


(An  amendment  allowing  classification  of  property  for  taxation 
was  defeated  in  1908.) 

The  question  of  calling  a  constitutional  convention  for  framing  a 
new  Constitution  is  to  be  voted  on  at  the  general  election  of  1918. 

ADMINISTRATION.— The  duties  formerly  imposed  upon  the  State 
Tax  Commission  are  by  Act  of  1917  vested  in  a  State  Tax  Commis- 
sioner. The  State  Board  of  Equalization  consists  of  the  State  Auditor, 
the  Commissioner  of  Public  Lands  and  the  State  Tax  Commissioner, 
who  is  the  secretary  of  the  board.  Local  assessors  are  elected  and  are 
eligible  for  more  than  two  successive  terms. 


934  STATE  TAXATION    SYSTEM — WASHINGTON. 

The  Board  of  Equalization  classifies  and  equalizes  the  assessments 
of  the  State. 

RAILROADS. — The  "operating  property"  of  railroads,  including 
franchise  value  under  the  unit  rule,  is  assessed  by  the  State  Com- 
missioner with  a  right  to  a  further  hearing  before  the  State  Board 
of  Equalization.  This  assessed  value  is  apportioned  to  the  counties 
according  to  mileage.  The  local  property  of  such  railroad  companies 
is  assessed  by  the  local  assessor.  Railroads  are  subject  to  the  local 
franchise  tax,  infra. 

INHERITANCE  TAX. — The  inheritance  tax  applies  to  all  property 
within  the  jurisdiction  of  the  State,  whether  of  residents  or  non- 
residents, exempting  $10,000  in  case  of  parent,  wife,  or  husband,  or 
descendant,  natural  or  adopted,  and  with  rates  graded  from  1  to  12 
per  cent,  according  to  degree  and  amount  of  inheritance.  Changes 
were  made  in  rates  by  Act  of  1917.  The  tax  applies  to  all  property, 
whether  tangible  or  intangible. 

Where  property  belongs  to  a  foreign  estate  the  tax  is  assessed  on 
the  market  value  remaining  after  payment  of  debts  chargeable  to  the 
estate.  On  a  proper  showing  being  made,  such  proportion  of  indebted- 
ness may  be  deducted  as  the  value  of  the  property  in  the  State  bears 
to  the  entire  estate.     (See  Laws  of  1911.) 

CORPORATIONS.— Corporations,  in  addition  to  tax  on  property, 
pay  an  annual  license  tax  to  the  Secretary  of  State  of  fifteen  dollars. 

The  operating  value  in  the  State  of  the  property  of  interstate  com- 
panies is  assessed  by  the  State  Tax  Commissioner  through  apportion- 
ing the  State's  part  of  the  entire  mileage;  and  this  State  value  thus 
ascertained  is  apportioned  to  the  counties  wherein  the  lines  are  lo- 
cated. Private  car  companies  pay  a  privilege  tax  to  the  State  of  7 
per  cent  of  the  gross  receipts  in  the  State  as  fixed  by  the  State  Tax 
Commissioner,  and  express  companies  5  per  cent.  This  is  in  addition 
to  the  tax  on  tangible  property. 

BANKS. — Bank  stock  is  assessed  where  the  bank  does  business  less 
the  assessed  value  of  the  real  estate  of  the  bank.  Private  banks  are 
assessed   on   the  general  average   of  their  borrowing  capital. 

EXEMPTIONS. — Exemptions,  in  addition  to  public  property,  also 
include  mortgages,  notes.  State,  county  and  city  bonds,  cemeteries, 
churches  whose  seats  are  free,  property  of  Young  Men's  Christian 
Association,  free  public  libraries,  schools,  and  colleges  with  real  estate 
not  over  ten  acres  which  are  open  to  all  persons  on  equal  terms;  per- 


STATE  TAX.VTION    SYSTEM — WEST   VIRGINIA.  935 

sonal  property  of  heads  of  families  up  to  $300;  fire  companies  and 
equipment,  fruit  trees  not  nursery  stock  and  not  forest  trees  artificially 
grown;  ships,  vessels  and  boats  in  actual  construction;  orphanages, 
reform  institutions,  homes  for  the  aged  and  infirm,  and  hospitals. 

ASSESSMENTS. — Real  property  is  assessed  biennially,  subject, 
however,  to  readjustment  as  circumstances  may  require;  and  personal 
property,  annually.  By  Act  of  1913,  the  assessed  value  of  all  taxable 
property  was  fixed  as  not  to  exceed  50  per  cent  of  its  true  value.  As 
credits  are  not  taxed  there  is  now  no  deduction  allowed  for  indebted- 
ness owing.  Money  is  held  not  to  be  exempt.  See  State  ex  rel.  Wolfe 
V.  Parmenter,  50  Wash.  164.  The  exemption  of  vessels  was  not  sus- 
tained by  the  Supreme  Court.  See  Pacific  Cold  Storage  Co.  v.  Pierce  Co., 
85  Wash.   426;    also  Ridpath  v.   Spokane  Co.,   23  Wash.   426. 

POLL  TAXES.— There  is  no  State  poll  tax,  but  a  county  poll  tax  of 
two  dollars  on  males  between  21  and  50,  for  road  purposes.  Cities  may 
also  levy  an  annual  street  poll  tax,  but  not  exceeding  two  dollars,  pay- 
able in  labor. 

COUNTIES. — Counties  levy  no  inheritance  or  special  corporation 
taxes.  The  property  included  in  the  assessment  and  equalization  is 
the  same  for  county  taxes  as  for  the  State. 

COLLECTIONS. — Taxes  are  payable  on  or  before  March  15th,  the 
collection  beginning  on  the  first  Monday  in  Fehruary.  Twelve  months 
after  the  real  estate  taxes  are  due  the  certificate  of  delinquency  bear- 
ing 12  per  cent  interest  may  be  issued;  and  after  three  years  such 
certificate  may  be  foreclosed  by  plenary  judicial  proceeding.  If  such 
certificate  of  delinquency  is  not  issued,  the  county  treasurer  may, 
after  five  years,  issue  a  certificate  of  delinquency  to  the  county  which 
may  then  foreclose  by  such  proceeding  in  court. 

Taxes  are  a  lien  against  the  property,  but  not  against  the  owner. 
Real  estate  may  be  redeemed  before  issue  of  tax  deed  on  judgment  in 
foreclosure.  (See  State  Tax  System  of  Washington  by  Professor 
Vandeveer  Custis,  published  by  University  of  Washington,  Seattle, 
1917.) 

WEST  VIRGINIA 

(Constitution.) 
Art.  X,  Sec.  1.  Taxation  shall  be  equal  and  uniform  throughout  the 
State,  and  all  property,  both  real  and  personal,  shall  be  taxed  in  pro- 
portion to  its  value,  to  be  ascertained  as  directed  by  law.  No  one 
species  of  property  from  which  a  tax  may  be  collected  shall  be  taxed 
higher  than  any  other  species  of  property  of  equal  value;  but  property 


936  STATE  TAXATION   SYSTEM — WEST  VIRGINIA. 

used  for  educational,  literary,  scientific,  religious  or  charitable  pur- 
poses; all  cemeteries  and  public  property  may,  by  law,  be  exempted 
from  taxation.  The  legislature  shall  have  power  to  tax,  by  uniform 
and  equal  laws,  all  privileges  and  franchises  of  persons  and  corpora- 
tions. 

Sec.  2.  The  legislature  shall  levy  an  annual  capitation  tax  of  one 
dollar  upon  each  male  inhabitant  of  the  State  who  has  attained  the 
age  of  twenty-one  years,  which  shall  be  annually  appropriated  to  the 
support  of  free  schools.  Persons  afflicted  with  bodily  infirmity  may 
be  exempted  from  this  tax. 

Sec.  5.  The  power  of  taxation  of  the  legislature  shall  extend  to 
provisions  for  the  payment  of  the  State  debt  and  interest  thereon,  the 
support  of  free  schools,  the  payment  of  the  annual  estimated  expenses 
of  the  State;  but  whenever  any  deficiency  in  the  revenue  shall  exist 
in  any  year,  it  shall,  after  regular  session  thereof  held  after  the  de- 
ficiency occurs,  levy  a  tax  for  the  ensuing  year,  sufficient  with  other 
sources  of  income  to  meet  such  deficiency  as  well  as  the  estimated 
expenses  of  such  year. 

Sec.  9.  The  legislature  may,  by  law,  authorize  the  corporate  authori- 
ties of  cities,  towns  and  villages,  for  corporate  purposes,  to  assess 
and  collect  taxes;  but  such  taxes  shall  be  uniform,  with  respect  to 
persons  and  property  within  the  jurisdiction  of  the  authority  levying 
the  same. 


(Statutory  references  following  are  to  the  "West  Virginia  Code  anno- 
tated 1906.) 

ADMINISTRATION.— The  Board  of  Public  Works,  consisting  of 
certain  elected  State  officials,  assesses  the  operating  property  of  pub- 
lic service  corporations  and  apportion  such  assessments  to  the  coun- 
ties, and  also  equalizes  assessments  between  the  counties. 

The  State  Tax  Commissioner,  appointed  for  a  term  of  six  years, 
assesses' the  inheritance  tax,  tabulates  the  returns  submitted  by  public 
service  or  public  utility  corporations  to  the  Board  of  Public  Works 
and  their  assessments  when  required,  and  also  inspects  the  work 
of  local  tax  officials.  The  property  of  individuals  and  of  corporations 
other  than  those  assessed  by  the  Board  of  Public  Works  is  assessed 
by  the  local  assessors.  The  essential  features  of  the  taxing  system 
are  first,  the  application  of  the  general  property  tax  practically  to  all 
classes  of  property;  second,  the  assessment  of  public  service  corpora- 
tions by  the  Board  of  Public  Works  and  the  State  collection  of  the 
general  property  tax  from  such  corporations  for  both  State  and  local 
purposes. 

RAILROADS.— Railroads  pay  for  State  and  local  purposes  the  gen- 
eral property  tax  on  property  not  used  in  operation.  In  addition 
they   pay  also  to   the  State   for   State  purposes   the   capital   stock  or 


STATE   TAXATION   SYSTEM — WEST   VIRGINIA.  937 

annual  license  tax.  Code,  Sees.  1046-1048,  as  amended  by  Laws  of 
1909,  Chap.  68.  The  assessment  is  made  by  valuing  the  railroad  sys- 
tem as  a  unit  as  outlined  in  the  railroad -tax  cases,  92  U.  S.  608,  supra, 
and  ascertaining  the  proportion  of  the  aggregate  value  located  in 
the  State,  and  this  value  is  apportioned  among  the  various  counties 
through  which  the  road  operates.  See  Code,  Sec,  768,  as  amended  by 
Laws   of  1909. 

CAR  COMPANIES. — Domestic  and  foreign  car  and  pipe  line  com- 
panies and  domestic  express  companies  pay  the  general  property  tax, 
also  the  capital  stock  or  annual  license  tax,  and  the  foreign  express 
companies  pay  a  route  mileage  tax.  Assessment  is  made  in  the  same 
manner  as  that  of  railroads.  Car  line  companies  are  assessed  on  the 
value  of  the  average  of  cars  used  in  the  State. 

PUBLIC  UTILITIES.— Domestic,  foreign,  gas,  water  and  electric 
light  companies  pay  the  general  property  tax  on  property  used  in  oper- 
ation, including  franchise  value,  and  in  addition  pay  the  State  for 
State  purposes  the  annual  stock  or  annual  license  tax.  Code,  Sec. 
1046,  1048,  as  amended.  Laws  1909,  Chap.  68.  Assessment  of  the  oper- 
ating property  of  such  companies  is  made  by  the  Board  of  Public 
Works.     Sees.  772-778,  Laws  of  1913,  Chap  9. 

CORPORATIONS. — Corporations  are  classified  by  statute  as  resi- 
dent domestic  who  has  its  principal  place  of  business  or  chief  works 
in  the  State,  and  a  non-resident  corporation,  whose  principal  place  of 
business  or  chief  works  are  located  without  the  State. 

Domestic  and  foreign  corporations,  except  the  public  service  cor- 
porations, pay  locally  the  general  property  tax  for  State  and  local 
purposes.  Domestic  corporations  pay  in  addition  to  the  general  prop- 
erty tax  an  annual  license  tax  based  on  the  authorized  capital  stock. 
Resident  corporations  pay  an  annual  license  tax  which  varies  from 
$10  when  the  authorized  capital  stock  is  $5,000  or  less,  $170  when  the 
authorized  capital  is  $100,000,  with  $60  additional  for  each  million 
additional  capital  stock.  The  non-resident  corporations  pay  an  annual 
license  tax  which  varies  from  $15  when  the  authorized  capital  stock 
is  $10,000  or  less  to  $675  when  the  authorized  capital  stock  is  more 
than  $4,000,000,  but  $50  additional  tax  on  each  million  dollars  author- 
ized capital  stock  in  excess  of  $4,000,000.  See  Code,  Sec.  1048,  as 
amended.  Laws  of  1909,  Chap.  68. 

BANKS.— The  shares  of  stock  of  banks  and  financial  institutions 
are  assessed  at  their  location  to  the  several  holders.  The  verified 
debts  of  shareholders  may  be  deducted  from  their  assessments. 


938  STATE  TAXATION    SYSTEM — WEST    VIRGINIA. 

FOREIGN  CORPORATIONS.— Foreign  corporations  except  express, 
telegraph  and  telephone  companies  owning  lines  in  the  State  pay  a 
license  tax  based  on  the  proportion  of  the  capital  stock  owned  or  used 
in  the  State.  If  the  assessed  value  of  the  property  amounts  to  $5000 
or  more  the  rates  prescribed  for  resident  corporations  apply;  but  if 
the  assessed  value  of  the  property  in  the  State  amounts  to  less  than 
$5000,  the  rates  prescribed  for  non-resident  corporations  apply.  In 
any  event  the  corporation  must  pay  an  annual  license  tax  of  not  less 
than  $100. 

LICENSES. — Domestic  and  foreign  manufacturing,  mercantile,  min- 
ing and  miscellaneous  corporations  pay  locally  the  general  property 
tax,  and  in  addition  pay  the  State  for  State  purposes  the  capital  stock 
or  annual  license  tax. 

Domestic  and  foreign  hydro-electric  corporations  pay  in  addition 
to  the  general  property  tax  the  capital  stock  or  annual  license  tax  and 
companies  not  selling  power  pay  a  license  tax  of  1/12  of  1  per  cent  per 
month  upon  their  authorized  capital.  The  total  amount  paid  per  an- 
num cannot  be  less  than  $500  nor  more  than  $5000.  See  Code,  Sec. 
760,  761,  1041,  1048.  as  amended,  laws  of  1909. 

Toll  and  bridge  companies  are  assessed  locally  as  realty  and  ten 
times  the  annual  rental  value  and  in  addition  pay  the  State  for  State 
purposes  the  capital  stock  or  annual  license  tax.     Code,  Sec.  760. 

SPECIAL,  LAND  TAX. — There  is  a  special  land  tax  of  5  cents  on 
each  acre  of  land  where  corporations  own  more  than  10,000  acres  of 
land.     See  Code,  Sec.  1045. 

INHERITANCE  TAX.— There  is  a  collateral  inheritance  tax  reg- 
ulated by  the  degree  of  sanguinity  of  the  inheritor  to  the  decedent. 
This  relates  to  all  property  passing  by  inheritance  in  the  State  of 
West  Virginia  regardless  of  whether  or  not  the  decedent  was  a  citizen 
or  resident  of  said  State.  The  State  Tax  Commissioner  has  general 
supervision  of  assessment  and  collection  of  the  inheritance  tax. 

COLLECTIONS. — All  taxes  are  assessed  on  the  first  day  of  April. 
Return  of  the  value  of  property  is  made  to  the  assessor  who  has  the 
power  to  finally  fix  the  value  of  such  property  for  assessment.  All 
taxes  are  payable  to  the  sheriff  on  or  before  the  30th  day  of  Novem- 
ber of  each  year  such  taxes  are  levied.  10  per  cent  per  annum  is  pay- 
able after  the  first  day  of  January  ensuing  on  any  delinquent  taxes. 
Taxes  are  a  lien  on  all  real  estate  from  the  first  of  April  together  with 
interest  at  the  rate  of  6  per  cent  per  annum  for  the  payment  of  said 
taxes.    It  seems  that  the  county  court  sits  as  a  court  of  equalization 


STATE  TAXATION    SYSTEM — WISCONSIN,  939 

and  certifies  the  tax  list  to  the  Auditor  of  the  State.  Property  may 
be  sold  for  taxes  by  order  of  the  Circuit  Court  or  county  court  after 
the  delinquent  list  has  been  published  on  the  second  Monday  of  De- 
cember after  such  term  of  the  proper  county  or  Circuit  Court.  Prop- 
erty sold  for  taxes  may  be  redeemed  within  a  year. 

WISCONSIN 

(The  Constitution.) 
Art.  VII,  Sec.  1,  as  amended  in  1908:  The  rule  of  taxation  shall  be 
uniform  and  taxes  shall  be  levied  upon  such  property  as  the  legisla- 
ture shall  prescribe.  Taxes  may  also  be  assessed  on  incomes,  privi- 
leges and  occupations,  which  taxes  may  be  graduated,  and  progressive 
and  reasonable  exemptions  may  be  provided. 


ADMINISTRATION.— A  State  Tax  Commission,  composed  of  three 
commissioners  appointed  by  the  Governor,  exercises  wide  supervisory 
powers  over  tax  administration.  As  a  Board  of  Assessment,  it  as- 
sesses the  property  of  railroads  and  public  utility  companies;  has 
the  supervision  and  direction  of  the  local  assessors  and  local  boards, 
and  values  the  entire  property  in  the  State  for  the  purpose  of  determ- 
ining the  proper  valuation.  The  State  Board  also  supervises  the  ad- 
ministration of  the  inheritance  tax  and  the  income  tax,  the  latter 
through  an  income  assessor  and  deputies  in  each  of  the  counties, 
appointed  through  the  State  Civil  Service  Commission.  The  commis- 
sion fixes  the  State  rate  on  general  property  and  recommends  legis- 
lation. 

RAILROADS. — Railroads  are  assessed  by  the  State  Tax  Commission 
at  the  average  rate  of  taxation  for  State  purposes  on  what  may  be 
termed  the  operative  property.  The  commission  in  valuing  railroads, 
considers  the  system  as  an  entirety  as  to  both  the  tangible  and  in- 
tangible elements  of  value,  and  the  proportion  of  the  value  of  inter- 
state properties  pertaining  to  the  State.  This  method  of  taxation 
was  a  substitute  for  the  tax  on  gross  earnings  which  was  formerly  in 
force.  This  "average  rate  of  taxation"  is  determined  by  dividing  the 
aggregate  taxes  levied  on  the  general  property  in  the  State  for  all 
purposes  by  the  true  cash  value  of  such  property  as  ascertained  by 
the  commission,  the  quotient  thus  obtained  constituting  the  average 
rate  of  taxation.  (Laws  of  1909,  Ch.  53.)  This  tax  is  in  lieu  of  other 
taxes  on  the  property  necessarily  used  in  the  operation  of  the  cor- 
porate franchise.  Terminals  and  warehouse  property  are  taxed 
locally. 


940  STATE  TAXATION   SYSTEM — WISCONSIN. 

PUBLIC  UTILITIES.— Substantially  the  same  rule  applies  to  the 
taxation  of  telegraph,  express  and  car  companies,  water,  gas,  elec- 
tricity, heat  and  power  companies,  all  being  assessed  by  the  State 
Board  at  the  average  rate  of  taxation. 

TELEPHONE  COMPANIES.— Telephone  companies  are  subject  to 
the  gross  earnings  tax  of  5  per  cent  on  tgross  receipts  equaling 
$500,000,  and  four  per  cent  when  such  receipts  equal  $300,000,  but  do 
not  exceed  $400,000.  An  additional  tax  equal  to  5  cents  on  any  tele- 
phone instrument  owned  and  operated  within  the  State  is  imposed  on 
telephone  companies  when  the  total  gross  income  tax  paid  by  any 
person  or  company  is  less  than  5  cents  on  each  telephone  instrument 
owned  or  operated  within  the  State.     (Laws  of  1911,  Ch.  651.) 

WATER  COMPANIES. — Dam  and  power  companies  organized  for 
driving  and  storing  logs  operated  in  the  navigable  waters  of  the 
State  pay  the  State  for  State  purposes  a  tax  of  2  per  cent  on  their 
gross  earnings,  less  deduction  for  taxes  on  such  property  as  is  used 
and  assessed  locally. 

STREET  RAILROADS. — Street  railroads  are  assessed  and  taxed  by 
the  State  at  the  average  rate  of  taxation  in  substantially  the  same 
manner  as  railroad  property.  Electric  light,  heat  and  power  com- 
panies are  taxed  in  the  same  manner.  The  tax  is  paid  to  the  State, 
15  per  cent  being  retained  for  State  purposes,  and  the  remaining 
eighty-five  per  cent  distributed  locally  in  proportion  to  the  gross  re- 
ceipts from  such  companies. 

VESSELS  ON  INTERNATIONAL  WATERS.— Vessels  owned  within 
the  State  employed  in  interstate  traflBc  in  the  navigation  of  interna- 
tional waters  are  subject,  at  the  option  of  the  owner,  either  to  the 
general  property  tax,  or  to  the  tax  of  3  cents  per  net  ton  of  registered 
tonnage,  in  lieu  of  other  taxes. 

INSURANCE  COMPANIES. — State  life  insurance  companies,  ex- 
cept fraternal  societies  and  purely  assessment  companies,  pay  an  an- 
nual license  fee  of  3  per  cent  upon  the  gross  income  from  the  State, 
except  upon  the  real  estate  upon  which  the  company  pays  taxes; 
while  foreign  life  insurance  companies  pay  an  annual  license  fee  of 
3  per  cent  of  gross  premiums,  except  on  real  estate.  Fire  and  marine 
insurance  companies,  other  than  domestic  unions,,  pay  an  annual 
license  fee  of  4  per  cent  of  the  amount  of  gross  premiums  received, 
less  reinsurance  and  cancellations.  Fire  insurance  companies  and 
agents  are  also  subject  to  special  charges  in  cities  and  villages  for 


STATE  TAXATION    SYSTEM WISCONSIN.  941 

the  maintenance  of  fire  departments.  Casualty  and  surety  insurance 
companies  pay  an  annual  license  fee  of  2  per  cent  upon  gross  pre- 
miums; also  licenses  in  cities  and  towns  for  insurance  agents.  All 
other  insurance  companies,  except  domestic  mutual  companies  pay 
an  annual  license  fee  of  $300.  As  to  annual  licenses  upon  occupations, 
both  State  and  local,  see  statutes. 

MORTGAGES.— A  mortgage  is  taxable  as  an  interest  in  the  real 
estate;  but  the  mortgagor  may  in  the  deed  elect  to  have  assessed  to 
him  together  with  his  own  interest  in  the  real  estate,  that  of  the 
mortgagee.  Most  mortgages  executed  in  recent  years  contain  this 
provision. 

BANKS. — Shares  of  stock  in  incorporated  banks  and  trust  com- 
panies are  taxed  as  personal  property  in  the  district  where  the  bank 
is  located.     The  real  estate  of  banks  is  taxed  as  other  real  estate. 

EXEMPTIONS.— Exemptions  include  public  property,  bonds  of  any 
county,  city  or  municipal  subdivision  of  the  State,  or  school  district, 
property  of  religious,  scientific,  literary  or  benevolent  association  used 
exclusively  therefor,  and  real  estate  not  exceeding  ten  acres,  lands 
reserved  as  lands  of  a  chartered  college  not  exceeding  forty  acres, 
and  parsonages  whether  occupied  by  the  pastor  permanently  or  rented 
for  his  benefit.  The  occasional  leasing  of  such  property  does  not 
render  it  liable  for  taxation.  Endowment  funds,  public  libraries, 
county  agricultural  societies,  pensions  of  the  United  States,  stock  in 
any  corporation  which  is  required  to  pay  taxes,  growing  crops,  private 
libraries  not  exceeding  in  value  $200;  bicycles,  sewing  machines,  fire- 
arms for  the  use  of  the  owner  not  exceeding  $25;  sundry  farm  pro- 
ducts and  provisions  and  fuel  provided  by  the  head  of  the  family  to 
sustain  its  members  for  six  months,  not  including  any  person  paying 
board.     (See  Laws  of  1911,  Ch.  305.) 

INHERITANCE  TAX.— An  inheritance  tax  is  imposed  on  transfers 
by  will  or  intestate  laws  on  property  within  the  State  or  within  its 
jurisdiction  when  the  deceased  are  residents  or  when  they  are  non- 
residents. 

Property  of  the  clear  value  of  $10,000  is  exempted  to  the  widow  and 
$2000  to  a  parent,  child,  husband  or  wife,  or  adopted  child,  and  those 
in  that  class  pay  one  per  cent  where  the  estate  does  not  exceed  $25,000, 
and  the  rates  are  graduated  from  one  per  cent  up  according  to  the  de- 
gree of  relationship  and  the  amount  of  the  inheritance. 

Property  transferred  to  municipal  corporations  and  the  State,  or  to 


942  STATE   TAXATION    SYSTEM — WISCONSIN. 

Wisconsin   corporations,   for   religious,   charitable   or   educational   pur- 
poses used  within  the  State,  are  exempted. 

The  inheritance  tax  is  applicable  to  securities  of  corporations  of 
the  State,  or  of  foreign  corporations  holding  property  within  the 
State,  transferred  by  non-resident  decedents,  but  is  proportioned  to 
the  value  of  the  property  of  the  corporation  in  this  State.  For  in- 
formation as  to  the  assessment  of  the  inheritance  tax,  address  the 
Public  Administrator  of  the  county  in  which  the  estate  is  pending. 

INCOME  TAX.— The  notable  feature  of  the  tax  system  of  Wiscon- 
sin is  the  income  tax,  which  is  a  substitute  in  great  measure  of  the 
taxation  of  intangible  securities,  and  was  held  valid  by  the  Supreme 
Court  of  Wisconsin.  (See  Income  Tax  Cases,  148  Wis.  456.)  This 
law  specifically  exempts  from  taxation:  (a)  money  and  credits;  (b) 
stocks  and  bonds  not  otherwise  specifically  provided  for;  (c)  per- 
sonal ornaments  and  jewelry  habitually  worn;  (d)  household  furnish- 
ings; (e)  machinery,  implements  and  tools  used  in  farm  or  garden 
and  (f)  gold  watch  carried  by  the  owner.  The  law  allows,  when  the 
income  tax  is  paid,  that  the  same  should  be  reduced  by  the  amount 
paid  on  the  personal  property  tax.  This  right  of  personal  property  off- 
set is  confined  to  the  person  or  concern  that  owns  the  personal  prop- 
erty assessed  and  is  chargeable  with  the  payment  of  both  taxes.  The 
effect  is  that  the  taxpayer  has  only  to  pay  the  larger  of  the  two. 

On  the  taxable  income  of  individuals,  families  or  co-partnerships,  1 
per  cent  is  levied  on  the  first  thousand  dollars;  one  and  one-quarter 
per  cent  on  the  second;  one  and  one-half  per  cent  on  the  third;  one 
and  three-quarter  per  cent  on  the  fourth;  two  per  cent  on  the  fifth; 
two  and  one-half  per  cent  on  the  sixth;  three  per  cent  on  the  seventh; 
three  and  one-half  per  cent  on  the  eighth;  four  per  cent  on  the 
ninth;  four  and  one-half  per  cent  on  the  tenth;  five  per  cent  on  the 
eleventh;  five  and  one-half  per  cent  on  the  twelfth,  and  six  per  cent 
on  all  additional  amounts. 

Exemption  of  individual  incomes  is  made  of  necessary  expenses  of 
less  than  $700,  amount  paid  in  taxes,  life  insurance  received  to 
$10,000,  if  the  taxpayer  was  legally  dependent  on  the  decedent. 

There  is  also  an  exception  to  an  individual  of  $800,  to  husband  and 
wife  $1200,  for  each  child  under  the  age  of  18  years,  $200.  For  each 
additional  person  for  whose  support  the  taxpayer  is  legally  liable, 
$200. 

This  income  tax  law  applies  to  corporations  as  well  as  individuals, 
excepting,  however,  the  corporations  which  are  specifically  taxed. 
Corporations  are  entitled   to   deduct   all   wages  of  employees  and   ex- 


STATE   TAXATION    SYSTEM — WYOMING.  943 

penses  of  conducting  business,  and  for  interest  and  depreciation,  and 
also  for  losses  actually  sustained  within  the  year  and  not  compen- 
sated by  insurance;  any  amount  paid  for  taxes,  or  on  dividends  or 
income  from  other  corporations,  the  income  of  which  is  assessed. 

The  corporation  specifically  assessed  by  payment  of  license  fees 
directly  in  the  State  in  lieu  of  taxes,  such  as  railroad  companies  and 
public  utility  companies,  insurance  companies,  etc.,  are  not  subject 
to  this  tax,  but  the  public  utilities  taxed  locally  are  not  exempted. 

COLLECTIONS.— Taxes  are  payable  between  the  third  Monday  of 
December  and  the  last  Monday  of  the  following  January.  Personal 
property  is  assessed  as  of  the  first  day  of  May,  the  real  estate  at  any 
time  between  said  date  and  the  last  Monday  in  June  of  the  year  for 
which  the  tax  is  to  be  levied.  Taxes  not  paid  by  the  last  Monday  in 
January,  are  entered  as  delinquent.  Taxes  on  personal  property  are 
collected  by  suit  with  interest  at  12  per  cent  from  the  first  day  of 
January  and  the  cost  of  collection.  Lands  upon  which  taxes  remain 
unpaid  are  advertised  and  sold  on  the  second  Tuesday  in  June,  for 
the  tax  with  interest  and  costs.  The  purchaser  is  entitled  to  a  deed 
three  years  from  the  sale  if  the  land  is  not  redeemed  prior  to  that 
time  by  the  payment  to  the  county  clerk  of  the  amount,  with  10  per 
cent  interest  and  costs.  Any  interest  of  a  minor  may  be  redeemed 
from  tax  sales  at  any  time  before  the  expiration  of  one  year  after 
majority.  That  of  any  idiot  or  insane  person,  within  five  years  after 
sale.  Any  part  of  the  premises  may  be  redeemed.  (See  Statutes, 
Sees.  1081  to  1170,  R.  S.) 

WYOMING 

Art.  I,  Sec.  28.    All  taxation  shall  be  equal  and  uniform. 

Art.  XV,  Sec.  3.  All  mines  and  mining  claims  from  which  gold, 
silver,  and  other  precious  metals,  soda,  saline,  coal,  mineral  oil  or 
other  valuable  deposit,  is  or  may  be  produced,  shall  be  taxed  in  addi- 
tion to  the  surface  improvements,  and  in  lieu  of  taxes  on  the  lands, 
on  the  gross  product  thereof,  as  may  be  prescribed  by  law;  provided, 
that  the  product  of  all  mines  shall  be  taxed  in  proportion  to  the 
value  thereof. 

Sec.  5.     (Requires  the  imposition  of  a  poll  tax  for  school  purposes.) 
Sec.  11.     All  property,  except  as  in  this  Constitution  otherwise  pro- 
vided,  shall   be   uniformly  assessed    for   taxation,   and    the   legislature 
shall  prescribe  such  regulations  as  shall   secure  a  just  valuation   for 
taxation  of  all  property,  real  and  personal. 

Sec.  12.  The  property  of  the  United  States,  the  State,  counties, 
cities,  towns,  school  districts,  municipal  corporations  and  public  li- 
braries, lots  with  the  buildings  thereon  used  exclusively  for  religious 


944  STATE  T.VXATION    SYSTEM — WYOMING. 

worship,  church  parsonages',  public  cemeteries,  shall  be  exempt  from 
taxation,  and  such  other  property  as  the  legislature  may  by  general 
law  provide. 

Sec.  13.     (Same  as  Iowa  Const.  1857,  Art.  VII,  Sec.  7.) 
Sec.  14.     The  power  of  taxation  shall  never  be  surrendered  or  sus- 
pended by  any  grant  or  contract  to  which  the  State  or  any  county  or 
other  municipal  corporation  shall  be  a  party. 


ADMINISTRATION. — A  Commissioner  of  Taxation  is  appointed  by 
the  Governor,  who  exercises  general  supervision  over  the  administra- 
tion of  the  assessment  and  tax  laws  and  tax  officials.  The  State 
Board  of  Equalization  is  composed  of  the  Secretary  of  State,  State 
Treasurer  and  State  Auditor,  who  have  power  to  equalize  between  the 
counties,  but  no  power  to  equalize  individual  assessments.  This  board 
also  assesses  railroads,  other  public  utilities  and  mines.  The  County 
Commissioners  constitute  a  County  Board  of  Equalization,  with  au- 
thority to  equalize  and  correct  assessments. 

RAILROADS. — The  property  of  railroad  companies,  telephone  and 
telegraph  companies  is  assessed  by  the  State  Board  and  the  valuation 
apportioned  to  the  various  taxing  districts.  Express  companies  are 
taxed  by  the  State  5  per  cent  on  gross  receipts  in  lieu  of  all  other 
taxes.  One-half  is  retained  by  the  State  for  State  uses,  and  the  other 
half  is  apportioned  to  the  counties. 

INSURANCE  COMPANIES.— Insurance  companies  pay  214  per  cent 
of  the  gross  premium  received  from  business  in  the  State  on  the  basis 
of  annual  reports  to  the  Insurance  Commissioner.  This  is  in  addition 
to  the  taxes  on  their  real  and  personal  property.  One-half  of  this 
special  tax  is  paid  to  the  county. 

CORPORATIONS. — Corporations,  whether  domestic  or  foreign,  are 
taxed  upon  their  property  under  the  General  property  tax.  By  Act  of 
1913,  corporations  were  subjected  to  an  occupation  tax,  varying  from 
$10.00  to  $25.00.  Shares  of  both  domestic  and  foreign  corporations  are 
not  taxed,  while  bonds  are  taxable. 

Public  utility  corporations  are  also  taxed  locally  under  the  general 
property  tax. 

BUSINESS. — Business  corporations,  that  is,  manufacturing,  mer- 
cantile and  mining  companies,  pay  the  general  property  tax.  Manu- 
facturing companies  are  assessed  on  the  estimated  yearly  average 
value  of  material  and  mercantile  companies  on  the  yearly  average 
value  of  merchandise. 


STATE  TAXATION   SYSTEM — WYOMING.  945 

BANKS. — Shares  of  stock  in  national  banks  are  assessed  to  the 
owner  at  their  par  value.  The  capital  and  surplus  of  State  hanks  are 
assessed,  the  amount  invested  in  real  estate  being  deducted  from  the 
amount  of  capital  invested. 

POLL  TAX. — There  is  no  State  poll  tax,  but  under  the  Constitution 
each  county  levies  a  poll  tax  of  two  dollars  on  every  male  between  21 
and  50  for  school  purposes.  There  may  also  be  levied  an  additional 
tax  on  males  between  21  and  50  for  road  purposes,  which  may  be 
worked  out. 

INHERITANCE  TAX.— The  inheritance  tax  exempts  life  estates  to 
beneficiaries  of  the  first-class,  and  also  the  sum  of  $10,000  of  each  be- 
quest, and  the  rate  is  2  per  cent,  while  in  the  case  of  other  benefi- 
ciaries, the  rate  is  5  per  cent,  and  $500.00  is  exempt.  The  entire  re- 
ceipts from  inheritance  tax  imposed  by  the  State,  are  retained  by  the 
county  in  which  collected  and  are  used  exclusively  for  county  roads. 

The  tax  is  imposed  upon  all  property  passing  by  will  or  intestate 
laws  and  on  all  property  in  the  State  of  a  non-resident. 

ASSESSMENTS.— There  is  one  assessment  list  for  State  and  county 
taxes  and  another  for  city  and  town  taxes.  The  basis  of  assessment 
is  the  actual  or  full  cash  market  value  to  April  1st.  Bona  fide  debts 
may  be  deducted  from  credits,  except  notes  given  as  premiums  of  in- 
surance, unpaid  subscriptions  to  institutions  or  societies,  or  unpaid 
subscriptions  for  capital  stock, 

LIVE  STOCK.— Live  stock  is  taxed  at  the  situs  of  its  "home 
range."  Before  cattle  are  brought  into  the  State,  notice  of  intention 
to  bring  them  into  the  State  must  be  filed  ten  days  prior  to  the  ship- 
ment, to  the  assessor  of  the  county  to  which  it  is  proposed  to  bring 
such  live  stock.  Live  stock  driven  into  the  State  prior  to  the  last 
day  of  the  year,  which  remains  for  a  period  of  not  less  than  thirty 
days,  is  assessed  in  the  same  manner  as  if  it  had  been  in  the  county 
at  the  time  of  the  annual  assessment,  provided  it  has  not  been  as- 
sessed in  some  other  county  for  that  year.  A  reciprocity  tax  is  levied 
on  live  stock  belonging  in  another  State,  but  which  grazes  part  of 
the  year  in  "Wyoming. 

OIL  WEIXS.- Mines  and  oil  wells,  whether  in  operation  or  not, 
are  assessed  and  taxed  separately  from  surface  values. 

WORKMEN'S  COMPENSATION.— Under  recent  amendment  to  the 
State  Constitution,  all  employments  designated  by  the  legislature  as 
extra  hazardous  employments,  are  taxed  at  graduated   rates   for  tha 


946  STATE  TAXATION    SYSTEM WYOMING. 

purpose  of  creating  a  fund  for  compensating  workingmen  for  injuries 
and  their  tieirs  for  death  caused  in  such  employment.  See  Sec.  473, 
supra,  as  to  U.  S.  Sup.  Court  on  constitutionality  of  this  law. 

EXEMPTIONS. — Exemptions  in  addition  to  public  property,  are 
public  libraries  and  property  held  for  charitable  uses,  churches,  par- 
sonages, family  bibles,  pictures  and  school  books,  household  and 
kitchen  furniture,  food  for  each  family  not  to  exceed  $500,  property 
used  in  the  manufacture  of  beet  sugar  in  the  State  for  a  period  of  ten 
years  where  75  per  cent  of  the  beets  used  are  grown  in  the  State; 
pensions,  salaries  and  payment  for  services  expected  to  be  rendered, 
all  mortgages  upon  property  within  the  State,  whether  real  or  chat- 
tel, together  with  the  indebtedness  thereby  secured,  provided  that  the 
mortgaged  property,  whether  real  or  personal,  is  taxed  at  its  true 
value.  State,  county,  municipal  and  school  district  bonds  owned  by 
residents  of  the  State  are  also  exempt. 

COLLECTION. — Taxes  are  due  and  payable,  without  demand,  after 
the  third  Monday  in  September.  After  December  31st,  all  unpaid 
taxes  are  delinquent,  A  penalty  of  8  per  cent  is  added,  and  the  whole 
draws  interest  from  that  date;  and  taxes  are  a  lien  from  that  date. 
Delinquent  taxes  are  collected  by  distress  and  sale. 

Real  estate  may  be  sold  for  taxes,  after  advertisement,  subject  to 
right  of  redemption  within  three  years  on  payment  of  amount  due, 
with  15  per  cent  added  and  10  per  cent  interest  from  date  of  sale,  and  any 
subsequent  taxes  paid  by  purchaser,  who  receives  a  certificate  of  pur- 
chase at  time  of  sale,  and  if  no  redemption  a  deed  at  end  of  three  years. 


THE  FEDERAL  SYSTEM  OF  INTERNAL 
TAXATION. 

The  Federal  system  of  internal  taxation,  that  is,  other  than 
customs  duties,  has  been  enormously  expanded  in  recent  years, 
and  especially  since  the  adoption  of  the  Sixteenth  Amendment 
in  1913.  As  already  shown  (Chapter  XVII)  the  taxing  power 
of  the  United  States,  based  on  the  express  or  implied  grants 
of  the  Constitution  is  only  qualified  as  to  direct  taxation  with 
reference  to  the  general  ownership  of  property;  and  the  im- 
portant statutes  are,  first,  the  Income  Tax,  first  enacted  October 
3,  1913,  and  then  re-enacted  in  the  General  Revenue  Act  of 
September  3,  1916,  and  extensively  amended  by  what  is  known 
as  the  ''War  Revenue  Act"  of  October  3,  1917.  For  conveni- 
ence of  reference  this  Income  Tax  Act  is  printed  with  the  amend- 
ments of  the  Act  of  1917  incorporated  in  the  respective 
sections.  Prior  to  the  adoption  of  the  Sixteenth  Amendment, 
Congress  in  1909  enacted  what  was  termed  a  Corporation  Ex- 
cise Tax  Law,  which  w^as  in  effect  an  income  tax  assessed  upon 
corporations  doing  business.  This  act  was  construed  in  a  num- 
ber of  opinions  by  the  Supreme  Court  and  the  other  Federal 
Courts,  and  references  have  been  made  thereto  where  they 
seemed  applicable  to  the  corresponding  sections  in  the  Income 
Tax  Law.     (See  supra,  Sec.  561.) 

This  Revenue  Act  of  September,  1916,  included  also  an  Estate 
or  Inheritance  Tax,  and  this  again  was  amended  by  the  Act  of 
March  3,  1917,  and  again  amended  and  the  rates  increased  by 
the  Act  of  October  3,  1917.  The  rates  fixed  by  these  successive 
acts  have  been  tabulated,  showing  the  dates  when  each  of  these 
schedules  of  rates  is  applicable. 

The  Act  of  October  3,  1917,  though  entitled,  "An  Act  to  Pro- 
vide Revenue  to  Defray  War  p]xpenses  and  for  Other  Purposes," 
is  not  limited  by  its  terms  to  the  duration  of  the  war;  so  that 

(947) 


948         FEDERAL  SYSTEM  OF  INTERNAL  TAXATION. 

its  duration  will  depend  upon  the  future  legislation  of  Con- 
gress.^ 

These  Acts,  particularly  the  "War  Revenue  Act  of  1917,  are 
very  interesting  illustrations  of  the  vast  scope  of  the  Federal 
taxing  power.  Though  the  General  Property  Tax,  based  on  the 
ownership  of  real  and  personal  property,  which  is  the  main  sup- 
port of  nearly  all  the  State  governments,  is  not  available  for  the 
general  government  on  account  of  the  constitutional  limitation 
as  to  direct  taxation,  this  Federal  power  is  not  limited  by  State 
lines  and  is  restrained  only  by  the  requirement  of  geographical 
uniformity,  and  in  this  ''war  revenue"  Act  extends  to  all  the 
business  and  commercial  activities  of  the  people,  whether  in- 
dividual or  corporate. 


1  It  should  be  noted  that  the  provision  in  the  act  limiting  the  taxes 
therein  imposed  to  the  present  wax,  was  stricken  out.    - 


THE  INCOME  TAX. 

SUMMARY    OF    INCOME    TAX    AS    AMENDED  OCTOBER  3, 

1917   949 

Title   I   953 

Part  1  953 

Sec.  1.  (a)  Normal  tax  of  two  per  cent  (27c)  on  net  in- 
come on  resident  and  non-resident,  (b)  graduated 
additional  tax,  (c)  applies  to  net  income  in  1916  and 
thereafter 954 

Sec.  2.  (a)  Income  defined,  (b)  income  of  estates  of  de- 
ceased persons,  (c)  March  1,  1913,  the  date  of  basis 
of  fair  market  values    954 

Sec.  3.     Additional  tax  includes  undistributed  corporate 

profits   955 

Sec.  4.  Proceeds  of  life  insurance  policies  not  income. 
Property  acquired  by  gift  or  bequest  not  income. 
Federal  and  State  salaries  excluded 956 

Sec.  5.     (a)   Deductions 956 

1.  Business  expenses 956 

2.  Interest  paid 956 

3.  Taxes  paid 957 

4.  Property  losses 957 

5.  Business  losses 957 

6.  Worthless  debts  charged  off 957 

7.  Depreciation  of  property 957 

8.  Allowance  in  case  of  oil   and  gas  wells  and 

mines,  how  computed 957 

9.  Contributions  for  charity,  when  excluded 957 

(b)    credits    allowed    for    normal    tax,    (c)    credit    for 
amount  withheld 95g 

Sec.  6.    Competition  of  net  income  in  case  of  non-resident 

aliens,     (a)  Deductions 958 

1.  Necessary  expenses 958 

2.  Interest 958 

3.  Taxes 958 

4.  Losses 958 

(949) 


950  THE  INCOME   TAX. 

Page 

5.  Losses  in  business 959 

6.  Debts  charged  off 959 

7.  Depreciation  of  property 959 

8.  How  computed  in  case  of  oil  and  gas  wells  and 

mines 959 

Sec.  7.    Deduction  of  $3000.00  allowed 959 

Additional  allowance  of  $1000.00  for  wife  and  $200.00 

for  each  of  dependent  children 960 

Sec.  8.    (a)  Returns,  how  made 960 

(b)  Of  individuals 960 

(c)  Of  guardians  and  trustees 961 

(d)  For  withholding  tax  repealed 961 

(e)  Profits  of  partnership 961 

(f)  Income  from  corporate  dividends  included..  962 

(g)  Individual  accounts  kept  upon  different  basis 
approved  by  Secretary  of  Treasury,  allowed.  962 

Sec.  9.    (a)  Assessment  and  administration 962 

Parties  notified  on  or  before  June  1st,  taxes  paid  on  or 

before  June  15 962 

Correction  of  assessments 962 

(b)  Mortgagors  and  others  making  periodical 
payments  for  non-residents,  withhold  normal 

tax 963 

(c)  Parties  making  periodical  pasrments  to  resi- 
dent   or   non-resident,    under    agreement    to 

pay  tax  upon  obligee,  withhold  normal  tax..     963 

(d)  and  (e)  Prior  provision  for  withholding  of 
normal   tax,   repealed 963 

(f)  Corporations  and  persons  collecting  foreign 
payment  of  interest  or  dividends  to  obtain 
license  from  Commissioner  of  Internal  Rev- 
enue      963 

(g)  All  gains,  profits,  and  income  to  be  paid  by 
the  owner  of  the  income  or  representative 
duly  authorized 964 

Provisions,  except  subdivision  (c),  relating  to 
payment  of  tax  at  source,  apply  only  to  nor- 
mal tax  upon  non-residents 964 

Part  II — Corporations 964 

Sec.  10.  (a)  Two  per  cent  normal  tax  on  corporations,  (b) 
additional  tax  of  ten  per  cent  remaining  undistributed 
at  end  of  each  calendar  year,  when  imposed 964 


THE   INCOME   TAX.  .  951 

Page 
Sec.  11.     (a)  The  corporations  and  associations  exempted 

from  taxation,   (b)   public  utilities  exempted .■ .     965 

Sec.  12.    (a)  Deductions  authorized  to  corporations 967 

1.  Necessary  expenses  of  business 967 

2.  Losses  of  property,  how  computed,  provision 

as  to  insurance 967 

3.  Interest  paid,  how  computed.    Taxes  paid....     967 
(b)  Computation  of  net  income  in  case  of  foreign  cor- 
porations and  deductions  therein  authorized,  (c)  as- 
sessment, insurance  companies 969 

Sec.  13.  (a)  Returns,  computation  of  corporate  tax,  (b)  re- 
turns, how  made,  (c)  estates  in  bankruptcy,  (d)  cor- 
poration may  make  returns  upon  its  own  basis  of  ac- 
counts under  regulations  of  department,  (e)  applica- 
tion of  act  to  withholding  at  source  in  case  of  non- 
resident aliens 971 

Sec.  14.  (a)  Assessment  made  upon  corporations  on  or 
before  June  1st  and  paid  on  or  before  June  15th.  Cor- 
rection of  returns  by  Commission,  (b)  assessments 
and  corrections  of  public  records  on  order  of  Presi- 
dent and  open  to  inspection  on  order  of  President  and 
State  officials  who  have  access  thereto,  (c)  penalties 
for  false  returns,  (d)  second  assessment  authorized.    973 

Sec.  15.     General  administrative  provision  975 

What  the  word  "State"  or  "United  States"  includes.     975 

Sec.  16.    Amending  Sees.  3167,  3172,  3173,  3176,  Revised 

Statutes  of  the  United  States 975 

Sec.  3167.  Penalties    for    disclosure    of    private 

business  in  tax  returns .' 975 

Sec.  3172.  Collector  to   investigate  -through   dis- 
trict as  to  liability  to  the  tax 975 

Sec.  3173.  Returns  for  taxation,  how  made 975 

Sec.  3176.  Correction  of  false  or  incorrect  returns     977 

Sec.  17.    Duty  of  Collector  to  give  receipts 977 

Sec.  18. .  Penalty  for  any  person  liable  to  pay  tax  refusing 

to  make  return  or  give  information 978 

Sec.  19.    Returns  to  be  verified  978 

Sec.  20.    Jurisdiction  of  District  Courts  to  compel  produc- 
tion of  books  and  papers  978 

Sec.  21.    Preparation  and  publication  of  statistics  author- 
ized       978 


952  THE  INCOME  TAX. 

Page 

Sec.  22.    Provisions  of  the  Act  extend  to  Porto  Rico  and 

Philippine  Islands 979 

Sec.  23.  Section  2  of  Act  of  October  3,  1913,  repealed, 
except  as  to  the  assessment  of  collection  of  taxes  ac- 
crued thereon 979 

Sec.  24.  Income  assessed  under  said  Act  not  income  with- 
in the  meaning  of  this  title 979 

Sec.  25.  Corporation  to  make  return  of  payment  of  divi- 
dends, and  of  names  and  addresses  of  stockholders  . .     979 

Sec.  26.  Persons  or  corporations  doing  business  as  brok- 
ers to  make  returns  under  oath  under  regulations  of 
Commissioner  of  Internal  Revenue 980 

Sec.  27.    All  parties  making  payments  to  give  information 

to  Commissioner  whenever  required 980 

Sec.  28.  The  amount  of  any  excess  profits  tax  or  a  part- 
ner's proportionate  share  of  an  excess  profit  tax  paid 
from  partnership  to  be  credited  in  the  net  income. . .     981 

Sec.   29.     The  income   of  foreign  governments   received 

from  investments  in  the  United  States  not  taxed. . . .     981 

Sec.  30.    Corporate  dividends  defined   981 

Sec.  31.  Premiums  paid  on  lives  of  employees  not  de- 
ducted       982 

Sec.  900  of  Act  of  September  8,  1917,  Invalidation  of  any 
one  clause  or  paragraph  not  to  invalidate  the  remain- 
der of  the  Act  982 

THE  FEDERAL  ESTATE  OR  INHERITANCE  TAX 983 

Title  n 983 

Estate  tax  of  Act  of  September  8,  1916 983 

As  amended  March  3,  1917 983 

Increase  of  rates  under  Act  of  October  3,  1917 988 

Table  of  rates  under  the  different  Acts 989 

Title  III 990 

Munitions  tax  of  September  8,  1916  990 

Miscellaneous  taxes  under  Act  of  September  8,  1916 991 

Remaining  titles  of  the  Act  of  September  3,  1916 1004 

Act  of  March  3,  1917 1004 


THE  FEDERAL   INCOME  TAX.  953 


ACT  OF  SEPTEMBER  8,   1916,  AS  AMENDED  BY  ACT 
OF  OCTOBER  3,  1917. 

[PuBuo — No.  271 — 64th  Congkess.] 

[H.  R.  16763.] 

An  Act  to  increase  the  revenue,  and  for  other  purposes. 

Be  it  enacted  'by  the  Senate  and  House  of  Representatives  of  the 
United  States  of  America  in  Congress  assembled, 

TITLE  I.— INCOME  TAX. 

(Sections  amended,  or  new  sections  added  by  War  Revenue  Act  of 
Oct.  3,  1917,  are  enclosed   in  brackets.) 

Part  I. — On  Individttals. 

Sec.  1.  (a)  That  there  shall  be  levied,  assessed,  collected,  and  paid 
annually  upon  the  entire  net  income  received  in  the  preceding  calendar 
year  from  all  sources  by  every  individual,  a  citizen  or  resident  of  the 
United  States,  a  tax  of  two  per  centum  upon  such  income;  and  a 
like  tax  shall  be  levied,  assessed,  collected,  and  paid  annually  upon 
the  entire  net  income  received  in  the  preceding  calendar  year  from 
all  sources  within  the  United  States  by  every  individual,  a  non-resident 
alien,  including  interest  on  bonds,  notes,  or  other  interest-bearing 
obligations  of  residents,  corporate  or  otherwise. 

(b)  In  addition  to  the  income  tax  imposed  by  subdivision  (a)  of 
this  section  (herein  referred  to  as  the  normal  tax)  there  shall  be  levied, 
assessed,  collected,  and  paid  upon  the  total  net  income  of  every 
individual,  or,  in  the  case  of  a  non-resident  alien,  the  total  net  income 
received  from  all  sources  within  the  United  States,  an  additional 
income  tax  (herein  referred  to  as  the  additional  tax)  of  one  per 
centum  per  annum  upon  the  amount  by  which  such  total  net  income 
exceeds  $20,000  and  does  not  exceed  $40,000,  two  per  centum  per 
annum  upon  the  amount  by  which  such  total  net  income  exceeds 
$40,000  and  does  not  exceed  $60,000,  three  per  centum  per  annum 
upon  the  amount  by  which  such  total  net  income  exceeds  $60,000 
and  does  not  exceed  $80,000,  four  per  centum  per  annum  upon  the 
amount  by  which  such  total  net  income  exceeds  $80,000  and  does 
not  exceed  $100,000,  five  per  centum  per  annum  upon  the  amount 
by  which  such  total  net  income  exceeds  $100,000  and  does  not  exceed 
$150,000,  six  per  centum  per  annum  upon  the  amount  by  which  such 
total  net  income  exceeds  $150,000,  and  does  not  exceed  $200,000, 
seven  per  centum  per  annum  upon  the  amount  by  which  such  total 
net  income  exceeds  $200,000  and  does  not  exceed  $250,000,  eight  per 
centum  per  annum  upon  the  amount  by  which  such  total  net  income 
exceeds  $250,000  and  does  not  exceed   $300,000,  nine  per  centum  per 


954  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

annum  upon  the  amount  by  which  such  total  net  income  exceeds 
$300,000  and  does  not  exceed  $500,000,  ten  per  centum  per  annum 
upon  the  amount  by  which  such  total  net  income  exceeds  $500,000, 
and  does  not  exceed  $1,000,000,  eleven  per  centum  per  annum  upon 
the  amount  by  which  such  total  net  income  exceeds  $1,000,000  and 
does  not  exceed  $1,500,000,  twelve  per  centum  per  annum  upon  the 
amount  by  which  such  total  net  income  exceeds  $1,500,000  and  does 
not  exceed  $2,000,000,  and  thirteen  per  centum  per  annum  upon  the 
amount  by  which  such  total  net  income  exceeds  $2,000,000. 

For  the  purpose  of  the  additional  tax  there  shall  be  included  as 
income  the  income  derived  from  dividends  on  the  capital  stock  or 
from  the  net  earnings  of  any  corporation,  joint-stock  company  or 
association,  or  insurance  company,  except  that  im  the  case  of  non- 
resident aliens  such  income  derived  from  sources  without  the  United 
States  shall  not  be  included. 

All  the  provisions  of  this  title  relating  to  the  normal  tax  on  indi- 
viduals, so  far  as  they  are  applicable  and  are  not  inconsistent  with 
this  subdivision  and  section  three,  shall  apply  to  the  imposition,  levy, 
assessment,  and  collection  of  the  additional  tax  imposed  under  this 
subdivision. 

(c)  The  foregoing  normal  and  additional  tax  rates  shall  apply  to 
the  entire  net  income,  except  as  hereinafter  provided,  received  by 
every  taxable  person  in  the  calendar  year  nineteen  hundred  and 
sixteen  and  in  each  calendar  year  thereafter. 

INCOME  DEFINED.l 

[Sec.  2.  (a)  That,  subject  only  to  such  exemptions  and  deductions 
as  are  hereinafter  allowed,  the  net  income  of  a  taxable  person  shall 
include  gains,   profits,   and   income,   derived    from   salaries,   wages,   or 


1  For  decisions  of  the  Supreme  Court  sustaining  the  constitutional- 
ity of  the  corporation  excise  tax  of  1909  prior  to  the  adoption  of  the 
16th  amendment,  and  also  the  income  tax  of  1913  upon  which  the 
act  of  1916  and  also  the  acts  of  1917  are  based,  see  Sees.  562  and 
5€3,  supra. 

On  the  fundamental  question  as  to  what  is  income  as  distinguished 
from  capital,  see  Lynch  v.  Turrish,  236  Fed.  653  (1916);  construing 
the  act  of  1913,  where  the  Circuit  Court  of  Appeals  of  the  8th  Cir- 
cuit held  that  the  enhanced  value  of  timber  lands  held  by  a  cor- 
poration, which  accrued  from  the  gradual  increase  of  values  during 
years  prior  to  the  enactment  of  the  act  of  1913,  although  distributed 
subsequent  to  that  date,  did  not  become  income  under  that  act,  but 
was  an  increase  of  capital  assets,  and  that  advance  of  the  value  of 
property  does  not  of  itself  constitute  income. 

As    to    timber   lands,    see   also    concluding   remarks    of    opinion    of 

Supreme  Court   in   the   Sargeant  Land   Co.   case,   242   IT.   S.   ,   see 

infra  p.    967,   61   L.    Ed.   p.   .      See  also   Gray   v.    Darlington,    15 

Wall,  63,  21  L.  Ed.  45  (1872),  construing  income  tax  law  of  1867. 
See  also  United  States  v.  Guggenheim  Exploration  Co.,  So.  D.  of  N. 
Y.,  238  Fed.  231   (1917),  construing  the  corporation  excise  Tax  of  1909. 


THE   FEDERAL    INCOME   TAX.  955 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

compensation  for  personal  service  of  whatever  kind  and  in  whatever 
form  paid,  or  from  professions,  vocations,  businesses,  trade,  commerce, 
or  sales,  or  dealings  in  property,  whether  real  or  personal,  growing 
out  of  the  ownership  or  use  of  or  interest  in  real  or  personal  property, 
also  from  interest,  rent,  dividends,  securities,  or  the  transaction  of 
any  business  carried  on  for  gain  or  profit,  or  gains  or  profits  and 
income   derived    from   any   source    whatever.] 

(b)  Income  received  by  estates  of  deceased  persons  during  the 
period  of  administration  or  settlement  of  the  estate,  shall  be  subject 
to  the  normal  and  additional  tax  and  taxed  to  their  estates,  and 
also  such  income  of  estates  or  any  kind  of  property  held  in  trust, 
including  such  income  accumulated  in  trust  for  the  benefit  of  unborn 
or  unascertained  persons,  or  persons  with  contingent  interests,  and 
income  held  for  future  distribution  under  the  terms  of  the  will  or 
trust  shall  be  likewise  taxed,  the  tax  in  each  instance,  except  when 
the  income  is  returned  for  the  purpose  of  the  tax  by  the  beneficiary, 
to  be  assessed  to  the  executor,  administrator,  or  trustee,  as  the  case 
may  be:  Provided,  That  where  the  income  is  to  be  distributed  annually 
or  regularly  between  existing  heirs  or  legatees,  or  beneficiaries  the 
rate  of  tax  and  method  of  computing  the  same  shall  be  based  in  each 
case  upon  the  amount  of  the  individual  share  to  be  distributed. 

Such  trustees,  executors,  administrators,  and  other  fiduciaries  are 
hereby  idemnified  against  the  claims  or  demands  of  every  beneficiary 
for  all  payments  of  taxes  which  they  shall  be  required  to  make  under 
the  provisions  of  this  title,  and  they  shall  have  credit  for  the  amount 
of  such  payments  against  the  beneficiary  or  principal  in  any  account- 
ing which  they  make  as  such  trustees  or  other  fiduciaries. 

(c)  For  the  purpose  of  ascertaining  the  gain  derived  from  the  sale 
or  other  disposition  of  property,  real,  personal,  or  mixed,  acquired 
before  March  first,  nineteen  hundred  and  thirteen,  the  fair  market 
price  or  value  of  such  property  as  of  March  first,  nineteen  hundred 
and  thirteen,  shall  be  the  basis  for  determining  the  amount  of  such 
gain  derived. 1 

ADDITIONAL   TAX   INCLINES    UXDISTRIBUTED    PROFITS. 

Sec.  3.  For  the  purpose  of  the  additional  tax,  the  taxable  income 
of  any  individual  shall  include  the  share  to  which  he  would  be  en- 
titled of  the  gains  and  profits,  if  divided  or  distributed,  whether 
divided  or  distributed  or  not,  of  all  corporations,  joint-stock  com- 
panies of  associations,  or  insurance  companies,  however  created  or 
organized,  formed  or  fraudulently  availed  of  for  the  purpose  of  pre- 
venting the  imposition  of  such  tax  through  the  medium  of  permitting 
such  gains  and  profits  to  accumulate  instead  of  being  divided  or 
distributed;  and  the  fact  that  any  such  corporation,  joint-stock 
company    or   association,    or    insurance    company,    is    a   mere    holding 

1  See  Lynch  v.  Turrish,  2.36  Fed.  653,  supra. 


956  THE   FEDERAL    EN-COME    TAX. 

[Amendments  of  October  3.  1917,  included  in  Brackets] 

company,  or  that  the  gains  and  profits  are  permitted  to  accumulate 
beyond  the  reasonable  needs  of  the  business,  shall  be  prima  facie 
evidence  of  a  fraudulent  purpose  to  escape  such  tax;  but  the  fact 
that  the  gains  and  profits  are  in  any  case  permitted  to  accximulate 
and  become  surpltis  shall  not  be  construed  as  evidence  of  a  purpose 
to  escape  the  said  tax  Ln  such  case  unless  the  Secretary  of  the  Treasury 
shall  certify  that  in  his  opinion  such  accumulation  is  unreasonable 
for  the  purposes  of  the  bustoess.  "When  requested  by  the  Commissioner 
of  Internal  Revenue,  or  any  district  collector  of  internal  revenue,  such 
corporation,  joint-stock  company  or  association,  or  insurance  com- 
pany shall  forward  to  him  a  correct  statement  of  such  gains  and  profits 
and  the  names  and  addresses  of  the  individuals  or  shareholders  who 
would  be  entitled  to  the  same  if  divided  or  distributed. 

[Sec.  4.  The  following  income  shall  be  exempt  from  the  provisions 
of  this  title: 

The  proc-eeds  of  life  insnrance  policies  paid  to  individual  beneficiaries 
upon  the  death  of  the  insured:  the  amoimt  received  by  the  insured,  as 
a  reram  of  premium  or  premiums  paid  by  him  under  life  insurance, 
endowment,  or  annuity  contracts,  either  during  the  term  or  at  the 
maturity  of  the  term  mentioned  in  the  contract  or  upon  surrender 
of  the  contract;  the  value  of  property  acquired  by  gift,  bequest,  devise, 
or  descent  (but  the  income  from  such  property  shall  be  included  as 
income) :  interest  upon  the  obligations  of  a  State  or  any  political  sub- 
division thereof  or  upon  the  obligations  of  the  United  States  (but,  in 
the  case  of  obligations  of  the  United  States  issued  after  September 
f  rst.  nineteen  hundred  and  seventeen,  only  if  and  to  the  extent  pro- 
vided in  the  Act  authorizing  the  issue  thereof)  or  its  possessions  or 
securities  issued  under  the  provisions  of  the  Federal  Farm  Loan  Act 
of  July  seventeenth,  nineteen  hundred  and  sixteen;  the  compensation 
of  the  present  President  of  the  United  States  during  the  term  for  which 
he  has  been  elected  and  the  judges  of  the  supreme  and  inferior  courts 
of  the  United  States  now  in  office,  and  the  compensation  of  all  officers 
and  employees  of  a  State,  or  any  political  subdivision  thereof,  except 
when  such  compensation  is  paid  by  the  United  States  Government.] 

DEDTTCnOXS    -AT TOWED. 

Sec.  -5.  That  in  computing  net  income  in  the  case  of  a  citizen  or 
resident  of  the  United  States — 

(a)  For  the  purpose  of  the  tax  there  shall  be  allowed  as  deduc- 
tions— 

First.  The  necessary  expenses  actually  paid  in  carrying  on  any 
business  or  trade,  not  including  personal,  living,  or  family  expenses; 

[Second.  All  interest  paid  within  the  year  on  his  indebtedness  except 
on  indebte<iness  incurred  for  the  purchase  of  obligations  or  securities 
the  interest  upon  which  is  exempt  from  taxation  as  income  under  this 
title; 


THE    rZlZBAL   ISO'jME   TAX.  957 

'Arr.endrr.er.ts  cf  October  3,  1917,  included  in  BrscKsts] 

Third.    Taxes  ra."!!  ":•'■::-   •"--  "rsr  :~":r~"^  '7  the  a-thcrlrr  ::  the 

United  S:^  ^^        -     :     ^  :  :r:- 

tories,  or  z    -  t       ■;    :  ■       :  ;i7 

State.    coMi::"     s  :„:_-:     :  -     r  _  ;- 

division  c:  ai.;.    =:;^:r    _   :   -  -          -     ^    _      -                    .    .ri-r- 

Sts;] 

Fotuth.  Losses  actually  sastalned  during  the  jear,  incmred  in  his 
business  or  trade,  or  arising  from  fires,  storms,  ^iqiwreek,  or  other 
casualty,  and  from  theft,  when  sach  losses  are  not  OMnpensated  tar 
by  insurance  or  otherwise:  Provided^  That  for  the  parpoee  of  aseer- 
talnitig  the  loss  sustained  froja  the  sale  or  other  di^ositifm  of  prop- 
erty, real,  personal,  or  mixed,  acquired  before  Mardi  first,  nineteen 
htmdred  and  thirteen,  the  fair  market  price  or  Talue  of  such  property 
as  of  March  first,  nineteen  hundred  and  thirteen,  shall  be  the  basis  for 
determining  the  amount  of  such  loss  sustained; 

Flftlu  In  transactions  entered  into  for  profit  but  not  eonneefed 
with  his  busine^  or  trade,  the  losses  actually  sustained  therein  during^ 
the  year  to  an  amount  not  exceeding  the  profits  arising  ther^^om^; 

Sixth.  Debts  due  to  the  taxpaya*  aetoaOly  aseeztained  to  be  worth- 
less and  charged  oft  within  the  year; 

Seventh.   A  reasonable  allowance  for  the  ex3iaust!ot!. 
of  property  arising  out  of  lis  tise   :r  e~r".:7T::ez:     - 
trade ; 

Eighth,    (a)  In  the  case  c:         ir  :  r:L=  -^'.'.^ 
for  actual  reduction  in  flow  ^:.:      - 
tiT   r_;_.   fow,  but  by  the  settle:  -   . 

t-r    ::iT    ::  mines  a  reas-oiisble  3.1. .     ^_.;  i.r    :    .,t  .... 
f--^^-      ^  :       ::t:     il    t    -  -.'zr  — ine  of  the  pre  i  :  :  :1:t 
Ctt-    :u  :  t  :    _:  i   i;:i    iur-i:  -'z-  year  for  wh: : :    -    -   - 
P-:."     r.   .itt  :ri:T    s::!  rri?  :-.^":le  allowance 
c:   ;    -L     i     izd   .;      Mr.  it-  rules  and  regulati::.^ 
:hr   St-  :ary  of  tzr   7r  :.;\;ry:   Proride±  That  "cr 
au::::r:2ed  in   (a)  and  ----■   ~~--i\  tIjo  capital 

cr  in  case  of  purchase  :  ;   Marcli  Srsr 

'"""  '''"—zy.  the  fair  n  r  _?  :f  -'z?.-   -- 

be  made,     y  r.   ;  Ir  ill 

—  :   r  new  buHdir.;;;.    .  ^^     , 

—  .iIt  ::  Ir  -rise  the  value  c:  ir 

nide  for  any  am: 
:-i  the  exhaustion 


v--          -         ---rrions   or   gift?    -- "-  -     -      -^  =  .--:-    -v^   ^^j.  ^^ 

relations    orfrr-  -ively    for 

"---r-                              scientific  or  societies 

for  th                            f  cruelty  to  rt  of  the 

net  in.v_.   ..            r   lnt:res  to  the  .r_r_  .-.■^.. 

or  individual,  t;  :i  ^n-;\uit  not  in  excess  :.  i 


958  THE   FEDERAL   INCOME  TAX. 

[Amendments  of  October  3,  1917,  included  in  Bracl<ets] 

payer's  taxable  net  income  as  computed  without  the  benefit  of  this 
paragraph,  such  contributions  or  gifts  shall  be  allowed  as  deductions 
only  if  verified  under  rules  and  regulations  prescribed  by  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury.] 

CREDITS    ALLOWED. 

(b)  For  the  purpose  of  the  normal  tax  only,  the  income  embraced 
in  a  personal  return  shall  be  credited  with  the  amount  received  as 
dividends  upon  the  stock  or  from  the  net  earnings  of  any  corporation, 
joint-stock  company  or  association,  trustee,  or  insurance  company, 
which  is  taxable  upon  its  net  income  as  hereinafter  provided; 

(c)  A  like  credit  shall  be  allowed  as  to  the  amount  of  income,  the 
normal  tax  upon  which  has  been  paid  or  withheld  for  payment  at  the 
source  of  the  income  under  the  provisions  of  this  title. 

NOX-BESIDEXT   ALIENS 

Sec.  6.  That  in  computing  net  income  in  the  case  of  a  non-resident 
alien — 

(a)  For  the  purpose  of  the  tax  there  shall  be  allowed  as  deductions — 
First.    The   necessary   expenses    actually    paid    in    carrying   on    any 

business   or  trade   conducted   by   him   within   the   United    States,   not 

including  personal,  living,  or  family  expenses; 

[Second.  The  proportion  of  all  interest  paid  within  the  year  by  such 
person  on  his  indebtedness  (except  on  indebtedness  incurred  for  the 
purchase  of  obligations  or  securities  the  interest  upon  which  is  exempt 
from  taxation  as  income  under  this  title)  which  the  gross  amount  of 
his  income  for  the  year  derived  from  sources  within  the  United  States 
bears  to  the  gross  amount  of  his  income  for  the  year  derived  from  all 
sources  within  and  without  the  United  States,  but  this  deduction  shall 
be  allowed  only  if  such  person  includes  in  the  return  required  by  sec- 
tion eight  all  the  information  necessary  for  its  calculation; 

Third.  Taxes  paid  within  the  year  imposed  by  the  authority  of  the 
United  States  (except  income  and  excess  profits  taxes),  or  of  its  terri- 
tories, or  possessions,  or  by  the  authority  of  any  State,  county,  school 
district,  or  municipality,  or  other  taxing  subdivision  of  any  State,  paid 
within  the  United  States,  not  including  those  assessed  against  local 
benefits';  ] 

Fourth.  Losses  actually  sustained  during  the  year,  incurred  in 
business  or  trade  conducted  by  him  within  the  United  States,  and 
losses  of  property  within  the  United  States  arising  from  fires,  storms, 
shipwreck,  or  other  casualty,  and  from  theft,  when  such  losses  are  not 
compensated  for  by  insurance  or  otherwise:  Provided,  That  for  the 
purpose  of  ascertaining  the  amount  of  such  loss  or  losses  sustained 
In  trade,  or  speculative  transactions  not  in  trade,  from  the  same  or 


THE   FEDERAL    INCOME   TAX.  959 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

any  kind  of  property  acquired  before  March  first,  nineteen  hundred  and 
thirteen,  the  fair  marltet  price  or  value  of  such  property  as  of  March 
first,  nineteen  hundred  and  thirteen,  shall  be  the  basis  for  determining 
the  amount  of  such  loss  or  losses  sustained; 

Fifth.  In  transactions  entered  into  for  profit  but  not  connected 
with  his  business  or  trade,  the  losses  actually  sustained  therein  during 
the  year  to  an  amount  not  exceeding  the  profits  arising  therefrom  in 
the  United  States; 

Sixth.  Debts  arising  in  the  course  of  business  or  trade  conducted  by 
him  within  the  United  States  due  to  the  taxpayer  actually  ascer- 
tained to  be  worthless  and  charged  off  within  the  year; 

Seventh.  A  reasonable  allowance  for  the  exhaustion,  wear  and  tear 
of  property  within  the  United  States  arising  out  of  its  use  or  employ- 
ment in  the  business  or  trade;  (a)  in  the  case  of  oil  and  gas  wells  a 
reasonable  allowance  for  actual  reduction  in  flow  and  production  to 
be  ascertained  not  by  the  flush  flow,  but  by  the  settled  production 
or  regular  flow;  (b)  in  the  case  of  mines  a  reasonable  allowance  for 
depletion  thereof  not  to  exceed  the  market  value  in  the  mine  of  the 
product  thereof  which  has  been  mined  and  sold  during  the  year  for 
which  the  return  and  computation  are  made,  such  reasonable  allow- 
ance to  be  made  in  the  case  of  both  (a)  and  (b)  under  rules  and 
regulations  to  be  prescribed  by  the  Secretary  of  the  Treasury:  Pro- 
vided, That  when  the  allowance  authorized  in  (a)  and  (b)  shall  equal 
the  capital  originally  invested,  or  in  case  of  purchase  made  prior  to 
March  first,  nineteen  hundred  and  thirteen,  the  fair  market  value  as 
of  that  date,  no  further  allowance  shall  be  made.  No  deduction  shall 
be  allowed  for  any  amount  paid  out  for  new  buildings,  permanent 
improvements,  or  betterments,  made  to  increase  the  value  of  any 
property  or  estate,  and  no  deduction  shall  be  made  for  any  amount 
of  expense  of  restoring  property  or  making  good  the  exhaustion 
thereof  for  which  an  allowance  is  or  has  been  made. 

[  (c)  A  non-resident  alien  individual  shall  receive  the  benefit  of  the 
deductions  and  credits  provided  for  in  this  section  only  by  filing  or 
causing  to  be  filed  with  the  collector  of  internal  revenue  a  true  and 
accurate  return  of  his  total  income,  received  from  all  sources,  corporate 
or  otherwise,  in  the  United  States,  in  the  manner  prescribed  by  this 
title;  and  in  case  of  his  failure  to  file  such  return  the  collector  shall 
collect  the  tax  on  such  income,  and  all  property  belonging  to  such  non- 
resident alien  individual  shall  be  liable  to  distraint  for  the  tax.] 

fSec.  7.  That  for  the  purpose  of  the  normal  tax  only,  there  shall  be 
allowed  as  an  exemption  in  the  nature  of  a  deduction  from  the  amount 
of  the  net  income  of  each  citizen  or  resident  of  the  United  States,  ascer- 
tained as  provided  herein,  the  sum  of  $3,000,  plus  $1,000  additional 
if  the  person  making  the  return  be  a  head  of  a  family  or  a  married 
man  with  a  wife  living  with  him,  or  plus  the  sum  of  $1,000  additional 
if  the  person  making  the  return  be  a  married  woman  with  a  husband 
living  with  her;   but  in  no  event  shall   this  additional   exemption  of 


960  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

$1,000  be  deducted  by  both  a  husband  and  a  wife:  Provided,  That  only- 
one  deduction  of  $4,000  shall  be  made  from  the  aggregate  income  of 
both  husband  and  wife  when  living  together:  Provided  further,  That 
if  the  person  making  the  return  is  the  head  of  a  family  there  shall  be 
an  additional  exemption  of  $200  for  each  child  dependent  upon  such 
person;  if  under  eighteen  years  of  age,  or  if  incapable  of  self-support 
because  mentally  or  physically  defective,  but  this  provision  shall  oper- 
ate only  in  the  case  of  one  parent  in  the  same  family:  Provided  further. 
That  guardians  or  trustees  shall  be  allowed  to  make  this  personal 
exemption  as  to  income  derived  from  the  property  of  which  such 
guardian  or  trustee  has  charge  in  favor  of  each  ward  or  cestui  que 
trust:  Provided  further,  That  in  no  event  shall  a  ward  or  cestui  que 
trust  be  allowed  a  greater  personal  exemption  than  as  provided  in  this 
section  from  the  amount  of  net  income  received  from  all  sources. 
There  shall  also  be  allowed  an  exemption  from  the  amount  of  the  net 
income  of  estates  of  deceased  citizens  or  residents  of  the  United  States 
during  the  period  of  administration  or  settlement,  and  of  trust  or 
other  estates  of  citizens  or  residents  of  the  United  States  the  income 
of  which  is  not  distributed  annually  or  regularly  under  the  provisions 
of  subdivision  (b)  of  section  two,  the  sum  of  $3,000,  including  such 
deductions  as  are  allowed  under  section  five.] 

EL'i'UKNS. 

Sec.  8.  (a)  The  tax  shall  be  computed  upon  the  net  income,  as 
thus  ascertained,  of  each  person  subject  thereto,  received  in  each 
preceding  calendar  year  ending  December  thirty-first. 

(b)  On  or  before  the  first  day  of  March,  nineteen  hundred  and 
seventeen,  and  the  first  day  of  March  in  each  year  thereafter,  a  true 
and  accurate  return  under  oath  shall  be  made  by  each  person  of 
lawful  age,  except  as  hereinafter  provided,  having  a  net  income  of 
$3,000  or  over  for  the  taxable  year  to  the  collector  of  internal  revenue 
for  the  district  in  which  such  person  has  his  legal  residence  or 
principal  place  of  business,  or  if  there  be  no  legal  residence  or 
place  of  business  in  the  United  States,  then  with  the  collector 
of  internal  revenue  at  Baltimore,  Maryland,  in  such  form  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall  prescribe,  setting  forth  specifically 
the  gross  amount  of  income  from  all  separate  sources,  and  from  the 
total  thereof  deducting  the  aggregate  items  of  allowances  herein 
authorized:  Provided,  That  the  Commissioner  of  Internal  Revenue 
shall  have  authority  to  grant  a  reasonable  extension  of  time,  in 
meritorious  cases,  for  filing  returns  of  income  by  persons  residing  or 
traveling  abroad  who  are  required  to  make  and  file  returns  of  income 
and  who  are  unable  to  file  said  returns  on  or  before  March  first  of 
each  year:  Provided  further.  That  the  aforesaid  return  may  be  made 
by  an  agent  when  by  reason  of  illness,  absence,  or  non-residence  the 
person  liable  for  said  return  is  unable  to  make  and  render  the  same, 
the  agent  assuming  the  responsibility  of  making  the  return  and  incur- 
ring penalties  provided  for  erroneous,  false,  or  fraudulent  return. 


THE   FEDERAL    INCOME   TAX.  961 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

[  (c)  Guardians,  trustees,  executors,  administrators,  receivers,  con- 
servators, and  all  persons,  corporations,  or  associations,  acting  in  any 
fiduciary  capacity,  shall  make  and  render  a  return  of  the  income  of  the 
person,  trust,  or  estate  for  whom  or  which  they  act.  and  be  subject  to 
all  the  provisions  of  this  title  which  apply  to  individuals.  Such  fiduciary 
shall  make  oath  that  he  has  sufficient  knowledge  of  the  affairs  of  such 
person,  trust,  or  estate  to  enable  him  to  make  such  return  and  that 
the  same  is,  to  the  best  of  his  knowledge  and  belief,  true  and  correct, 
and  be  subject  to  all  the  provisions  of  this  title  which  apply  to  indi- 
viduals: Provided.  That  a  return  made  by  one  or  two  or  more  joint 
fiduciaries  filed  in  the  district  where  such  fiduciary  resides,  under  such 
regulations  as  the  Secretary  of  the  Treasury  may  prescribe,  shall  be  a 
sufficient  compliance  with  the  requirements  of  this  paragraph:  Pro- 
vided further,  That  no  return  of  income  not  exceeding  $3,000  shall  be 
required  except  as  in  this  title  otherwise  provided.] 

(Subdivision  (d)  providing  for  withholding  and  payment  at 
source  of  amount  of  normal  tax  from  payments  to  tax  payer  was  re- 
pealed by  act  of  October  3,  1917.) 

[  (e)    Persons  carrying  on  business  in  partnership  shall  be  liable  for 
income  tax   only   in   their  individual   capacity,   and   the  share   of  the 
profits  of  the  partnership  to  which  any  taxable  partner  would  be  en- 
titled  if  the  same   were  divided,   whether  divided  or  otherwise,  shall 
be  returned  for  taxation  and  the  tax  paid  under  the  provisions  of  this 
title:     Provided,  That  from  the  net  distributive  interests  on  which  the 
individual  members  shall  be  liable  for  tax,  normal  and  additional,  there 
shall  be  excluded  their  proportionate  shares  received  from  interest  on 
the  obligations  of  a  State  or  any  political  or  taxing  subdivision  thereof, 
and  upon  the  obligations  of  the  United  States  (if  and  to  the  extent  that 
it  is  provided  in  the  Act  authorizing  the  issue  of  such  obligations  of 
the  United   States  that  they  are  exempt  from  taxation)    and   its  pos- 
FCfs-'ons.  and  that  for  the  purpose  of  computing  the  normal  tax  there 
shall  be  allowed  a  credit,  as  provided  by  section  five,  subdivision   (b), 
for  their   proportionate   share   of  the   profits  derived    from   dividends. 
Such    partnership,    when   requested   by   the   Commissioner    of   Internal 
Revenue  or  any  district  collector,  shall  render  a  correct  return  of  the 
rarnings,  profits,  and  income  of  the  partnership,  except  income  exempt 
under  section   four  of  this  Act,  setting   forth   the   item   of  the   gross 
income  and  the  deductions  and  credits  allowed  by  this  title,  and  the 
names  and  addresses  of  the  individuals  who  would  be  entitled  to  the 
net  earnings,  profits,  and  income,  if  distributed.     A  partnership  shall 
have  the  same  privilege  of  fixing  and  making  returns  upon  the  basis 
of  its  own  fiscal  year  as  is  accorded  to  corporations  under  this  title. 
If  a  fiscal  year  ends  during  nineteen  hundred  and  sixteen   or  a  sub- 
sequent calendar  year  for  which  there  is  a  rate  of  tax  different  from 
the  rate  for  the  preceding  calendar  year,  then    (1)   the  rate  for  such 
preceding  calendar   year  shall   apply   to  an   amount  of  each   partner's 
share  of  such   partnership  profits  equal   to  the   proportion   which   the 
part  of  such  fiscal  year  falling  within  such  calendar  year  bears  to  the 


962  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

full  fiscal  year,  and  (2)  the  rate  for  the  calendar  year  during  which 
such  fiscal  year  ends  shall  apply  to  the  remainder.] 

(f)  In  every  return  shall  be  included  the  income  derived  from  divi- 
dends on  the  capital  stock  or  from  the  net  earnings  of  any  corporation, 
joint-stock  company  or  association,  or  insurance  company,  except  that 
in  the  case  of  non-resident  aliens  such  income  derived  from  sources 
without  the  United  States  shall  not  be  included. 

(g)  An  individual  keeping  accounts  upon  any  basis  other  than  that 
of  actual  receipts  and  disbursements,  unless  such  other  basis  does  not 
clearly  reflect  his  income,  may,  subject  to  regulations  made  by  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  make  his  return  upon  the  basis  upon  which  his 
accounts  are  kept,  in  which  case  the  tax  shall  be  computed  upon  his 
income  as  so  returned. 

ASSESSMENT    AND    ADMINISTRATION. 

Sec.  9.  (a)  That  all  assessments  shall  be  made  by  the  Commis- 
sioner of  Internal  Revenue  and  all  persons  shall  be  notified  of  the 
amount  for  which  they  are  respectively  liable  on  or  before  the  first 
day  of  June  of  each  successive  year,  and  said  amounts  shall  be  paid 
on  or  before  the  fifteenth  day  of  June,  except  in  cases  of  refusal  or 
neglect  to  make  such  return  and  in  cases  of  erroneous,  false,  or  fraudu- 
lent returns,  in  which  cases  the  Commissioner  of  Internal  Revenue 
shall,  upon  the  discovery  thereof,  at  any  time  within  three  years 
after  said  return  is  due,  or  has  been  made,  make  a  return  upon  infor- 
mation obtained  as  provided  for  in  this  title  or  by  existing  law,  or 
require  the  necessary  corrections  to  be  made,  and  the  assessment 
made  by  the  Commissioner  of  Internal'  Revenue  thereon  shall  be 
paid  by  such  person  or  persons  immediately  upon  notification  of  the 
amount  of  such  assessment;  and  to  any  sum  or  sums  due  and  unpaid 
after  the  fifteenth  day  of  June  in  any  year,  and  for  ten  days  after 
notice  and  demand  thereof  by  the  collector,  there  shall  be  added  the 
sum  of  five  per  centum  on  the  amount  of  tax  unpaid,  and  interest  at 
the  rate  of  one  per  centum  per  month  upon  said  tax  from  the  time 
the  same  became  due,  except  from  the  estates  of  insane,  deceased,  or 
insolvent  persons.! 

[  (b)  All  persons,  corporations,  partnerships,  associations,  and  insur- 
ance companies,  in  whatever  capacity  acting,  including  lessees  or  mort- 


iln  U.  S.  V.  General  Inspection  &  Loading  Co.,  204  Fed.  657  (1913). 
District  of  N.  J.,  it  was  held  that  under  the  Corporate  Excise  Law,  which 
contained  a  similar  provision  for  giving  notice  of  the  assessment  to 
the  corporation,  this  notice  could  be  lawfully  given  by  mail;  and  a 
notice  so  sent  by  the  Collector,  in  a  franked  envelope,  bearing  the 
return  card,  was  presumptively  received,  and  the  burden  was  upon 
the  corporation  to  prove  to  the  contrary  to  avoid  the  penalty  for  non- 
payment, following  the  general  rule  declared  in  Rosenthal  v.  Walker, 
111  U.  S.  185,  28  L.  Ed.  395  (1884). 


THE   FEDERAL   INCOME   TAX.  963 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

gagors  of  real  or  personal  property,  trustees  acting  in  any  trust  ca- 
pacity, executors,  administrators,  receivers,  conservators,  employers, 
and  all  officers  and  employees  of  the  United  States,  having  the  control, 
receipt,  custody,  disposal,  or  payment  of  interest,  rent,  salaries,  wages, 
premiums,  annuities,  compensation,  remuneration,  emoluments,  or 
other  fixed  or  determinable  annual  or  periodical  gains,  profits,  and 
income  of  any  non-resident  alien  individual,  other  than  income  derived 
from  dividends  on  capital  stock,  or  from  the  net  earnings  of  a  corpora- 
tion, joint-stock  company  or  association,  or  insurance  company,  which 
is  taxable  upon  its  net  income  as  provided  in  this  title,  are  hereby 
authorized  and  required  to  deduct  and  withhold  from  such  annual  or 
periodical  gains,  profits,  and  income  such  sum  as  will  be  sufficient  to 
pay  the  normal  tax  imposed  thereon  by  this  title,  and  shall  make 
returns  thereof  on  or  before  March  first  of  each  year  and,  on  or  before 
the  time  fixed  by  law  for  the  payment  of  the  tax,  shall  pay  the  amount 
withheld  to  the  officer  of  the  United  States  Government  authorized  to 
receive  the  same;  and  they  are  each  hereby  made  personally  liable  for 
such  tax,  and  they  are  each  hereby  indemnified  against  every  person, 
corporation,  partnership,  association,  or  insurance  company,  or  demand 
whatsoever  for  all  payments  which  they  shall  make  in  pursuance  and 
by  virtue  of  this  title.] 

[(c)  The  amount  of  the  normal  tax  hereinbefore  imposed  shall  also 
be  deducted  and  withheld  from  fixed  or  determinable  annual  or  peri- 
odical gains,  profits,  and  income  derived  from  interest  upon  bonds  and 
mortgages,  or  deeds  of  trust  or  other  similar  obligations  of  corpora- 
tions, joint-stock  companies,  associations,  and  insurance  companies  (if 
such  bonds,  mortgages,  or  other  obligations  contain  a  contract  or  pro- 
vision by  which  the  obligor  agrees  to  pay  any  portion  of  the  tax  im- 
posed by  this  title  upon  the  obligee  or  to  reimburse  the  obligee  for  any 
portion  of  the  tax  or  to  pay  the  Interest  without  deduction  for  any  tax 
which  the  obligor  may  be  required  or  permitted  to  pay  thereon  or  to 
retain  therefrom  under  any  law  of  the  United  States),  whether  payable 
annually  or  at  shorter  or  longer  periods  and  whether  such  interest 
is  payable  to  a  non-rosident  alien  individual  or  to  an  individual  citizen 
or  resident  of  the  United  States,  subject  to  the  provisions  of  the  fore- 
going subdivision  (b)  of  this  section  requiring  the  tax  to  be  withheld 
at  the  source  and  deducted  from  annual  income,  and  returned  and  paid 
to  the  Government,  unless  the  person  entitled  to  receive  such  interest 
shall  file  with  the  withholding  agent,  on  or  before  February  first,  a 
signed  notice  in  writing  claiming  the  benefit  of  an  exemption  under 
section  seven  of  this  title.] 

(Subdivisions  (d)  and  (e)  providing  for  withholding  and  payment 
at  source  of  amount  of  normal  tax  from  payments  of  interest  upon 
foreign   securities  also   repealed  by   act  of  October   3,   1917.) 

[  (f)  All  persons,  corporations,  partnerships,  or  associations,  under- 
taking as  a  matter  of  busint^ss  or  for  profit  the  collection  of  foreign 
payments  of  interest  or  dividends  by  means  of  coupons,  checks,  or  bills 


964  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackcets] 

of  exchange  shall  obtain  a  license  from  the  Commissioner  of  Internal 
Revenue,  and  shall  be  subject  to  such  regulations  enabling  the  Govern- 
ment to  obtain  the  information  required  under  this  title,  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  shall  prescribe;  and  whoever  knowingly  undertakes  to 
collect  such  payments  as  aforesaid  without  having  obtained  a  license 
therefor,  or  without  complying  with  such  regulations,  shall  be  deemed 
guilty  of  a  misdemeanor  and  for  each  offense  be  fined  in  a  sum  not 
exceeding  $5,000,  or  imprisoned  for  a  term  not  exceeding  one  year, 
or  both,  in  the  discretion  of  the  court. 

(g)  The  tax  herein  imposed  upon  gains,  profits,  and  incomes  not 
falling  under  the  foregoing  and  not  returned  and  paid  by  virtue  of  the 
foregoing  or  as  otherwise  provided  by  law  shall  be  assessed  by  per- 
sonal return  under  rules  and  regulations  to  be  prescribed  by  the  Com- 
missioner of  Internal  Revenue  and  approved  by  the  Secretary  of  the 
Treasury.  The  intent  and  purpose  of  this  title  is  that  all  gains,  profits, 
and  income  of  a  taxable  class,  as  defined  by  this  title,  shall  be  charged 
and  assessed  with  the  corresponding  tax,  normal  and  additional,  pre- 
scribed by  this  title,  and  said  tax  shall  be  paid  by  the  owner  of  such 
income,  or  the  proper  representative  having  the  receipt,  custody,  con- 
trol, or  disposal  of  the  same.  For  the  purpose  of  this  title  ownership 
or  liability  shall  be  determined  as  of  the  year  for  which  a  return  is 
required  to  be  rendered. 

The  provisions  of  this  section,  except  Subdivision  C,  relating  to  the 
deduction  and  payment  of  the  tax  at  the  source  of  income  shall  only 
apply  to  the  normal  tax  hereinbefore  imposed  upon  non-resident  alien 
individuals.] 

PART  II— ON  CORPORATIONS. 

[Sec.  10.  (a)  That  there  shall  be  levied,  assessed,  collected,  and  paid 
annually  upon  the  total  net  income  received  in  the  preceding  calendar 
year  from  all  sources  by  every  corporation,  joint-stock  company  or 
association,  or  insurance  company,  organized  in  the  United  States,  no 
matter  how  created  or  organized,  but  not  including  partnerships,  a  tax 
of  two  per  centum  upon  such  income;  and  a  like  tax  shall  be  levied, 
assessed,  collected,  and  paid  annually  upon  the  total  net  income  re- 
ceived in  the  preceding  calendar  year  from  all  sources  within  the 
United  States  by  every  corporation,  joint-stock  company  or  association, 
or  insurance  company,  organized,  authorized,  or  existing  under  the 
laws  of  any  foreign  country,  including  interest  on  bonds,  notes,  or 
other  interest-bearing  obligations  of  residents,  corporate  or  otherwise, 
and  including  the  income  derived  from  dividends  on  capital  stock  or 
from  net  earnings  of  resident  corporations,  joint-stock  companies  or 
associations,  or  insurance  companies,  whose  net  income  is  taxable  under 
this  title.i 


1  As   to   the  determination   of  what   is   corporate   income   as   distin- 
guished from  capital,  see  Lynch  v.  Turrish,  236  Fed.  653,  supra,  p.  954. 


THE   FEDERAL   INCOME    TAX.  965 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

(b)  In  addition  to  the  income  tax  imposed  by  subdivision  (a)  of  this 
section  there  shall  be  levied,  assessed,  collected,  and  paid  annually  an 
additional  tax  of  ten  per  centum  upon  the  amount,  remaining  undis- 
tributed six  months  after  the  end  of  each  calendar  or  fiscal  year, 
of  the  total  net  income  of  every  corporation,  joint-stock  company  or 
association,  or  insurance  company,  received  during  the  year,  as  de- 
termined for  the  purposes  of  the  tax  imposed  by  such  subdivision  (a), 
but  not  including  the  amount  of  any  income  taxes  paid  by  it  within  the 
year  imposed  by  the  authority  of  the  United  States. 

The  tax  imposed  by  this  subdivision  shall  not  apply  to  that  portion 
of  such  undisputed  net  income  which  is  actually  invested  and  employed 
in  the  business  or  is  retained  for  employment  in  the  reasonable  re- 
quirements of  the  business,  or  is  invested  in  obligations  of  the  United 
States  issued  after  September  first,  nineteen  hundred  and  seventeen: 
Provided,  That  if  the  Secretary  of  the  Treasury  ascertains  and  finds 
that  any  portion  of  such  amount  so  retained  at  any  time  for  employ- 
ment in  the  business  is  not  so  employed  or  is  not  reasonably  required 
In  the  business  a  tax  of  fifteen  per  centum  shall  be  levied,  assessed, 
collected,  and  paid  thereon. 

The  foregoing  tax  rates  shall  apply  to  the  undistributed  net  income 
received  by  every  taxable  corporation,  joint-stock  company  or  associa- 
tion, or  insurance  company  in  the  calendar  year  nineteen  hundred  and 
seventeen  and  in  each  year  thereafter,  except  that  if  it  has  fixed  its 
own  fiscal  year  under  the  provisions  of  existing  law,  the  foregoing 
rates  shall  apply  to  the  proportion  of  the  taxable  undistributed  net 
income  returned  for  the  fiscal  year  ending  prior  to  December  thirty- 
first,  nineteen  hundred  and  seventeen,  which  the  period  between  Janu- 
ary first,  nineteen  hundred  and  seventeen,  and  the  end  of  such  fiscal 
year  bears  to  the  whole  of  such  fiscal  year.] 


CONDITIONAL    AND    OTHER    EXEMPTIONS. 

Sec.  11.  (a)  That  there  shall  not  be  taxed  under  this  title  any  In- 
come received  by  any — 

First.     Labor,  agricultural,  or  horticultural  organization; 

Second.  Mutual  savings  bank  not  having  a  capital  stock  represented 
by  shares; 

Third.  Fraternal  beneficiary  society,  order,  or  association,  operat- 
ing under  the  lodge  system  or  for  the  exclusive  benefit  of  the  mem- 
bers of  a  fraternity  itself  operating  under  the  lodge  system,  and  pro- 
viding for  the  payment  of  life,  sick,  accident,  or  other  benefits  to  the 
members  of  such   society,  order,   or  association   or  their  dependents; 

Fourth.  Domestic  building  and  loan  association  and  cooperative 
banks  without  capital  stock  organized  and  operated  for  mutual  pur- 
poses and  without  profit; 

Fifth.  Cemetery  company  owned  and  operated  exclusively  for  the 
benefit  of  its  members; 


966  THE  FEDERAL  INCOME  TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

Sixth.  Corporation  or  association  organized  and  operated  exclu- 
sively for  religious,  charitable,  scientific,  or  educational  purposes,  no 
part  of  the  net  income  of  which  inures  to  the  benefit  of  any  private 
stockholder  or  individual; 

Seventh.  Business  league,  chamber  of  commerce,  or  board  of  trade, 
not  organized  for  profit  and  no  part  of  the  net  income  of  which  inures 
to  the  benefit  of  any  private  stockholder  or  individual;   • 

Eighth.  Civic  league  or  organization  not  organized  for  profit  but 
operated   exclusively  for   the  promotion  of  social  welfare; 

Ninth.  Club  organized  and  operated  exclusively  for  pleasure,  recre- 
ation, and  other  non-profitable  purposes,  no  part  of  the  net  income 
of  which  inures  to  the  benefit  of  any  private  stockholder  or  member; 

Tenth.  Farmers'  or  other  mutual  hail,  cyclone,  or  fire  insurance 
company,  mutual  ditch  or  irrigation  company,  mutual  or  cooperative 
telephone  company,  or  like  organization  of  a  purely  local  character, 
the  income  of  which  consists  solely  of  assessments,  dues,  and  fees 
collected  from  members  for  the  sole  purpose  of  meeting  its  expenses; 

Eleventh.  Farmers,'  fruit  growers,'  or  like  association,  organized 
and  operated  as  a  sales  agent  for  the  purpose  of  marketing  the  pro- 
ducts of  its  members  and  turning  back  to  them  the  proceeds  of  sales, 
less  the  necessary  selling  expenses,  on  the  basis  of  the  quantity  of 
produce  furnished  by  them; 

Twelfth.  Corporation  or  association  organized  for  the  exclusive 
purpose  of  holding  title  to  property,  collecting  income  therefrom, 
and  turning  over  the  entire  amount  thereof,  less  expenses,  to  an  organi- 
zation which  itself  is  exempt  from  the  tax  imposed  by  this  title;   or 

Thirteenth.  Federal  land  banks  and  national  farm-loan  associa- 
tions as  provided  in  section  twenty-six  of  the  Act  approved  July  sev- 
enteenth, nineteen  hundred  and  sixteen,  entitled  "An  Act  to  provide 
capital  for  agricultural  development,  to  create  standard  forms  of  in- 
vestment based  upon  farm  mortgage,  to  equalize  rates  of  interest 
upon  farm  loans,  to  furnish  a  market  for  United  States  bonds,  to 
create  Government  depositaries  and  financial  agents  for  the  United 
States,  and  for  other  purposes." 

Fourteen.  Joint-stock  land  banks  as  to  income  derived  from  bonds 
or  debentures  of  other  joint-stock  land  banks  or  any  Federal  land 
bank  belonging  to  such  joint-stock  land  bank. 

(b)  There  shall  not  be  taxed  under  this  title  any  income  derived 
from  any  public  utility  or  from  the  exercise  of  any  essential  govern- 
mental function  accruing  to  any  State,  Territory,  or  the  District  of 
Columbia,  or  any  political  subdivision  of  a  State  or  Territory,  nor  any 
income  accruing  to  the  government  of  the  Philippine  Islands  or  Porto 
Rico,  or  of  any  political  subdivision  of  the  Philippine  Islands  or 
Porto  Rico:  Provided,  That  whenever  any  State,  Territory,  or  the 
District  of  Columbia,  or  any  political  subdivision  of  a  State  or  Ter- 
ritory, has,  prior  to  the  passage  of  this  title,  entered  in  good  faith 
into  a  contract  with  any  person  or  corporation,  the  object  and  pur- 


THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 


967 


pose  of  which  is  to  acquire,  construct,  operate,  or  maintain  a  public 
utility,  no  tax  shall  be  levied  under  the  provisions  of  this  title  upon 
the  income  derived  from  the  operation  of  such  public  utility,  so  far 
as  the  payment  thereof  will  impose  a  loss  or  burden  upon  such  State, 
Territory,  or  the  District  of  Columbia,  or  a  political  subdivision  of 
a  State  or  Territory;  but  this  provision  is  not  intended' to  confer 
upon  such  person  or  corporation  any  financial  gain  or  exemption  or  to 
relieve  such  person  or  corporation  from  the  payment  of  a  tax  as  pro- 
vided for  in  this  title  upon  the  part  or  portion  of  the  said  income  to 
which  such  person  or  corporation  shall  be  entitled  under  such  con- 
tract. 

DEDUCTIONS. 

Sec.  12.  (a)  In  the  case  of  a  corporation,  joint-stock  company  or 
association,  or  insurance  company,  organized  in  the  United  States, 
such  net  income  shall  be  ascertained  by  deducting  from  the  gross 
amount  of  its  income  received  within  the  year  from  all  sources — 

First.  All  the  ordinary  and  necessary  expenses  paid  within  the  year 
in  the  maintenance  and  operation  of  its  business  and  properties, 
including  rentals  or  other  payments  required  to  be  made  as  a  condi- 
tion to  the  continued  use  or  possession  of  property  to  which  the  cor- 
poration has  not  taken  or  is  not  taking  title,  or  in  which  it  has  no 
equity.i 

Second.  All  losses  actually  sustained  and  charged  off  within  the 
year  and  not  compensated  by  insurance  or  otherwise,  including  a 
reasonable  allowance  for  the  exhaustion,  wear  and  tear  of  property 
arising  out  of  its  use  or  employment  in  the  business  or  trade:  (a)  in 
the  case  of  oil  and  gas  wells  a  reasonable  allowance  for  actual  reduc- 
tion in  flow  and  production  to  be  ascertained  not  by  the  flush  flow, 
but  by  the  settled  production  or  regular  flow;   (b)  in  the  case  of  mines  2 


1  The  determination  of  what  are  proper  expenses  to  be  deducted 
from  gross  income  was  discussed  in  the  construction  of  the  corpora- 
tion excise  tax  law  of  1909.  which  was  in  effect  an  income  tax  levied 
upon  corporations  doing  business,  see  Baldwin  Locomotive  Works 
V.  McCosh,  221  Fed.  59  (1915),  C.  C.  A.  3rd  Circuit;  Conn.  Mut.  Life 
Ins.  Co.  V.  Eaton,  218  Fed.  206;  Middlesex  Banking  Co.  v.  Eaton,  Col- 
lector, 221  Fed.  86;  Herrold  v.  Mut.  Benefit  Life  Ins.  Co.,  201  Fed. 
918,  C.  C.  A.  3rd  Circuit. 

2  In  Von  Baumbach  v.  Sargeant  Land  Co.,  242  U.  S.  ,  61  L.  Ed. 

,    (January,  1917),  the  Court  reversed  the  C.   C.  A..  8th  Circuit, 

in  219  Fed.  231,  and  held  that  the  so-called  royalty  received  by  the 
corporate  owners  of  land  leased  for  long  terms,  for  the  purpose  of 
mining  merchantable  iron  ore,  to  persons  who  agreed  to  pay  monthly 
a  specified  sum  per  ton  for  all  ore  mined  and  shipped  the  previous 
month,  was  an  income  under  the  Corporation  Tax  Law  of  1909,  which 
imposed  a  tax  measure  by  annual  income  upon  doing  business  in  a 
corporate  capacity.  The  Court  held  also  that  the  exhaustion  of  the 
ore  body  resulting  from  the  process  of  mining,  was  not  an  element 
to  be  considered  in  determining  the  reasonable  depreciation  which, 
under  the  Act  of  1909,  was  to  be  deducted  from  the  annual   Income 


968  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

a  reasonable  allowance  for  depletion  thereof  not  to  exceed  the  market 
value  in  the  mine  of  the  product  thereof  which  has  been  mined  and 
sold  during  the  year  for  which  the  return  and  computation  are  made, 
such  reasonable  allowance  to  be  made  in  the  case  of  both  (a)  and  (b) 
under  rules  and  regulations  to  be  prescribed  by  the  Secretary  of  the 
Treasury:  Provided,  That  when  the  allowance  authorized  in  (a)  and 
(b)  shall  equal  the  capital  originally  invested,  or  in  case  of  purchase 
made  prior  to  March  first,  nineteen  hundred  and  thirteen,  the  fair 
market  value  as  of  that  date,  no  further  allowance  shall  be  made; 
and  (c)  in  the  case  of  insurance  companies,  the  net  addition,  if  any, 
required  by  law  to  be  made  within  the  year  to  reserve  funds  and  the 
sums  other  than  dividends  paid  within  the  year  on  policy  and  annuity 
contracts:  Provided,  That  no  deduction  shall  be  allowed  for  any 
amount  paid  out  for  new  buildings,  permanent  improvements,  or 
betterments  made  to  increase  the  value  of  any  property  or  estate, 
and  no  deduction  shall  be  made  for  any  amount  of  expense  of  restoring 
property  or  making  good  the  exhaustion  thereof  for  which  an  allow- 
ance is  or  has  been  made:  Provided  further,  That  mutual  fire  and 
mutual  employers'  liability  and  mutual  workmen's  compensation  and 
mutual  casualty  insurance  companies  requiring  their  members  to 
make  premium  deposits  to  provide  for  losses  and  expenses  shall  not 
return  as  income  any  portion  of  the  premium  deposits  returned  to 
their  policyholders,  but  shall  return  as  taxable  income  all  income 
received  by  them  from  all  other  sources  plus  such  portions  of  the 
premium  deposits  as  are  retained  by  the  companies  for  purposes 
other  than  the  payment  of  losses  and  expenses  and  reinsurance 
reserves:  Provided  further.  That  mutual  marine  insurance  companies 
shall  include  in  their  return  of  gross  income  gross  premiums  collected 
and  received  by  them  less  amounts  paid  for  reinsurance,  but  shall  be 
entitled  to  include  in  deductions  from  gross  income  amounts  repaid 
to  policyholders  on  account  of  premiums  previously  paid  by  them 
and  interest  paid  upon  such  amounts  between  the  ascertainment 
thereof  and  the  payment  thereof,  and  life  insurance  companies  shall 
not  include  as  income  in  any  year  such  portion  of  any  actual  premium 
received  from  any  individual  policyholder  as  shall  have  been  paid 
back  or  credited  to  such  individual  policyholder,  or  treated  as  an 
abatement  of  premium  of  such  individual  policyholder,  within  such 
year; 

Third.  The  amount  of  interest  paid  within  the  year  on  its  in- 
debtedness (except  on  indebtedness  incurred  for  the  purchase  of 
obligations  or  securities  the  interest  upon  which  is  exempt  from 
taxation  as  income  under  this  title)  to  an  amount  of  such  indebted- 
ness not  in  excess  of  the  sum  of  (a)  the  entire  amount  of  the  paid-up 
capital   stock  outstanding  at  the  close  of  the  year,   or,  if  no  capital 


of  a  corporate  miner.  The  Court,  however,  recognized  in  the  opinion 
that  Congress  had  realized  the  equitable  considerations  requiring  an 
allowance  both  in  the  Act  of  1913  and  in  the  Act  of  1916,  but  had 
not  done  so  in  the  Act  of  1909. 


THE   FEDERAL   INCOME   TAX.  969 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

stock,  the  entire  amount  of  capital  employed  in  the  business  at  the 
close  of  the  year,  and  (b)  one-half  of  its  interest-bearing  indebtedness 
then  outstanding:  Provided,  That  for  the  purpose  of  this  title  pre- 
ferred capital  stock  shall  not  be  considered  interest-bearing  indebt- 
edness, and  interest  or  dividends  paid  upon  this  stock  shall  not  be 
deductible  from  gross  income:  Provided  further.  That  in  cases  where- 
in shares  of  capital  stock  are  issued  without  par  or  nominal  value, 
the  amount  of  paid-up  capital  stock,  within  the  meaning  of  this  sec- 
tion, as  represented  by  such  shares,  will  be  the  amount  of  cash,  or  its 
equivalent,  paid  or  transferred  to  the  corporation  as  a  consideration 
for  such  shares:  Provided  further.  That  in  the  case  of  indebtedness 
•wholly  secured  by  property  collateral,  tangible  or  intangible,  the  sub- 
ject of  sale  or  hypothecation  in  the  ordinary  business  of  such  cor- 
poration, joint-stock  company  or  association  as  a  dealer  only  in  the 
property  constituting  such  collateral,  or  in  loaning  the  funds  thereby 
procured,  the  total  interest  paid  by  such  corporation,  company,  or 
association  within  the  year  on  any  such  indebtedness  may  be  de- 
ducted as  a  part  of  its  expenses  of  doing  business,  but  interest  on 
such  indebtedness  shall  only  be  deductible  on  an  amount  of  such  in- 
debtedness not  in  excess  of  the  actual  value  of  such  property  col- 
lateral: Provided  further,  That  in  the  case  of  bonds  or  other  indebt- 
edness, which  have  been  issued  with  a  guaranty  that  the  interest 
payable  thereon  shall  be  free  from  taxation,  no  deduction  for  the 
payment  of  the  tax  herein  imposed,  or  any  other  tax  paid  pursuant 
to  such  guaranty,  shall  be  allowed;  and  in  the  case  of  a  bank,  bank- 
ing association,  loan  or  trust  company,  interest  paid  within  the  year 
on  deposits  or  on  moneys  received  for  investment  and  secured  by  in- 
terest-bearing certificates  of  indebtedness  issued  by  such  bank,  bank- 
ing association,  loan  or  trust  company  shall  be  deducted; 

Fourth.  Taxes  paid  within  the  year  imposed  by  the  authority  of 
the  United  States  (except  income  and  excess  profits  taxes),  or  of  its 
Territories,  or  possessions,  or  any  foreign  country,  or  by  the  authority 
of  any  State,  county,  school  district,  or  municipality,  or  other  taxing 
subdivision  of  any  State,  not  including  those  assessed  against  local 
benefits,  i 

(b)  In  the  case  of  a  corporation,  joint-stock  company  or  association, 
or  insurance  company,  organized,  authorized,  or  existing  under  the 
laws  of  any  foreign  country,  such  net  income  shall  be  ascertained 
by  deducting  from  the  gross  amount  of  its  income  received  within 
the  year  from  all  sources  within  the  United  States — 

First.  All  the  ordinary  and  necessary  expenses  actually  paid  within 
the  year  out  of  earnings  in  the  maintenance  and  operation  of  its 
business   and    property   within    the   United    States,    including   rentals 


1  It  was  held  in  Elliott  Nat'l  Bank  v.  Gill,  C.  C.  A.  1st  Circuit,  218 
Fed.  933,  under  the  corporation  tax  act  of  1909,  that  a  national  bank 
was  not  authorized  to  deduct  taxes  assessed  against  its  stockholders 
which  it  had  paid  in  the  first  instance  for  the  stockholders. 


970  THE   FEDERAL   INCOME  TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

or  other  payments  required  to  be  made  as  a  condition  to  the  continued 
use  or  possession  of  property  to  which  the  corporation  has  not  talten 
or  is  not  taking  title,  or  in  which  it  has  no  equity. 

Second.  All  losses  actually  sustained  within  the  year  in  business 
or  trade  conducted  by  it  within  the  United  States  and  not  compen- 
sated by  insurance  or  otherwise,  including  a  reasonable  allowance 
for  the  exhaustion,  wear  and  tear  of  property  arising  out  of  its  use 
or  employment  in  the  business  or  trade;  (a)  and  in  the  case  (a)  of 
oil  and  gas  wells  a  reasonable  allowance  for  actual  reduction  in  flow 
and  production  to  be  ascertained  not  by  the  flush  flow,  but  by  the 
settled  production  or  regular  flow;  (b)  in  the  case  of  mines  a  reason- 
able allowance  for  depletion  thereof  not  to  exceed  the  market  value 
in  the  mine  of  the  product  thereof  which  has  been  mined  and  sold 
during  the  year  for  which  the  return  and  computation  are  made, 
such  reasonable  allowance  to  be  made  in  the  case  of  both  (a)  and  (b) 
under  rules  and  regulations  to  be  prescribed  by  the  Secretary  of  the 
Treasury:  Provided,  That  when  the  allowance  authorized  in  (a) 
and  (b)  shall  equal  the  capital  originally  invested,  or  in  case  of  pur- 
chase made  prior  to  March  first,  nineteen  hundred  and  thirteen,  the 
fair  market  value  as  of  that  date,  no  further  allowance  shall  be  made; 
and  (c)  in  the  case  of  insurance  companies,  the  net  addition,  if  any, 
required  by  law  to  be  made  within  the  year  to  reserve  funds  and  the 
sums  other  than  dividends  paid  within  the  year  on  policy  and  annuity 
contracts:  Provided,  That  no  deduction  shall  be  allowed  for  any 
amount  paid  out  for  new  buildings,  permanent  improvements,  or 
betterments,  made  to  increase  the  value  of  any  property  or  estate, 
and  no  deduction  shall  be  made  for  any  amount  of  expense  of  re- 
storing property  or  making  good  the  exhaustion  thereof  for  which 
an  allowance  is  or  has  been  made:  Provided,  further.  That  mutual 
fire  and  mutual  employers'  liability  and  mutual  workmen's!  com- 
pensation and  mutual  casualty  insurance  companies  requiring  their 
members  to  make  premium  deposits  to  provide  for  losses  and  expenses 
shall  not  return  as  income  any  portion  of  the  premium  deposits 
returned  to  their  policyholders,  but  shall  return  as  taxable  income 
all  income  received  by  them  from  all  other  sources  plus  such  portions 
of  the  premium  deposits  as  are  retained  by  the  companies  for  pur- 
poses other  than  the  payment  of  losses  and  expenses  and  reinsurance 
reserves:  Provided  further.  That  mutual  marine  insurance  companies 
shall  include  in  their  return  of  gross  income  gross  premiums  collected 
and  received  by  them  less  amounts  paid  for  reinsurance,  but  shall  be 
entitled  to  include  in  deductions  from  gross  income  amounts  repaid 
to  policyholders  on  account  of  premiums  previously  paid  by  them, 
and  interest  paid  upon  such  amounts  between  the  ascertainment 
thereof  and  the  payment  thereof,  and  life  insurance  companies  shall 
not  include  as  income  in  any  year  such  portion  of  any  actual  pre- 
mium received  from  any  individual  policyholder  as  shall  have  been 
paid  back  or  credited  to  such  individual  policyholder,  or  treated  as 
an  abatement  of  premium  of  such  individual  policyholder,  within 
such  year; 


THE   FEDERAL    INCOME   TAX.  971 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

[Third.  The  amount  of  interest  paid  within  the  year  on  its  indebt- 
edness (except  on  indebtedness  incurred  for  the  purchase  of  obliga- 
tions or  securities  the  interest  upon  which  is  exempt  from  taxation 
as  income  under  this  title)  to  an  amount  of  such  Indebtedness  not 
in  excess  of  the  proportion  of  the  sum  of  (a)  the  entire  amount  of 
the  paid-up  capital  stock  outstanding  at  the  close  of  the  year,  or,  if 
no  capital  stock,  the  entire  amount  of  the  capital  employed  in  the 
business  at  the  close  of  the  year,  and  (b)  one-half  of  its  interest- 
bearing  indebtedness  then  outstanding,  which  the  gross  amount  of 
its  income  for  the  year  from  business  transacted  and  capital  invested 
within  the  United  States  bears  to  the  gross  amount  of  its  income  de- 
rived from  all  sources  within  and  without  the  United  States:  Pro- 
vided, That  in  the  case  of  bonds  or  other  indebtedness  which  have 
been  issued  with  a  guaranty  that  the  interest  payable  thereon  shall 
be  free  from  taxation,  no  deduction  for  the  payment  of  the  tax  herein 
imposed  or  any  other  tax  paid  pursuant  to  such  guaranty  shall  be 
allowed;  and  in  case  of  a  bank,  banking  association,  loan  or  trust 
company,  or  branch  thereof,  interest  paid  within  the  year  on  deposits 
by  or  on  moneys  received  for  investment  from  either  citizens  or  resi- 
dents of  the  United  States  and  secured  by  interest-bearing  certificates 
of  indebtedness  issued  by  such  bank,  banking  association,  loan  or 
trust  company,  or  branch  thereof; 

Fourth.  Taxes  paid  within  the  year  imposed  by  the  authority  of 
the  United  States  (except  income  and  excess  profits  taxes),  or  of  its 
Territories,  or  possessions,  or  by  the  authority  of  any  State,  county, 
school  district,  or  municipality,  or  other  taxing  subdivision  of  any 
State,  paid  within  the  United  States,  not  including  those  assessed 
against  local  benefits.] 

(c)  In  the  case  of  assessment  insurance  companies,  whether  domes- 
tic or  foreign,  the  actual  deposit  of  sums  with  State  or  Territorial 
officers,  pursuant  to  law,  as  additions  to  guarantee  or  reserve  funds 
shall  be  treated  as  being  payments  required  by  law  to  reserve  funds. 


Sec.  13.  (a)  The  tax  shall  be  computed  upon  the  net  income,  as 
thus  ascertained,  received  within  each  preceding  calendar  year  end- 
ing December  thirty-first:  Provided,  That  any  corporation,  joint- 
stock  company  or  association,  or  insurance  company,  subject  to  this 
tax,  may  designate  the  last  day  of  any  month  in  the  year  as  the  day 
of  the  closing  of  its  fiscal  year  and  shall  be  entitled  to  have  the  tax 
payable  by  it  computed  upon  the  basis  of  the  net  income  ascertained 
as  herein  provided  for  the  year  ending  on  the  day  so  designated  in 
the  year  preceding  the  date  of  assessment  instead  of  upon  the  basis 
of  the  net  income  for  the  calendar  year  preceding  the  date  of  assess- 
ment; and  it  shall  give  notice  of  the  day  it  has  thus  designated  as  the 
closing  of  its  fiscal  year  to  the  collector  of  the  district  in  which  its 
principal  business  oflBce  is  located  at  any   time   not  less   than  thirty 


972  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

days  prior  to  the  first  day  of  March  of  the  year  in  which  its  return 
would  be  filed  if  made  upon  the  basis  of  the  calendar  year; 

(b)  Every  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  subject  to  the  tax  herein  imposed,  shall,  on  or  before 
the  first  day  of  march,  nineteen  hundred  and  seventeen,  and  the  first 
day  of  March  in  each  year  thereafter,  or,  if  it  has  designated  a  fiscal 
year  for  the  computation  of  its  tax,  then  within  sixty  days  after  the 
close  of  such  fiscal  year  ending  prior  to  December  thirty-first,  nineteen 
hundred  and  sixteen,  and  the  close  of  each  such  fiscal  year  thereafter, 
render  a  true  and  accurate  return  of  its  annual  net  income  in  the  man- 
ner and  form  to  be  prescribed  by  the  Commissioner  of  Internal  Rev- 
enue, with  the  approval  of  the  Secretary  of  the  Treasury,  and  contain- 
ing such  facts,  data,  and  Information  as  are  appropriate  and  in  the 
opinion  of  the  commissioner  necessary  to  determine  the  correctness 
of  the  net  income  returned  and  to  carry  out  the  provisions  of  this 
title.  The  return  shall  be  sworn  to  by  the  president,  vice-president, 
or  other  principal  officer,  and  by  the  treasurer  or  assistant  treasurer. 
The  return  shall  be  made  to  the  collector  of  the  district  in  which  is 
located  the  principal  office  of  the  corporation,  company,  or  associa- 
tion, where  are  kept  its  books  of  account  and  other  data  from  which 
the  return  is  prepared,  or  in  the  case  of  a  foreign  corporation,  com- 
pany, or  association,  to  the  collector  of  the  district  in  which  is  located 
its  principal  place  of  business  in  the  United  States,  or  if  it  have  no 
principal  place  of  business,  office,  or  agency  in  the  United  States,  then 
to  the  collector  of  internal  revenue  at  Baltimore,  Maryland.  All  such 
returns  shall  as  received  be  transmitted  forthwith  by  the  collector  to 
the  Commissioner  of  Internal  Revenue; 

(c)  In  cases  wherein  receivers,  trustees  in  bankruptcy,  or  assignees 
are  operating  the  property  or  business  of  corporations,  joint-stock 
companies  or  associations,  or  insurance  companies,  subject  to  tax 
imposed  by  this  title,  such  receivers,  trustees,  or  assignees  shall 
make  returns  of  net  income  as  and  for  such  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies,  in  the 
same  manner  and  form  as  such  organizations  are  hereinbefore  re- 
quired to  make  returns,  and  any  income  tax  due  on  the  basis  of  such 
returns  made  by  receivers,  trustees,  or  assignees  shall  be  assessed 
and  collected  in  the  same  manner  as  if  assessed  directly  against  the 
organizations  of  whose  businesses  or  properties  they  have  custody 
and  control; 

(d)  A  corporation,  joint-stock  company  or  association,  or  insur- 
ance company,  keeping  accounts  upon  any  basis  other  than  that  of 
actual  receipts  and  disbursements,  unless  such  other  basis  does  not 
clearly  reflect  its  income,  may,  subject  to  regulations  made  by  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  make  its  return  upon  the  basis  upon  which  its 
accounts  are  kept,  in  which  case  the  tax  shall  be  computed  upon  its 
income  as  so  returned; 

f  (e)  All  the  provisions  of  this  title  relating  to  the  tax  authorized 
and  required  to  be  deducted  and  withheld  and  paid  to  the  officer  of  th» 


THE   FEDERAL   INCOME   TAX.  973 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

United  States  Government  authorized  to  receive  the  same  from  the 
Income  of  non-resident  alien  individuals  from  sources  within  the 
United  States  shall  be  made  applicable  to  the  tax  imposed  by  subdi- 
vision (a)  of  section  ten  upon  incomes  derived  from  interest  upon 
bonds  and  mortgages  or  deeds  of  trust  or  similar  obligations  of  do- 
mestic or  other  resident  corporations,  joint-stock  companies  or  asso- 
ciations, and  insurance  companies  by  non-resident  alien  firms,  co- 
partnerships, companies,  corporations,  joint-stock  companies  or  asso- 
ciations, and  insurance  companies,  not  engaged  in  business  or  trade 
within  the  United  States  and  not  having  any  office  or  place  of  business 
therein.] 

(f)  Likewise,  all  the  provisions  of  this  title  relating  to  the  tax 
authorized  and  required  to  be  deducted  and  withheld  and  paid  to 
the  officer  of  the  United  States  Government  authorized  to  receive 
the  same  from  the  income  of  non-resident  alien  individuals  from 
sources  within  the  United  States  shall  be  made  applicable  to  income 
derived  from  dividends  upon  the  capital  stock  or  from  the  net  earn- 
ings of  domestic  or  other  resident  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies  by  non-resident  alien 
companies,  corporations,  joint-stock  companies  or  associations,  and 
Insurance  companies  not  engaged  in  business  or  trade  within  the 
United  States  and  not  having  any  office  or  place  of  business  therein. 

ASSESSMENT    AND    ADMIXISTRATION 

Sec.  14.  (a)  All  assessments  shall  be  made  and  the  several  cor- 
porations, joint-stock  companies  or  associations,  and  insurance  com- 
panies shall  be  notified  of  the  amount  for  which  they  axe  respectively 
liable  on  or  before  the  first  day  of  June  of  each  successive  year,  and 
said  assessment  shall  be  paid  on  or  before  the  fifteenth  day  of  June: 
Provided,  That  every  corporation,  joint-stock  company  or  association, 
and  insurance  company,  computing  taxes  upon  the  income  of  the 
fiscal  year  which  it  may  designate  in  the  manner  hereinbefore  pro- 
vided, shall  pay  the  taxes  due  under  its  assessment  within  one 
hundred  and  five  days  after  the  date  upon  which  it  is  required  to  file 
its  list  or  return  of  income  for  assessment;  except  in  cases  of  refusal 
or  neglect  to  make  such  return,  and  in  cases  of  erroneous,  false,  or 
fraudulent  returns,  in  which  cases  the  Commissioner  of  Internal 
Revenue  shall,  upon  the  discovery  thereof,  at  any  time  within  three 
years  after  said  return  is  due,  make  a  return  upon  information 
obtained  as  provided  for  in  this  title  or  by  existing  law;  and  the 
assessment  made  by  the  Commissioner  of  Internal  Revenue  thereon 
shall  be  paid  by  such  corporation,  joint-stock  company  or  association, 
or  insurance  company  immediately  upon  notification  of  the  amount 
of  such  assessment;  and  to  any  sum  or  sums  due  and  unpaid  after 
the  fifteenth  day  of  June  in  any  year,  or  after  one  hundred  and  five 
days  from  the  date  on  which  the  return  of  income  is  requirod  to  be 
made  by  the  taxpayer,  and  after  ten  days'  notice  and  demand  thereof 
by  the  collector,  there  shall  be  added   the  sum  of  five  per  centum 


974  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Bracl<ets] 

on  the  amount  of  tax  unpaid  and  interest  at  the  rate  of  one  per 
centum  per  month  upon  said  tax  from  the  time  the  same  becomes 
due:  Provided,  That  upon  the  examination  of  any  return  of  income 
made  pursuant  to  this  title,  the  Act  of  August  fifth,  nineteen  hundred 
and  nine,  entitled,  "An  Act  to  provide  revenue,  equalize  duties  and 
encourage  the  industries  of  the  United  States,  and  for  other  pur- 
poses," and  the  Act  of  October  third,  nineteen  hundred  and  thirteen, 
entitled,  "An  Act  to  reduce  tariff  duties  and  to  provide  revenue  for 
the  Government,  and  for  other  purposes,"  if  it  shall  appear  that 
amounts  of  tax  have  been  paid  in  excess  of  those  properly  due,  the 
taxpayer  shall  be  permitted  to  present  a  claim  for  refund  thereof  not- 
withstanding the  provisions  of  section  thirty-two  hundred  and  twenty- 
eight  of  the  Revised  Statutes; 

(b)  When  the  assessment  shall  be  made,  as  provided  in  this  title, 
the  returns,  together  with  any  corrections  thereof  which  may  have 
been  made  by  the  commissioner,  shall  be  filed  in  the  office  of  the 
Commissioner  of  Internal  Revenue  and  shall  constitute  public  records 
and  be  open  to  inspection  as  such:  Provided,  That  any  and  all  such 
returns  shall  be  open  to  inspection  only  upon  the  order  of  the  Presi- 
dent, under  rules  and  regulations  to  be  prescribed  by  the  Secretary 
of  the  Treasury  and  approved  by  the  President:  Provided  further. 
That  the  proper  officers  of  any  State  imposing  a  general  income  tax 
may,  upon  the  request  of  the  governor  thereof,  have  access  to  said 
returns  or  to  an  abstract  thereof,  showing  the  name  and  income  of 
each  such  corporation,  joint-stock  company  or  association,  or  insur- 
ance company,  at  such  times  and  in  such  manner  as  the  Secretary  of 
the  Treasury  may  prescribe;! 

(c)  If  any  of  the  corporations,  joint-stock  companies  or  associa- 
tions, or  insurance  companies  aforesaid  shall  refuse  or  neglect  to 
make  a  return  at  the  time  or  times  hereinbefore  specified  in  each 
year,  or  shall  render  a  false  or  fraudulent  return,  such  corporation, 
joint-stock  company  or  association,  or  insurance  company  shall  be 
liable  to  a  penalty  of  not  exceeding  $10,000:  Provided,  That  the  Com- 
missioner of  Internal  Revenue  shall  have  authority,  in  the  case  of 
either  corporations  or  individuals,  to  grant  a  reasonable  extension 
of  time  in  meritorious  cases,  as  he  may  deem  proper. 

(d)  That  section  thirty-two  hundred  and  twenty-five  of  the  Re- 
vised Statutes  of  the  United  States  be,  and  the  same  is  hereby, 
amended  so  as  to  read  as  follows: 

"Sec.  3225.  When  a  second  assessment  is  made  in  case  of  any  list, 
statement,  or  return,  which  in  the  opinion  of  the  collector  or  deputy 
collector  was  false  or  fraudulent,  or  contained  any  understatement 
or  undervaluation,  no  tax  collected  under  such  assessment  shall  be 
recovered  by  any  suit  unless  it  is  proved  that  the  said  list,  statement, 
or  return  was  not  false  nor  fraudulent  and  did  not  contain  any  under- 


1  See  income  tax  law  in  the   State  systems   of  Connecticut,   p.   795, 
supra,  and  New  York,  p.   877,  supra. 


THE   FEDERAL   INCOME   TAX.  975 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

statement  or  undervaluation;  but  this  section  shall  not  apply  to  state- 
ments or  returns  made  or  to  be  made  in  good  faith  under  the  laws  of 
the  United  States  regarding  annual  depreciation  of  oil  or  gas  wells  and 
mines." 

PART   III.— GENERAL   ADMINISTRATIVE   PROVISIONS. 

Sec.  15.  That  the  word  "State"  or  "United  States"  when  used  in 
this  title  shall  be  construed  to  include  any  Territory,  the  District  of 
Columbia,  Porto  Rico,  and  the  Philippine  Islands,  when  such  con- 
struction is  necessary  to  carry  out  its  provisions. 

Sec.  16.  That  sections  thirty-one  hundred  and  sixty-seven,  thirty- 
one  hundred  and  seventy-two,  thirty-one  hundred  and  seventy-three, 
and  thirty-one  hundred  and  seventy-six  of  the  Revised  Statutes  of 
the  United  States  as  amended  are  hereby  amended  so  as  to  read*  as 
follows: 

"Sec.  3167.  It  shall  be  unlawful  for  any  collector,  deputy  collec- 
tor, agent,  clerk,  or  other  officer  or  employee  of  the  United  States  to 
divulge  or  to  make  known  in  any  manner  whatever  not  provided 
by  law  to  any  person  the  operations,  style  of  work,  or  apparatus  of 
any  manufacturer  or  producer  visited  by  him  in  the  discharge  of  his 
official  duties,  or  the  amount  or  source  of  income,  profits,  losses, 
expenditures,  or  any  particular  thereof,  set  forth  or  disclosed  in  any 
income  return,  or  to  permit  any  income  return  or  copy  thereof  or  any 
book  containing  any  abstract  or  particulars  thereof  to  be  seen  or 
examined  by  any  person  except  as  provided  by  law;  and  it  shall  be 
unlawful  for  any  person  to  print  or  publish  in  any  manner  whatever 
not  provided  by  law  any  income  return  or  any  part  thereof  or  source 
of  income,  profits,  losses,  or  expenditures  appearing  in  any  income 
return;  and  any  offense  against  the  foregoing  provision  shall  be  a 
misdemeanor  and  be  punished  by  a  fine  not  exceeding  $1,000  or  by 
imprisonment  not  exceeding  one  year,  or  both,  at  the  discretion  of 
the  court;  and  if  the  offender  be  an  officer  or  employee  of  the  United 
States  he  shall  be  dismissed  from  office  or  discharged  from  employ- 
ment. 

"Sec.  3172.  Every  collector  shall,  from  time  to  time,  cause  his 
deputies  to  proceed  through  every  part  of  his  district  and  inquire 
after  and  concerning  all  persons  therein  who  are  liable  to  pay  any 
internal-revenue  tax,  and  all  persons  owning  or  having  the  care  and 
management  of  any  objects  liable  to  pay  any  tax,  and  to  make  a  list 
of  such  persons  and  enumerate  said  objects. 

"Sec.  3173.  It  shall  be  the  duty  of  any  person,  partnership,  firm, 
association,  or  corporation,  made  liable  to  any  duty,  special  tax,  or 
other  tax  imposed  by  law,  when  not  otherwise  provided  for,  (1)  in 
case  of  a  special  tax,  on  or  before  the  thirty-first  day  of  July  in  each 
year,  (2)  in  case  of  income  tax  on  or  before  the  first  day  of  March 
in  each  year,  or  on  or  before  the  last  day  of  the  sixty-day  period 


976  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

next  following  the  closing  date  of  the  fiscal  year  for  which  it  makes  a 
return  of  its  income,  and  (3)  in  other  cases  before  the  day  on  which 
the  taxes  accrue,  to  make  a  list  or  return,  verified  by  oath,  to  the 
collector  or  a  deputy  collector  of  the  district  where  located,  of  the 
articles  or  objects,  including  the  amount  of  annual  income  charged 
with  a  duty  or  tax,  the  quantity  of  goods,  wares,  and  merchandise, 
made  or  sold  and  charged  with  a  tax,  the  several  rates  and  aggregate 
amount,  according  to  the  forms  and  regulations  to  be  prescribed  by 
the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  for  which  such  person,  partnership,  firm, 
association,  or  corporation  is  liable:  Provided,  That  if  any  person 
liable  to  pay  any  duty  or  tax,  or  owning,  possessing,  or  having  the 
care  or  management  of  property,  goods,  wares,  and  merchandise, 
article  or  objects  liable  to  pay  any  duty,  tax,  or  license,  shall  fail  to 
make  and  exhibit  a  list  or  return  required  by  law,  but  shall  consent 
to  disclose  the  particulars  of  any  and  all  the  property,  goods,  wares, 
and  merchandise,  articles,  and  objects  liable  to  pay  any  duty  or  tax, 
or  any  business  or  occupation  liable  to  pay  any  tax  as  aforesaid, 
then,  and  in  that  case,  it  shall  be  the  duty  of  the  collector  or  deputy 
collector  to  make  such  list  or  return,  which,  being  distinctly  read, 
consented  to,  and  signed  and  verified  by  oath  by  the  person  so  own- 
ing, possessing,  or  having  the  care  and  management  a^  aforesaid, 
may  be  received  as  the  list  of  such  person:  Provided  further,  That  in 
case  no  annual  list  or  return  has  been  rendered  by  such  person  to 
the  collector  or  deputy  collector  as  required  by  law,  and  the  person 
shall  be  absent  from  his  or  her  residence  or  place  of  business  at  the 
time  the  collector  or  a  deputy  collector  shall  call  for  the  annual  list 
or  return,  it  shall  be  the  duty  of  such  collector  or  deputy  collector 
to  leave  at  such  place  of  residence  or  business,  with  some  one  of  suit- 
able age  and  discretion,  if  such  be  present,  otherwise  to  deposit  in 
the  nearest  post  office,  a  note  or  memorandum  addressed  to  such 
person,  requiring  him  or  her  to  render  to  such  collector  or  deputy 
collector  the  list  or  return  required  by  law  within  ten  days  from  the 
date  of  such  note  or  memorandum,  verified  by  oath.  And  if  any 
person,  on  being  notified  or  required  as  aforesaid,  shall  refuse  or 
neglect  to  render  such  list  or  return  within  the  time  required  as  afore- 
said, or  whenever  any  person  who  is  required  to  deliver  a  monthly  or 
other  return  of  objects  subject  to  tax  fails  to  do  so  at  the  time  re- 
quired, or  delivers  any  return  which,  in  the  opinion  of  the  collector, 
is  erroneous,  false,  or  fraudulent,  or  contains  any  undervaluation  or 
understatement,  or  refuses  to  allow  any  regularly  authorized  Gov- 
ernment oflScer  to  examine  the  books  of  such  person,  firm,  or  corpo- 
ration, it  shall  be  lawful  for  the  collector  to  summon  such  person, 
or  any  other  person  having  possession,  custody,  or  care  of  books  of 
account  containing  entries  relating  to  the  business  of  such  person,  or 
any  other  person  he  may  deem  proper,  to  appear  before  him  and 
produce  such  books  at  a  time  and  place  named  in  the  summons,  and 
to  give  testimony  or  answer  interrogatories,  under  oath,  respecting 
any  objects  or  income  liable  to  tax  or  the  returns  thereof.  The  col- 
lector may  summon  any  person   residing  or   found   within   the  State 


THE   FEDERAL   INCOME   TAX. 
[Amendments  of  October  3,  1917,  included  in  Bracl<ets] 


977 


or  Territory  in  which  his  district  lies;  and  when  the  person  intended 
to  be  summoned  does  not  reside  and  can  not  be  found  within  such 
State  or  Territory,  he  may  enter  any  collection  district  where  such 
person  may  be  found  and  there  make  the  examination  herein  author- 
ized. And  to  this  end  he  may  there  exercise  all  the  authority  which 
he  might  lawfully  exercise  in  the  district  for  which  he  was  commis- 
sioned: Provided,  That  'person,*  as  used  in  this  section,  shall  be 
construed  to  include  any  corporation,  joint-stock  company  or  asso- 
ciation, or  insurance  company  when  such  construction  is  necessary 
to  carry  out  its  provisions. 

"Sec.  3176.  If  any  person,  corporation,  company,  or  association 
fails  to  make  and  file  a  return  or  list  at  the  time  prescribed  by  law, 
or  makes,  willfully  or  otherwise,  a  false  or  fraudulent  return  or  list, 
the  collector  or  deputy  collector  shall  make  the  return  or  list  from  his 
own  knowledge  and  from  such  information  as  he  can  obtain  through 
testimony  or  otherwise.  Any  return  or  list  so  made  and  subscribed 
by  a  collector  or  deputy  collector  shall  be  prima  facie  good  and  suffi- 
cient for  all  legal  purposes, 

"If  the  failure  to  file  a  return  or  list  is  due  to  sickness  or  absence 
the  collector  may  allow  such  further  time,  not  exceeding  thirty  days, 
for  making  and  filing  the  return  or  list  as  he  deems  proper. 

"The  Commissioner  of  Internal  Revenue  shall  assess  all  taxes,  other 
than  stamp  taxes,  as  to  which  returns  or  lists  are  so  made  by  a  col- 
lector or  deputy  collector.  In  case  of  any  failure  to  make  and  file  a 
return  or  list  within  the  time  prescribed  by  law  or  by  the  collector, 
the  Commissioner  of  Internal  Revenue  shall  add  to  the  tax  fifty  per 
centum  of  its  amount  except  that,  when  a  return  is  voluntarily  and 
without  notice  from  the  collector  filed  after  such  time  and  it  is  shown 
that  the  failure  to  file  it  was  due  to  a  reasonable  cause  and  not  to 
willful  neglect,  no  such  addition  shall  be  made  to  the  tax.  In  case  a 
false  or  fraudulent  return  or  list  is  willfully  made,  the  Commissioner 
of  Internal  Revenue  shall  add  to  the  tax  one  hundred  per  centum 
of  its  amount. 

"The  amount  so  added  to  any  tax  shall  be  collected  at  the  same 
time  and  in  the  same  manner  and  as  part  of  the  tax  unless  the  tax  has 
been  paid  before  the  discovery  of  the  neglect,  falsity,  or  fraud,  in 
which  case  the  amount  so  added  shall  be  collected  in  the  same  manner 
as  the  tax." 

Sec.  17.  That  it  shall  be  the  duty  of  every  collector  of  internal 
revenue,  to  whom  any  payment  of  any  taxes  is  made  under  the  pro- 
visions of  this  title,  to  give  to  the  person  making  such  payments  a  full 
written  or  printed  receipt,  expressing  the  amount  paid  and  the  par- 
ticular account  for  which  such  payment  was  made;  and  whenever 
such  payment  is  made  such  collector  shall,  if  required,  give  a  separate 
receipt  for  each  tax  paid  by  any  debtor,  on  account  of  payments  made 
to  or  to  be  made  by  him  to  separate  creditors  in  such  form  that  such 
debtor  can  conveniently  produce  the  same  separately  to  his  several 
creditors  in  satisfaction  of  their  respective  demands  to  the  amounts 


978  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

specified  in  such  receipts;  and  such  receipts  shall  be  sufficient  evidence 
in  favor  of  such  debtor  to  justify  him  in  withholding  the  amount 
therein  expressed  from  his  next  payment  to  his  creditor;  but  such 
creditor  may,  upon  giving  to  his  debtor  a  full  written  receipt,  ac- 
knowledging the  payment  to  him  of  whatever  sum  may  be  actually 
paid,  and  accepting  the  amount  of  tax  paid  as  aforesaid  (specifying 
the  same)  as  a  further  satisfaction  of  the  debt  to  that  amount,  require 
the  surrender  to  him  of  such  collector's  receipt. 

[Sec.  18.  That  any  person,  corporation,  partnership,  association  or 
insurance  company,  liable  to  pay  the  tax  to  make  a  return  or  to 
supply  information  required  under  this  title,  who  refuses  or  neglects 
to  pay  such  tax,  to  make  such  return  or  to  supply  such  information 
at  the  time  or  times  herein  specified  in  each  year,  shall  be  liable, 
except  as  otherwise  specially  provided  in  this  title,  to  a  penalty  of 
not  less  than  $20  nor  more  than  $1,000.  Any  individual  or  any  officer 
of  any  corporation,  partnership,  association,  or  insurance  company, 
required  by  law  to  make,  render,  sign,  or  verify  any  return  or  to 
supply  any  information,  who  makes  any  false  or  fraudulent  return 
or  statement  with  intent  to  defeat  or  evade  the  assessment  required 
by  this  title  to  be  made,  shall  be  guilty  of  a  misdemeanor,  and  shall 
be  fined  not  exceeding  $2,000,  or  be  imprisoned  not  exceeding  one 
year  or  both,  in  the  discretion  of  the  court,  with  the  costs  of  prosecu- 
tion: Provided,  That  where  any  tax  heretofore  due  and  payable  has 
been  duly  paid  by  the  taxpayer,  it  shall  not  be  re-collected  from  any 
withholding  agent  required  to  retain  it  at  its  source,  nor  shall  any 
penalty  be  imposed  or  collected  in  such  cases  from  the  taxpayer,  or 
such  withholding  agent  whose  duty  it  was  to  retain  it,  for  failure  to 
return  or  pay  the  same,  unless  such  failure  was  fraudulent  and  for 
the  purpose  of  evading  payment.] 

[Sec.  19.  The  collector  or  deputy  collector  shall  require  every 
return  to  be  verified  by  the  oath  of  the  party  rendering  it.  If  the 
collector  or  deputy  collector  have  reason  to  believe  that  the  amount 
of  any  income  returned  is  understated,  he  shall  give  due  notice  to  the 
person  making  the  return  to  show  cause  why  the  amount  of  the  return 
should  not  be  increased,  and  upon  proof  of  the  amount  understated 
may  increase  the  same  accordingly.  Such  person  may  furnish  sworn 
testimony  to  prove  any  relevant  facts,  and,  if  dissatisfied  with  the 
decision  of  the  collector,  may  appeal  to  the  Commissioner  of  Internal 
Revenue  for  his  decision  under  such  rules  of  procedure  as  may  be 
prescribed  by  regulation. 

[Sec.  20.  That  jurisdiction  is  hereby  conferred  upon  the  district 
courts  of  the  United  States  for  the  district  within  which  any  person 
summoned  under  this  title  to  appear  to  testify  or  to  produce  books 
shall  reside,  to  compel  such  attendance,  production  of  books,  and 
testimony  by  appropriate  process. 

[Sec.  21.  That  the  preparation  and  publication  of  statistics  reason- 
ably available  with  respect  to  the  operation  of  the  income  tax  law  and 


THE   FEDERAL   INCOME   TAX. 
[Amendments  of  October  3,  1917,  included  in  Brackets] 


979 


containing  classifications  of  taxpayers  and  of  income,  the  amounts 
allowed  as  deductions  and  exemptions,  and  any  other  facts  deemed 
pertinent  and  valuable,  shall  be  made  annually  by  the  Commissioner 
of  Internal  Revenue  with  the  approval  of  the  Secretary  of  the  Treas- 
ury. 

Sec.  22.  That  all  administrative,  special,  and  general  provisions  of 
law,  including  the  laws  in  relation  to  the  assessment,  remission,  collec- 
tion, and  refund  of  internal-revenue  taxes  not  heretofore  specifically 
repealed  and  not  inconsistent  with  the  provisions  of  this  title,  are 
hereby  extended  and  made  applicable  to  all  the  provisions  of  this  title 
and  to  the  tax  herein  imposed. 

Sec.  23.  That  the  provisions  of  this  title  shall  extend  to  Porto  Rico 
and  the  Philippine  Islands:  Provided,  That  the  administration  of  the 
law  and  the  collection  of  the  taxes  imposed  in  Porto  Rico  and  the  Phil- 
ippine Islands  shall  be  by  the  appropriate  internal-revenue  officers  of 
those  governments,  and  all  revenues  collected  in  Porto  Rico  and  the 
Philippine  Islands  thereunder  shall  accrue  intact  to  the  general  Gov- 
ernments thereof,  respectively:  Provided  further,  That  the  jurisdic- 
tion in  this  title  conferred  upon  the  district  courts  of  the  United  States 
shall,  so  far  as  the  Philippine  Islands  are  concerned,  be  vested  in  the 
courts  of  the  first  instance  of  said  islands:  And  provided  further. 
That  nothing  in  this  title  shall  be  held  to  exclude  from  the  computa- 
tion of  the  net  income  the  compensation  paid  any  ofiicial  by  the  gov- 
ernments of  the  District  of  Columbia,  Porto  Rico,  and  the  Philippine 
Islands,  or  the  political  subdivisions  thereof. 

Sec.  24.  That  Section  II  of  the  Act  approved  October  third,  nine- 
teen hundred  and  thirteen,  entitled  "An  Act  to  reduce  tariff  duties  and 
to  provide  revenue  for  the  Government,  and  for  other  purposes,"  is 
hereby  repealed,  except  as  herein  otherwise  provided,  and  except  that 
it  shall  remain  in  force  for  the  assessment  and  collection  of  all  taxes 
which  have  accrued  thereunder,  and  for  the  imposition  and  collection 
of  all  penalties  or  forfeitures  which  have  accrued  or  may  accrue  in 
relation  to  any  of  such  taxes,  and  except  that  the  unexpected  balance 
of  any  appropriation  heretofore  made  and  now  available  for  the  ad- 
ministration of  such  section  or  any  provision  thereof  shall  be  avail- 
able for  the  administration  of  this  title  or  the  corresponding  provi- 
sion thereof. 

Sec.  25.  That  income  on  which  has  been  assessed  the  tax  imposed 
by  Section  II  of  the  Act  entitled  "An  Act  to  reduce  tariff  duties  and  to 
provide  revenue  for  the  Government,  and  for  other  purposes,"  ap- 
proved October  third,  nineteen  hundred  and  thirteen,  shall  not  be 
considered  as  income  within  the  meaning  of  this  title:  Provided, 
that  this  section  shall  not  conflict  with  that  portion  of  section  ten, 
of  this  title,  under  which  a  taxpayer  has  fixed  its  own  fiscal  year. 

Sec.  26.  EJvery  corporation,  joint-stock  company  or  association,  or 
insurance  company  subject  to  the  tax  herein  imposed,  when  required 


980  THE   FEDERAL   INCOME   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

by  the  Commissioner  of  Internal  Revenue,  shall  render  a  correct  re- 
turn, duly  verified  under  oath,  of  its  payments  of  dividends  whether 
made  in  cash  or  its  equivalent  or  in  stock,  including  the  names  and 
addresses  of  stockholders  and  the  number  of  shares  owned  by  each, 
and  the  tax  years  and  the  applicable  amounts  in  which  such  divi- 
dends were  earned,  in  such  form  and  manner  as  may  be  prescribed 
by  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury. 

(Sections  27  to  32  inclusive  were  added  by  Act  of  Oct.  3,  1917.) 

[Sec.  27.  That  every  person,  corporation,  partnership,  or  association, 
doing  business  as  a  broker  on  any  exchange  or  board  of  trade  or  other 
similar  place  of  business  shall,  when  required  by  the  Commissioner 
of  Internal  Revenue,  render  a  correct  return  duly  verified  under  oath, 
under  such  rules  and  regulations  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury,  may 
prescribe,  showing  the  names  of  customers  for  whom  such  person, 
corporation,  partnership,  or  association  has  transacted  any  business, 
with  such  details  as  to  the  profits,  losses,  or  other  information  which 
the  commissioner  may  require,  as  to  each  of  such  customers,  as  will 
enable  the  Commissioner  of  Internal  Revenue  to  determine  whether 
all  income  tax  due  on  profits  or  gains  of  such  customers  has  been 
paid. 

Sec.  28.  That  all  persons,  corporations,  partnerships,  associations 
and  insurance  companies,  in  whatever  capacity  acting,  including 
lessees  or  mortgagors  of  real  or  personal  property,  trustees  acting  in 
any  trust  capacity,  executors,  administrators,  receivers,  conservators, 
and  employers,  making  payment  to  another  person,  corporation,  part- 
nership, association,  or  insurance  company,  of  interest,  rent,  salaries, 
wages,  premiums,  annuities,  compensation,  remuneration,  emoluments, 
or  other  fixed  or  determinable  gains,  profits,  and  income  (other  than 
payments  described  in  sections  twenty-six  and  twenty-seven),  of  $800 
or  more  in  any  taxable  year,  or,  in  the  case  of  such  payments  made 
by  the  United  States,  the  oflacers  or  employees  of  the  United  States 
having  information  as  to  such  payments  and  required  to  make  returns 
in  regard  thereto  by  the  regulations  hereinafter  provided  for,  are 
hereby  authorized  and  required  to  render  a  true  and  accurate  return 
to  the  Commissioner  of  Internal  Revenue,  under  such  rules  and  reg- 
ulations and  in  such  form  and  manner  as  may  be  prescribed  by  him, 
with  the  approval  of  the  Secretary  of  the  Treasury,  setting  forth 
the  amount  of  such  gains,  profits,  and  Income,  and  the  name  and 
address  of  the  recipient  of  such  payment:  Provided,  That  such  re- 
turns shall  be  required,  regardless  of  amounts,  in  the  case  of  pay- 
ments of  interest  upon  bonds  and  mortgages  or  deeds  of  trust  or  other 
similar  obligations  of  corporations,  joint-stock  companies,  associa- 
tions, and  insurance  companies,  and  in  the  case  of  collections  of  items 
(not  payable  in  the  United  States)  of  interest  upon  the  bonds  of  for- 
eign countries  and  interest  from  the  bonds  and  dividends  from  the 
stock  of  foreign   corporations   by   persons,   corporations,   partnerships, 


THE   FEDERAL   INCOME   TAX.  981 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

or  associations,  undertaking  as  a  matter  of  business  or  for  profit  the 
collection  of  foreign  payments  of  such  interest  or  dividends  by  means 
of  coupons,  checks,  or  bills  of  exchange. 

When  necessary  to  make  effective  the  provisions  of  this  section  the 
name  and  address  of  the  recipient  of  income  shall  be  furnished  upon 
demand  of  the  person,  corporation,  partnership,  association,  or  in- 
surance company  paying  the  income. 

The  provisions  of  this  section  shall  apply  to  the  calendar  year  nine- 
teen hundred  and  seventeen  and  each  calendar  year  thereafter,  but 
shall  not  apply  to  the  payment  of  interest  on  obligations  of  the  United 
States. 

Sec.  29.  That  in  assessing  income,  tax  the  net  income  embraced  in 
the  return  shall  also  be  credited  with  the  amount  of  any  excess  profits 
tax  imposed  by  Act  of  Congress  and  assessed  for  the  same  calendar 
or  fiscal  year  upon  the  taxpayer  and,  in  the  case  of  a  member  of  a 
partnership,  with  his  proportionate  share  of  such  excess  profits  tax 
imposed  upon  the  partnership. 

Sec.  30.  That  nothing  in  Section  II  of  the  Act  approved  October 
third,  nineteen  hundred  and  thirteen,  entitled  "An  Act  to  reduce  tariff 
duties  and  to  provide  revenue  for  the  Government,  and  for  other  pur- 
poses," or  in  this  title,  shall  be  construed  as  taxing  the  income  of 
foreign  governments  received  from  investments  in  the  United  States 
in  stocks,  bonds,  or  other  domestic  securities,  owned  by  such  foreign 
governments,  or  from  interest  on  deposits  in  banks  in  the  United 
States  of  moneys  belonging  to  foreign  governments. 

Sec.  31.  The  term  "dividends"  as  used  in  this  title  shall  be  held  to 
mean  any  distribution  made  or  ordered  to  be  made  by  a  corporation, 
joint-stock  company,  association,  or  insurance  company,  out  of  its 
earnings  or  profits  accrued  since  March  1,  1913,  and  payable  to  its 
shareholders,  whether  in  cash  or  in  stock  of  the  corporation,  joint- 
stock  company,  association,  or  insurance  company,  which  stock  divi- 
dend shall  be  considered  income,  to  the  amount  of  the  earnings  or 
profits  so  distributed. 

(b)  Any  distribution  made  to  the  shareholders  or  members  of  a 
corporation,  joint-stock  company,  or  association,  or  insurance  company 
in  the  year  nineteen  hundred  and  seventeen,  or  subsequent  tax  years, 
shall  be  deemed  to  have  been  made  from  the  most  recently  accum- 
ulated undivided  profits  or  surplus,  and  shall  constitute  a  part  of  the 
annual  income  of  the  distributee  for  the  year  in  which  received,  and 
shall  be  taxed  to  the  distributee  at  the  rates  prescribed  by  law  for  the 
years  in  which  such  profits  or  surplus  were  accumulated  by  the  cor- 
poration, joint-stock  company,  association,  or  insurance  company,  but 
nothing  herein  shall  be  construed  as  taxing  any  earnings  or  profits 
accrued  prior  to  March  1,  1913,  but  such  earnings  on  profits  may  be 
distributed  in  stock  dividends  or  otherwise,  exempt  from  the  tax, 
after  the  distribution  of  earnings  and  profits  accrued  since  March  1, 
1013,  has  been   made.     This  subdivision   shall  not  apply  to  any  dis- 


982  THE   FEDERAL   INCOME  TAX. 

[Amendments  of  October  3,  1917,  included  in  Srackets] 

tribution   made   prior   to   August   6,   1917,   out   of   earnings   or   profits 
accrued  prior  to  March  1,  1913. 

Sec.  32.  Premiums  paid  on  life  insurance  policies  covering  the 
lives  of  officers,  employees,  or  those  financially  interested  in  any  trade 
or  business  conducted  by  an  individual,  partnership,  corporation,  joint- 
stock  company  or  association,  or  insurance  company,  shall  not  be  de- 
ducted in  computing  the  net  income  of  such  individual,  corporation, 
joint-stock  company  or  association,  or  insurance  company,  or  in  com- 
puting the  profits  of  such  partnership  for  the  purposes  of  subdivision 
(e)   of  section  9. 

Any  amount  heretofore  withheld  by  any  withholding  agent  as  re- 
quired by  Title  I  of  such  Act  of  September  eight,  nineteen  hundred 
and  sixteen,  on  account  of  the  tax  imposed  upon  the  income  of  any  in- 
dividual, a  citizen  or  resident  of  the  United  States,  for  the  calendar 
year  nineteen  hundred  and  seventeen,  except  in  the  cases  covered  by 
subdivision  (c)  of  section  9  of  such  Act,  as  amended  by  this  Act, 
shall  be  released  and  paid  over  to  such  individual,  and  the  entire  tax 
upon  the  income  of  such  individual  for  such  year  shall  be  assessed  and 
collected  in  the  manner  prescribed  by  such  Act  as  amended  by  this  Act.] 

The  Revenue  Act  of  September  eight,  nineteen  hundred  and  seven- 
teen, of  which  the  Income  Tax  as  then  enacted  was  Title  I,  concluded 
with  the  following  section: 

Sec.  900.  That  if  any  clause,  sentence,  paragraph,  or  part  of  this 
Act  shall  for  any  reason  be  adjudged  by  any  court  of  competent  juris- 
diction to  be  invalid,  such  judgment  shall  not  affect,  impair,  or  in- 
validate the  remainder  of  said  Act,  but  shall  be  confined  in  its  opera- 
tion to  the  clause,  sentence,  paragraph,  or  part  thereof  directly  in- 
volved in  the  controversy  in  which  such  judgment  shall  have  been 
rendered. 

For  similar  provision  in  the  Act  of  October  three,  nineteen  hundred 
and  seventeen,  which  enacted  the  amendments  to  the  Income  Tax  Law, 
which  have  been  incorporated  in  the  Act  as  above,  see  infra,  p.  104. 


THE   FEDERAL   ESTATE    TAX.  983 

[Amendments  of  October  3,  1917,  included  in  Bracl<ets] 

THE   FEDERAL    ESTATE    OR    INHERITANCE    TAX. 

The  Federal  Inheritance  Tax,  or  Estate  Tax,  as  it  is  called,  was 
first  enacted  as  Title  II  in  the  Act  of  September  eight,  nineteen  hun- 
dred and  sixteen,  and  was,  re-enacted  and  amended  with  increase  of 
rates  in  the  Act  of  March  three,  nineteen  hundred  and  seventeen,  in 
what  is  known  as  the  Munitions  Act,  and  was  amended  by  increase  of 
rates  by  the  War  Revenue  Act  of  October  three,  nineteen  hundred  and 
seventeen. 

The  Act  of  nineteen  hundred  and  sixteen  as  amended  in  March  three, 
nineteen  hundred  and  seventeen,  is  as  follows: 

TITLE    II.— ESTATE   TAX.i 

Sec.  200.     That  when  used  in  this  title — 

The  term  "person"  includes  partnerships,  corporations,  and  asso- 
ciations; 

The  term  "United  States"  means  only  the  States,  the  Territories 
of  Alaska  and  Hawaii,  and  the  District  of  Columbia; 

The  term  "executor"  means  the  executor  or  administrator  of  the 
decedent,  or,  if  there  is  no  executor  or  administrator,  any  person 
who  takes  possession  of  any  property  of  the  decedent;   and 

The  term  "collector"  means  the  collector  of  internal  revenue  of 
the  district  in  which  was  the  domicile  of  the  decedent  at  the  time  of 
his  death,  or,  if  there  was  no  such  domicile  in  the  United  States, 
then  the  collector  of  the  district  in  which  is  situated  the  part  of  the 
gross  estate  of  the  decedent  in  the  United  States,  or,  if  such  part  of 
the  gross  estate  is  situated  in  more  than  one  district,  then  the  col- 
lector of  internal  revenue  at  Baltimore,  Maryland. 

Sec.  201.  That  a  tax  (hereinafter  in  this  title  referred  to  as  the 
tax),  equal  to  the  following  percentages  of  the  value  of  the  net  estate, 
to  be  determined  as  provided  in  section  two  hundred  and  three,  is 
hereby  imposed  upon  the  transfer  of  the  net  estate  of  every  decedent 
dying  after  the  passage  of  this  Act,  whether  a  resident  or  non-resident 
of  the  United  States: 

"One  and  one-half  per  centum  of  the  amount  of  such  net  estate  not  in 
excess  of  $50,000; 

"Three  per  centum  of  the  amount  by  which  such  net  estate  ex- 
ceeds $50,000  and   does  not  exceed  $150,000; 

"Four  and  one-half  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $150,000  and  does  not  exceed  $250,000; 


1  For  construction  of  the  Inheritance  Tax  Law  enacted  in  the  Span- 
ish War  Revenue  Act  of  1898,  which  was  repealed  April  12,  1902,  see 
supra,  Sec.  564. 


984  THE   FEDERAL   ESTATE    TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

"Six  per  centum  of  the  amount  by  which  such  net  estate  exceeds 
$250,000  and  does  not  exceed  $450,000; 

"Seven  and  one-half  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $450,000  and   does  not  exceed   $1,000,000; 

"Nine  per  centum  of  the  amount  by  which  such  net  estate  exceeds 
$1,000,000  and  does  not  exceed  $2,000,000; 

"Ten  and  oneihalf  per  centum  of  the  amount  by  which  such  net 
estate  exceeds  $2,000,000  and  does  not  exceed  $3,000,000; 

"Twelve  per  centum  of  the  amount  by  which  such  net  estate 
exceeds  $3,000,000  and  does  not  exceed  $4,000,000; 

"Thirteen  and  one-half  per  centum  of  the  amount  by  which  such 
net  estate  exceeds  $4,000,000  and  does  not  exceed  $5,000,000;   and 

"Fifteen  per  centum  of  the  amount  by  which  such  net  estate 
exceeds  $5,000,000." 

That  the  tax  on  the  transfer  of  the  net  estate  of  decedents  dying 
between  September  eighth,  nineteen  hundred  and  sixteen,  and  the 
passage  of  this  Act  shall  be  computed  at  the  rates  originally  pre- 
scribed in  the  Act  approved  September  eighth,  nineteen  hundred  and 
sixteen. 

Sec.  202.  That  the  value  of  the  gross  estate  of  the  decedent  shall 
be  determined  by  including  the  value  at  the  time  of  his  death  of  all 
property,  real  or  personal,  tangible  or  intangible,  wherever  situated: 
(a)  To  the  extent  of  the  interest  therein  of  the  decedent  at  the  time 
of  his  death  which  after  his  death  is  subject  to  the  payment  of  the 
charges  against  his  estate  and  the  expenses  of  its  administration  and 
is  subject  to  distribution  as  part  of  his  estate. 

(b)  To  the  extent  of  any  interest  therein  of  which  the  decedent  has 
at  any  time  made  a  transfer,  or  with  respect  to  which  he  has  created 
a  trust,  in  contemplation  of  or  intended  to  take  effect  in  possession  or 
enjoyment  at  or  after  his  death,  except  in  case  of  a  bona  fide  sale  for 
a  fair  consideration  in  money  or  money's  worth.  Any  transfer  of  a 
material  part  of  his  property  in  the  nature  of  a  final  disposition  or 
distribution  thereof,  made  by  the  decedent  within  two  years  prior  to 
his  death  without  such  a  consideration,  shall,  unless  shown  to  the 
contrary,  be  deemed  to  have  been  made  in  contemplation  of  death 
within  the  meaning  of  this  title;  and 

(c)  To  the  extent  of  the  interest  therein  held  jointly  or  as  tenants 
in  the  entirety  by  the  decedent  and  any  other  person,  or  deposited  in 
banks  or  other  institutions  in  their  joint  names  and  payable  to  either 
or  the  survivor,  except  such  part  thereof  as  may  be  shown  to  have 
originally  belonged  to  such  other  person  and  never  to  have  belonged 
to  the  decedent. 

For  the  purpose  of  this  title  stock  in  a  domestic  corporation  owned 
and  held  by  a  non-resident  decedent  shall  be  deemed  property  within 
the  United  States,  and  any  property  of  which  the  decedent  has  made 
a  transfer  or  with  respect  to  which  he  has  created  a  trust,  within  the 
meaning  of  subdivision    (b)    of  this  section,  shall  be  deemed  to  be 


THE  FEDERAL   ESTATE   TxVX.  985 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

situated  in  the  United  States,  if  so  situated  either  at  the  time  of  the 
transfer  or  the  creation  of  the  trust,  or  at  the  time  of  the  decedent's 
death. 

Sec.  203.  That  for  the  purpose  of  the  tax  the  value  of  the  net 
estate  shall  be   determined — 

(a)  In  the  case  of  a  resident,  by  deducting  from  the  value  of  the 
gross  estate — 

(1)  Such  amounts  for  funeral  expenses,  administration  expenses, 
claims  against  the  estate,  unpaid  mortgages,  losses  incurred  during 
the  settlement  of  the  estate  arising  from  fires,  storms,  shipwreck,  or 
other  casualty,  and  from  theft,  when  such  losses  are  not  compensated 
for  by  insurance  or  otherwise,  support  during  the  settlement  of  the 
estate  of  those  dependent  upon  the  decedent,  and  such  other  charges 
against  the  estate,  as  are  allowed  by  the  laws  of  the  jurisdiction, 
whether  within  or  without  the  United  States,  under  which  the  estate 
is  being  administered;   and 

(2)  An  exemption  of  $50,000; 

(b)  In  the  case  of  a  non-resident,  by  deducting  from  the  value  of 
that  part  of  his  gross  estate  which  at  the  time  of  his  death  is  situated 
in  the  United  States  that  proportion  of  the  deductions  specified  in 
paragraph  (1)  of  subdivision  (a)  of  this  section  which  the  value  of 
such  part  bears  to  the  value  of  his  entire  gross  estate,  wherever 
situated.  But  no  deductions  shall  be  allowed  in  the  case  of  a  non- 
resident unless  the  executor  includes  in  the  return  required  to  be 
filed  under  section  two  hundred  and  five  the  value  at  the  time  of  his 
death  of  that  part  of  the  gross  estate  of  the  non-resident  not  situated 
in  the  United  States. 

Sec.  204.  That  the  tax  shall  be  due  one  year  after  the  decedent's 
death.  If  the  tax  is  paid  before  it  is  due  a  discount  at  the  rate  of 
five  per  centum  per  annum,  calculated  from  the  time  payment  is 
made  to  the  date  when  the  tax  is  due,  shall  be  deducted.  If  the  tax 
is  not  paid  within  ninety  days  after  it  is  due  interest  at  the  rate  of 
ten  per  centum  per  annum  from  the  time  of  the  decedent's  death  shall 
be  added  as  part  of  the  tax,  unless  because  of  claims  against  the 
estate,  necessary  litigation,  or  other  unavoidable  delay  the  collector 
finds  that  the  tax  can  not  be  determined,  in  which  case  the  interest 
shall  be  at  the  rate  of  six  per  centum  per  annum  from  the  time  of  the 
decedent's  death  until  the  cause  of  such  delay  is  removed,  and  there- 
after at  the  rate  of  ten  per  centum  per  annum.  Litigation  to  defeat 
the  payment  of  the  tax  shall  not  be  deemed  necessary  litigation. 

Sec.  205.  That  the  executor,  within  thirty  days  after  qualifying 
as  such,  or  after  coming  into  possession  of  any  property  of  the  dece- 
dent, whichever  event  first  occurs,  shall  give  written  notice  thereof 
to  the  collector.  The  executor  shall  also,  at  such  times  and  in  such 
manner  as  may  be  required  by  the  regulations  made  under  this  title, 
file  with  the  collector  a  return  under  oath  in  duplicate,  setting  forth 
(a)   the  value  of  the  gross  estate  of  the  decedent  at  the  time  of  hi8 


986  THE   FEDERAL  ESTATE   TAX. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

death,  or,  in  case  of  a  non-resident,  of  that  part  of  his  gross  estate 
situated  in  the  United  States;  (b)  the  deductions  allowed  under  sec- 
tion two  hundred  and  three;  (c)  the  value  of  the  net  estate  of  the 
decedent  as  defined  in  section  two  hundred  and  three;  and  (d)  the 
tax  paid  or  payable  thereon;  or  such  part  of  such  information  as  may 
at  the  time  be  ascertainable  and  such  supplemental  data  as  may  be 
necessary  to  establish  the  correct  tax. 

Return  shall  be  made  in  all  cases  of  estates  subject  to  the  tax  or 
where  the  gross  estate  at  the  death  of  the  decedent  exceeds  $60,000, 
and  in  the  case  of  the  state  of  every  non-resident  any  part  of  whose 
gross  estate  is  situated  in  the  United  States.  If  the  executor  is 
unable  to  make  a  complete  return  as  to  any  part  of  the  gross  estate 
of  the  decedent,  he  shall  include  in  his  return  a  description  of  such 
part  and  the  name  of  every  person  holding  a  legal  or  beneficial  interest 
therein,  and  upon  notice  from  the  collector  such  person  shall  in  like 
manner  make  a  return  as  to  such  part  of  the  gross  estate.  The  Com- 
missioner of  Internal  Revenue  shall  make  all  assessments  of  the  tax 
under  the  authority  of  existing  administrative  special  and  general 
provisions  of  law  relating  to  the  assessment  and  collection  of  taxes. 

Sec.  206.  That  if  no  administration  is  granted  upon  the  estate  of  a 
decedent,  or  if  no  return  is  filed  as  provided  in  section  two  hundred 
and  five,  or  if  a  return  contains  a  false  or  incorrect  statement  of  a 
material  fact,  the  collector  or  deputy  collector  shall  make  a  return  and 
the  Commissioner  of  Internal  Revenue  shall  assess  the  tax  thereon. 

Sec.  207.  That  the  executor  shall  pay  the  tax  to  the  collector  or 
deputy  collector.  If  for  any  reason  the  amount  of  the  tax  can  not 
be  determined,  the  payment  of  a  sum  of  money  sufficient,  in  the 
opinion  of  the  collector,  to  discharge  the  tax  shall  be  deemed  payment 
in  full  of  the  tax,  except  as  in  this  section  otherwise  provided.  If  the 
amount  so  paid  exceeds  the  amount  of  the  tax  as  finally  determined, 
the  Commissioner  of  Internal  Revenue  shall  refund  such  excess  to 
the  executor.  If  the  amount  of  the  tax  as  finally  determined  exceeds 
the  amount  so  paid  the  commissioner  shall  notify  the  executor  of  the 
amount  of  such  excess.  From  the  time  of  such  notification  to  the 
time  of  the  final  payment  of  such  excess  part  of  the  tax,  interest  shall 
be  added  thereto  at  the  rate  of  ten  per  centum  per  annum,  and  the 
amount  of  such  excess  shall  be  a  lien  upon  the  entire  gross  estate, 
except  such  part  thereof  as  may  have  been  sold  to  a  bona  fide  pur- 
chaser for  a  fair  consideration  in  money  or  money's  worth. 

The  collector  shall  grant  to  the  person  paying  the  tax  duplicate 
receipts,  either  of  which  shall  be  sufficient  evidence  of  such  payment, 
and  shall  entitle  the  executor  to  be  credited  and  allowed  the  amount 
thereof  by  any  court  having  jurisdiction  to  audit  or  settle  his 
accounts. 

Sec.  208.  That  if  the  tax  herein  imposed  is  not  paid  within  sixty 
days  after  it  is  due,  the  collector  shall,  unless  there  is  reasonable  cause 
for  further  delay,  commence  appropriate  proceedings  in  any  court  of 
the  United  States,  in  the  name  of  the  United   States,  to  subject  the 


THE   FEDERAL   ESTATE    TAX.  987 

[Amendments  of  October  3,  1917,  included  in  Bracl<ets] 

property  of  the  decedent  to  be  sold  under  the  judgment  or  decree  of 
the  court.  From  the  proceeds  of  such  sale  the  amount  of  the  tax, 
together  with  the  costs  and  expenses  of  every  description  to  be 
allowed  by  the  court,  shall  be  first  paid,  and  the  balance  shall  be 
deposited  according  to  the  order  of  the  court,  to  be  paid  under  its 
direction  to  the  person  entitled  thereto.  If  the  tax  or  any  part 
thereof  is  paid  by,  or  collected  out  of  that  part  of  the  estate  passing  to 
or  in  the  possession  of,  any  person  other  than  the  executor  in  his 
capacity  as  such,  such  person  shall  be  entitled  to  reimbursement  out 
of  any  part  of  the  estate  still  undistributed  or  by  a  just  and  equitable 
contribution  by  the  persons  whose  interest  in  the  estat^e  of  the  decedent 
would  have  been  reduced  if  the  tax  had  been  paid  before  the  distri- 
bution of  the  estate  or  whose  interest  is  subject  to  equal  or  prior 
liability  for  the  payment  of  taxe^  debts,  or  other  charges  against  the 
estate,  it  being  the  purpose  and  intent  of  this  title  that  so  far  as  is 
practicable  and  unless  otherwise  directed  by  the  will  of  the  decedent 
the  tax  shall  be  paid  out  of  the  estate  before  its  distribution. 

Sec.  209.     That  unless  the  tax  is  sooner  paid  in  full,  it  shall  be  a 
lien  for  ten  years  upon  the  gross  estate  of  the  decedent,  except  that- 
such  part  of  the  gross  estate  as  is  used  for  the  payment  of  charges 
against  the  estate  and  expenses  of  its  administration,  allowed  by  any 
court  having  jurisdiction  thereof,  shall  be  divested  of  such  lien. 

If  the  decedent  makes  a  transfer  of,  or  creates  a  trust  with  respect 
to,  any  property  in  contemplation  of  or  intended  to  take  effect  in 
possession  or  enjoyment  at  or  after  his  death  (except  in  the  case  of 
a  bona  fide  sale  for  a  fair  consideration  in  money  or  money's  worth), 
and  if  the  tax  in  respect  thereto  is  not  paid  when  due,  the  transferee 
or  trustee  shall  be  personally  liable  for  such  tax,  and  such  property, 
to  the  extent  of  the  decedent's  interest  therein  at  the  time  of  such 
transfer,  shall  be  subject  to  a  like  lien  equal  to  the  amount  of  such 
tax.  Any  part  of  such  property  sold  by  such  transferee  or  trustee 
to  a  bona  fide  purchaser  for  a  fair  consideration  in  money  or  money's 
worth  shall  be  divested  of  the  lien  and  a  like  lien  shall  then  attach 
to  all  the  property  of  such  transferee  or  trustee,  except  any  part 
sold  to  a  bona  fide  purchaser  for  a  fair  consideration  in  money  or 
money's  worth. 

Sec.  210.  That  whoever  knowingly  makes  any  false  statements  in  any 
notice  or  return  required  to  be  filed. by  this  title  shall  be  liable  to  a 
penalty  of  not  exceeding  $5,000,  or  imprisonment  not  exceeding  one 
year,  or  both,  in  the  discretion  of  the  court. 

Whoever  fails  to  comply  with  any  duty  imposed  upon  him  by  sec- 
tion two  hundred  and  five,  or,  having  in  his  possession  or  control 
any  record,  file,  or  paper,  containing  or  supposed  to  contain  any 
information  concerning  the  estate  of  the  decedent,  fails  to  oxhibir  the 
same  upon  request  to  the  Commissioner  of  Internal  Revenue  or  any 
collector  or  law  officer  of  the  United  States,  or  his  duly  authorized 
deputy  or  agent,  who  desires  to  examine  ^he  same  in  the  perform- 
ance of  his  duties  under  this  title,  shall  be  liable  to  a  penalty  of  not 


988  THZ    FZIZEAL   ESTATE  TAX. 

[Amendments  of  October  3,  1917,  incluses  ■'-  8'-ac<etsI 

exceeding  S500,  to  be  recorered,  with  costs  of  suit,  in  a  ciTil  action 
in  the  name  of  the  United  States^ 

Sec.  ?11.  That  all  administratiTe,  special,  and  general  prorisions 
of  law,  inclading  the  laws  in  relation  to  the  assessment  and  collection 
of  taxes,  not  heretofore  specificaUj  repealed,  are  her^y  made  to 
apply  to  this  title  so  far  as  ^iplicable  and  not  inconsistent  with  its 
proTisicms. 

Sec.  212.  That  the  Co~n!;=  -r:  ::  Internal  Reremue,  with  the 
approTal  of  the  Secretary  -:.-  Tr  iury,  shall  malce  snch  r^nla^ 
tions,  and  prescribe  arc  r-:  :-  '  -  :?e  o'  snch  books  and  forms, 
as  he  may  deem  necessi " ;         . ;  r r ;  : .  -  : : ;    ^ :  ons  of  this  title. 

TEE   rSCtaSASR  OF    aiTES    V     :i  .       :   L    -^aS    lS*l\tL>LE  TAX   BOX. 

The  rates  fixed  by  tb^  a  :     '   -  1916,  as  amended  zj  .ie 

Act  of  March  3,  1^1"    -  -:.  ^  ;--    :  .    ircer  -he  T:--^  IX  ::  :i- 

War  EMate  Tax.  =t;:  '^  -  ii:  1  a."!  i.  ::::':.^:  ::  ::i::-  ~is 
enacted  exeir;::ir  :j:t  — :i-T=  ::  :i:^^  i?  '?  --  '----  — l-it-ary  ser-rl-e. 
These  sectiorL:  i.r-.  i  =  :  . . .     - 

[War  Estate  T  a:;  I-    iii::   -    -:    ■':  =:  -iz   :-::=^:    ":    =^  ■;::- 

201  of  the  act  enti.i-i  .^ji  A.::  zo  iz.^:ii^-i  zi.i  ri.iz.L.i  ijii  :;.-  :  ler 
pmpases,"  approred  September  8,  1916,  as  amended: 

(a)  A  tax  eqnal  to  the  followtng  percentages  of  its  ralne  is  hereby 
imposed  npon  the  transfer  of  each  net  estate  of  every  decedent  dying 
^ter  fhe  passage  of  this  Act/  the  transfer  of  which  is  taxable  under 
snch  section  (the  Talne  of  such  net  estate  to  be  determined  as  prorided 
in  title  2  or  snch  Act  of  September  8,  1916) : 

One-half  of  one  per  c^itmn  of  the  amount  of  such  net  estate  not  in 
excess  of  |50,000. 

One  per  centum  of  the  amount  by  which  such  re:  e=:2.:e  exi^ds 
$50,000  and  does  not  exceed  $150,000. 

One  and  one-half  v^r  centum  of  the  amount  by  which  such  net  estate 
exceeds  $150,000  and  does  not  exceed  $250,000. 

Two  per  ceiitum  of  the  amount  by  which  such  net  estate  ezT-re-:: 
$250,000  and  does  not  exceed  $450,000. 

Two  and  one-half  per  centum  of  the  amount  by  which  =  ::h  r^:  r  =  :a.:e 
exceeds  $450,000  and  does  not  exceed  $1,000,000. 

Three  per  centum  of  the  amount  by  which  sz-'z  r.-- 
$1,000,000  and  does  not  exceed  $2,000,000. 

Three  and  one-half  per  centum  of  the  an:  b.  snch  net 

estate  exceeds  $2,000,000  and  does  not  exceed  I 

Four  per  centum  of  the  amount  by  whiek   -  -  ris 

$2,000,000  and  does  not  exceed  $4,000,000. 

Four  and  one-half  per  centum  of  the  amoTm":  = :  .i  re:  es:.a:e 

exceeds  $4,000,000  and  does  not  exceei  !' 


THE   PEDKRAl.   ESTATE    TAX. 


989 


[Amefldments  of  Oc: 


Fire  per 

Seven  p- 
I8.000.00C 
Ten  per 

SOL  Tl 
of  tiieiiet 
naval  for 
in  vhidi 
injuries  r 
after  tbe 
tenninati 
Presf--r- 

A  M 


-   .'♦  ar  ReTcHiie  Acz  ot  \j<.ixrOS:s  ^  1&17.> 


Net  estates  ir. 

Of  amotir-    - 


br  »'b:- 


4''- 


Act  of  Act  (tf 

Mareh3.1917      Oct.3.1917 

1%%  2% 


3%  4 " 


6^c 


Of  1- 


.iz  estate 
and  does  not 


7% 


7%% 


10% 


u% 


14  '^b 


]2« 


1«^ 


990  THE    MUNITIONS   TAX   OF    1916. 

[Amendments  of  October  3,  1917,  included  in  Brackets] 

Of  amount  by  which  net  estate 
exceeds  $4,000,000  and  does  not 
exceed  $5,000,000   9%  131/^%  18% 

Of  amount  by  which  net  estate 
exceeds  $5,000,000  and  does  not 
exceed  $8,000,000   10%  15%  20% 

Of  amount  by  \^hich  net  estate 
exceeds  $8,000,000  and  does  mot 
exceed  $10,000,000    10%  15%  22% 

Of  amount  by  which  such  net 
estate   exceeds   $10,000,000 10%  15%  25% 


THE    MUNITIONS    TAX. 

Title  III  of  the  Act  of  September  8,  1916,  known  as  the  Munitions 
Manufacturers'  Tax  Act,  was  amended  by  the  Act  of  March  3,  1917, 
and  repealed  by  Section  214  of  the  Act  of  October  3,  1917,  wherein  it  was 
provided  that  any  amount  paid  should  be  credited  toward  the  payment 
of  the  tax  imposed  by  the  Act  of  October  3,  1917,  and  it  was  amended  so 
that  the  rate  of  tax  for  the  taxable  year  of  1917  should  be  ten  per  cent 
instead  of  twelve  and  one-half  per  cent.  But  that  ceased  to  be  in  effect 
on  and  after  January  1,  1918. 


MISCELLANEOUS   FEDERAL   EXCISE    TAXES.  991 


TITLE  IV.— MISCELLANEOUS  TAXES. 

Sec.  400.  That  there  shall  be  levied,  collected,  and  paid  a  tax  of 
$1.50  on  all  beer,  lager  beer,  ale,  porter,  and  other  similar  fermented 
liquor,  brewed  or  manufactured  and  sold,  or  stored  in  warehouse,  or 
removed  for  consumption  or  sale,  within  the  United  States,  by  what- 
ever name  such  liquors  may  be  called,  for  every  barrel  containing  not 
more  than  thirty-one  gallons;  and  at  a  like  rate  for  any  other  quantity 
or  for  the  fractional  parts  of  a  barrel  authorized  and  defined  by  law. 
And  section  thirty-three  hundred  and  thirty-nine  of  the  Revised 
Statutes  is  hereby  amended  accordingly. 

Sec.  401.  That  natural  wine  within  the  meaning  of  this  Act  shall 
be  deemed  to  be  the  product  made  from  the  normal  alcoholic  fermen- 
tation of  the  juice  of  sound,  ripe  grapes,  without  addition  or  abstrac- 
tion, except  such  as  may  occur  in  the  usual  cellar  treatment  of  clarify- 
ing and  aging:  Provided,  hotcever.  That  the  product  made  from  the 
juice  of  sound,  ripe  grapes  by  complete  fermentation  of  the  must 
under  proper  cellar  treatment  and  corrected  by  the  addition  (under 
the  supervision  of  a  gauger  or  storekeeper-gauger  in  the  capacity  of 
gauger)  of  a  solution  of  water  and  pure  cane,  beet,  or  dextrose  sugar 
(containing,  respectively,  not  less  than  ninety-five  per  centum  of 
actual  sugar,  calculated  on  a  dry  basis)  to  the  must  or  to  the  wine,  to 
correct  natural  deficiencies,  when  such  addition  shall  not  increase  the 
volume  of  the  resultant  product  more  than  thirty-five  per  centum, 
and  the  resultant  product  does  not  contain  less  than  five  parts  per 
thousand  of  acid  before  fermentation  and  not  more  than  thirteen  per 
centum  of  alcohol  after  complete  fermentation,  shall  be  deemed  to  be 
wine  within  the  meaning  of  this  Act,  and  may  be  labeled,  transported, 
and  sold  as  "wine,"  qualified  by  the  name  of  the  locality  where  pro- 
duced, and  may  be  further  qualified  by  the  name  of  its  own  particular 
type  or  variety:  And  provided  further,  That  wine  as  defined  in  this 
section  may  be  sweetened  with  cane  sugar  or  beet  sugar  or  pure  con- 
densed grape  must  and  fortified  under  the  provisions  of  this  Act,  and 
wines  so  sweetened  or  fortified  shall  be  considered  sweet  wine  within 
the  meaning  of  this  Act. 

Sec.  402.  (a)  That  upon  all  still  wines,  including  vermouth,  and 
upon  all  artificial  or  imitation  wines  or  compound  sold  as  wine  here- 
after produced  in  or  imported  into  the  United  States,  and  upon  all 
like  wines  which  on  the  date  this  section  takes  effect  shall  be  in  the 
possession  or  under  the  control  of  the  producer,  holder,  dealer,  or 
compounder  there  shall  be  levied,  collected,  and  paid  taxes  at  rates 
as  follows: 

On  wines  containing  not  more  than  fourteen  per  centum  of  abso- 
lute alcohol,  4  cents  per  wine  gallon,  the  per  centum  of  alcohol  tax- 
able under  this  section  to  be  reckoned  by  volume  and  not  by  weight. 

On   wines  containing  more  than   fourteen  per  centum  and  not  ex- 


992  MISCELLANEOUS   FEDERAL   EXCISE    TAXES. 

ceeding  twenty-one  per  centum  of  absolute  alcohol,  10  cents  per  wine 
gallon. 

On  wines  containing  more  than  twenty-one  per  centum  and  not 
exceeding  twenty-four  per  centum  of  absolute  alcohol,  25  cents  per 
wine  gallon. 

All  such  wines  containing  more  than  twenty-four  per  centum  of 
absolute  alcohol  by  volume  shall  be  classed  as  distilled  spirits  and 
shall  pay  tax  accordingly:  Provided,  That  on  all  unsold  still  wines  in 
the  actual  possession  of  the  producer  at  the  time  this  title  takes  effect, 
upon  which  the  tax  imposed  by  the  Act  approved  October  twenty- 
second,  nineteen  hundred  and  fourteen,  entitled  "An  Act  to  increase 
the  internal  revenue  and  for  other  purposes,"  and  the  joint  resolu- 
tion approved  December  seventeenth,  nineteen  hundred  anl  fifteen, 
entitled  "Joint  resolution  extending  the  provisions  of  the  Act  en- 
titled 'An  Act  to  increase  the  internal  revenue,  and  for  other  purposes,' 
approved  October  twenty-second,  nineteen  hundred  and  fourteen,  to 
December  thirty-first,  nineteen  hundred  and  sixteen,"  has  been  as- 
sessed, the  tax  so  assessed  shall  be  abated,  or,  if  paid,  refunded  under 
such  regulations  as  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  may  prescribe. 

(b)  That  the  taxes  imposed  by  this  section  shall  be  paid  by  stamp 
on  removal  of  the  wines  from  the  customhouse,  winery,  or  other 
bonded  place  of  storage  for  consumption  or  sale,  and  every  person 
hereafter  producing,  or  having  in  his  possession  or  under  his  control 
when  this  section  takes  effect,  any  wines  subject  to  the  tax  imposed 
in  this  section  shall  file  such  notice,  describing  the  premises  on  which 
such  wines  are  produced  or  stored;  shall  execute  a  bond  in  such 
form;  shall  make  such  inventories  under  oath;  and  shall,  prior  to 
sale  or  removal  for  consumption,  affix  to  each  cask  or  vessel  contain- 
ing such  wine  such  marks,  labels,  or  stamps  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
may  from  time  to  time  prescribe;  and  the  premises  described  in  such 
notice  shall,  for  the  purpose  of  this  section,  be  regarded  as  bonded 
premises.  But  the  provisions  of  this  subdivision  of  this  section, 
except  as  to  payment  of  tax  and  the  affixing  of  the  required  stamps 
or  labels,  shall  not  apply  to  wines  held  by  retail  dealers,  as  defined 
in  section  thirty-two  hundred  and  forty-four  of  the  Revised  Statutes 
of  the  United  States,  nor,  subject  to  regulations  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  shall  the  tax  imposed  by  this  section  apply  to  wines 
produced  for  the  family  use  of  the  producer  thereof  and  not  sold  or 
otherwise  removed  from  the  place  of  manufacture  and  not  exceeding 
in  any  case  two  hundred  gallons  per  year.  The  Commissioner  of 
Internal  Revenue  is  hereby  authorized  to  have  prepared  and  issue 
such  stamps  denoting  payment  of  the  tax  imposed  by  this  section 
as  he  may  deem  requisite  and  necessary;  and  until  such  stamps  are 
provided  the  taxes  imposed  by  this  section  shall  be  assessed  and  col- 
lected as  other  taxes  are  assessed  and  collected,  and  all  provisions  of 
law  relating  to  assessment  and  collection  of  taxes,  so  far  as  applicable, 
are  hereby  extended  to  the  taxes  imposed  by  this  section. 


MISCELLANEOUS   FEDERAL   EXCISE   TAXES.  993 

(c)  That  under  such  regulations  and  official  supervision  and  upon 
the  giving  of  such  notices,  entries,  bonds,  and  other  security  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  may  prescribe,  any  producer  of  wines  defined 
under  the  provisions  of  this  section  or  section  four  hundred  and  one 
of  this  Act,  may  withdraw  from  any  fruit  distillery  or  special  bonded 
warehouse  grape  brandy,  or  wine  spirits,  for  the  fortification  of  such 
wines  on  the  premises  where  actually  made:  Provided,  That  there 
shall  be  levied  and  assessed  against  the  producer  of  such  wines  a 
tax  of  10  cents  per  proof  gallon  of  grape  brandy  or  wine  spirits  so 
used  by  him  in  the  fortification  of  such  wines  during  the  preceding 
month,  which  assessment  shall  be  paid  by  him  within  six  months 
from  the  date  of  notice  thereof:  Provided  further.  That  nothing  herein 
contained  shall  be  construed  as  exempting  any  wines,  cordials, 
liqueurs,  or  similar  compounds  from  the  payment  of  any  tax  provided 
for  in  this  section. 

That  sections  forty-two,  forty-three,  and  forty-five  of  the  Act  of 
October  first,  eighteen  hundred  and  ninety,  as  amended  by  section 
sixty-eight  of  the  Act  of  August  twenty-seventh,  eighteen  hundred 
and  ninety-four,  are  further  amended  to  read  as  follows: 

"Sec.  42.  That  any  producer  of  pure  sweet  wines  may  use  in  the 
preparation  of  such  sweet  wines,  under  such  regulations  and  after 
the  filing  of  such  notices  and  bonds,  together  with  the  keeping  of 
such  records  and  the  rendition  of  such  reports  as  to  materials  and 
products  as  the  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  may  prescribe,  wine  spirits  produced 
by  any  duly  authorized  distiller,  and  the  Commissioner  of  Internal 
Revenue,  in  determining  the  liability  of  any  distiller  of  wine  spirits  to 
assessment  under  section  thirty-three  hundred  and  nine  of  the  Re- 
vised Statutes,  is  authorized  to  allow  such  distiller  credit  in  his  com- 
putations for  the  wine  spirits  withdrawn  to  be  used  in  fortifying  sweet 
wines  under  this  Act. 

"Sec.  43.  That  the  wine  spirits  mentioned  in  section  forty-two 
herein  mentioned  is  the  product  resulting  from  the  distillation  of 
fermented  grape  juice,  to  which  water  may  have  been  added  prior  to, 
during,  or  after  fermentation,  for  the  sole  purpose  of  facilitating  the 
fermentation  and  economical  distillation  thereof,  and  shall  be  held 
to  include  the  product  from  grapes  or  their  residues  commonly 
known  as  grape  brandy,  and  shall  include  commercial  grape  brandy 
which  may  have  been  colored  with  burnt  sugar  or  caramel;  and  the 
pure  sweet  wine  which  may  be  fortified  with  wine  spirits  under  the 
provisions  of  this  Act  is  fermented  or  partially  fermented  grape 
juice  only,  with  the  usual  cellar  treatment,  and  shall  contain  no 
other  substance  whatever  introduced  before,  at  the  time  of,  or  after 
fermentation,  except  as  herein  expressly  provided:  Provided,  That  the 
addition  of  pure  boiled  or  condensed  grape  must  or  pure  crystallized 
cane  or  beet  sugar,  or  pure  dextrose  sugar  containing,  respectively, 
not  less  than  ninety-five  per  centum  of  actual  sugar,  calculated  on  a 
dry  basis,  or  water,  or  any  or  all  of  them,  to  the  pure  grape  juice 
before    fermentation,    or    to    the    fermented    product    of    such    grape 


994  MISCELLANEOUS   FEDERAL   EXCISE   TAXES. 

juice,  or  to  both,  prior  to  the  fortification  herein  provided  for, 
either  for  the  purpose  of  perfecting  sweet  wines  according  to  com- 
mercial standards  or  for  mechanical  purposes,  shall  not  be  excluded 
by  the  definition  of  pure  sweet  wine  aforesaid:  Provided,  hoicever. 
That  the  cane  or  beet  sugar,  or  pure  dextrose  sugar  added  for  sweeten- 
ing purposes  shall  not  be  in  excess  of  eleven  per  centum  of  the  weight 
of  the  wine  to  be  fortified:  And  provided  further,  That  the  addition  of 
water  herein  authorized  shall  be  under  such  regulations  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  may  from  time  to  time  prescribe:  Provided,  hoioever. 
That  records  kept  in  accordance  with  such  regulations  as  to  the 
percentage  of  saccharine,  acid,  alcoholic,  and  added  water  content 
of  the  wine  offered  for  fortification  shall  be  open  to  inspection  by  any 
official  of  the  Department  of  Agriculture  thereto  duly  authorized  by 
the  Secretary  of  Agriculture;  but  in  no  case  shall  such  w-ines  to  which 
water  has  been  added  be  eligible  for  fortification  under  the  provisions 
of  this  Act,  where  the  same,  after  fermentation  and  before  fortifica- 
tion, have  an  alcoholic  strength  of  less  than  five  per  centum  of  their 
volume. 

"Sec.  45.  That  under  such  regulations  and  official  supervision,  and 
upon  the  execution  of  such  entries  and  the  giving  of  such  bonds,  bills 
of  lading,  and  other  security  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  shall  prescribe,  any 
producer  of  pure  sweet  wines  as  defined  by  this  Act  may  withdraw 
wine  spirits  from  any  special  bonded  warehouse  in  original  packages  or 
from  any  registered  distillery  in  any  quantity  not  less  than  eighty  wine 
gallons,  and  may  use  so  much  of  the  same  as  may  be  required  by  him 
under  such  regulations,  and  after  the  filing  of  such  notices  and  bonds 
and  the  keeping  of  such  records  and  the  rendition  of  such  reports  as 
to  materials  and  products  and  the  disposition  of  the  same  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  shall  prescribe,  in  fortifying  the  pure  sweet  wines  made 
by  him,  and  for  no  other  purpose,  in  accordance  with,  the  foregoing 
limitations  and  provisions;  and  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  is  authorized  when- 
ever he  shall  deem  it  to  be  necessary  for  the  prevention  of  violations 
of  this  law  to  prescribe  that  wine  spirits  withdrawn  under  this  section 
shall  not  be  used  to  fortify  wines  except  at  a  certain  distance  pre- 
scribed by  him  from  any  distillery,  rectifying  house,  winery,  or  other 
establishment  used  for  producing  or  storing  distilled  spirits,  or  for 
making  or  storing  wines  other  than  wines  which  are  so  fortified,  and 
that  in  the  building  in  which  such  fortification  of  wines  is  practiced 
no  wines  or  spirits  other  than  those  permitted  by  this  regulation  shall 
be  stored  in  any  room  or  part  of  the  building  in  which  fortification  of 
wines  is  practiced.  The  use  of  wine  spirits  for  the  fortification  of 
sweet  w'ines  under  this  Act  shall  be  under  the  immediate  supervision 
of  an  officer  of  internal  revenue,  who  shall  make  returns  describing 
the  kinds  and  quantities  of  wine  so  fortified,  and  shall  affix  such 
stamps  and  seals  to  the  packages  containing  such  wines  as  may  be 
prescribed  by  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary   of  the  Treasury;    and   the  Commissioner  of 


MISCELLANEOUS   FEDERAL    EXCISE   TAXES.  995 

Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
shall  provide  by  regulations  the  time  within  which  wines  so  fortified 
with  the  wine  spirits  so  withdrawn  may  be  subject  to  inspection, 
and  for  final  accounting  for  the  use  of  such  wine  spirits  and  for 
rewarehousing  or  for  payment  of  the  tax  on  any  portion  of  such  wine 
spirits  which  remain  not  used  in  fortifying  pure  sweet  wines." 

(d)  That  under  such  regulations  and  upon  the  execution  of  such 
notices,  entries,  bonds,  and  other  security  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
may  prescribe,  domestic  wines  subject  to  the  tax  imposed  by  this 
section  may  be  removed  from  the  winery  where  produced,  free  of 
tax,  for  storage  on  other  bonded  premises  or  from  said  premises  to 
other  bonded  premises:  Provided,  That  not  more  than  one  such  ad- 
ditional removal  shall  be  allowed,  or  for  exportation  from  the  United 
States  or  for  use  as  distilling  material  at  any  regularly  registered  dis- 
tillery: Provided,  however,  That  the  distiller  using  any  such  wine  as 
material  shall,  subject  to  the  provisions  of  section  thirty-three  hun- 
dred and  nine  of  the  Revised  Statutes  of  the  United  States,  as  amended, 
be  held  to  pay  the  tax  on  the  product  of  such  wines  as  will  include  both 
the  alcoholic  strength  therein  produced  by  fermentation  and  that 
obtained  from  the  brandy  or  wine  spirits  added  to  such  wines  at  the 
time  of  fortification. 

(e)  That  upon  all  domestic  and  imported  sparkling  wines,  liqueurs, 
cordials,  and  similar  compounds  remaining  in  the  hands  of  dealers 
when  this  section  takes  effect,  or  thereafter  removed  from  the  place 
of  manufacture  or  storage  for  sale  or  consumption,  there  shall  be  levied 
and  paid,  by  stamp,  taxes  as  follows: 

On  each  bottle  or  other  container  of  champagne  or  sparkling  wine, 
3  cents  on  each  one-half  pint  or  fraction  thereof. 

On  each  bottle  or  other  container  of  artificially  carbonated  wine, 
1^2  cents  on  each  one-half  pint  or  fraction  thereof. 

On  each  bottle  or  other  container  of  liqueurs,  cordials,  or  similar 
compounds,  by  whatever  name  sold  or  offered  for  sale,  containing 
sweet  wine,  fortified  with  grape  brandy  under  the  provisions  of  para- 
graph (c)  of  this  section,  IVz  cents  on  each  one-half  pint  or  fraction 
thereof. 

The  taxes  imposed  by  this  section  shall  not  apply  to  wines,  liqueurs, 
or  cordials  on  which  the  tax  imposed  by  the  Act  approved  October 
twenty-second,  nineteen  hundred  and  fourteen,  entitled  "An  Act  to 
increase  the  internal  revenue,  and  for  other  purposes,"  and  the  joint 
resolution  approved  December  seventeenth,  nineteen  hundred  and 
fifteen,  entitled  "Joint  resolution  extending  the  provisions  of  the  Act 
entitled  'An  Act  to  increase  the  internal  revenue,  and  for  other  pur- 
poses,' approved  October  twenty-second,  nineteen  hundred  and  four- 
teen, to  December  thirty-first,  nineteen  hundred  and  sixteen,"  has  been 
paid  by  stamp. 

The  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  is  hereby  authorized  to  have  prepared 
suitable  revenue  stamps  denoting  the  payment  of  the  taxes  imposed 


996  MISCELLANEOUS   FEDERAL    EXCISE   TAXES. 

by  this  section;  and  all  provisions  of  law  relating  to  internal-revenue 
stamps,  so  far  as  applicable,  are  hereby  extended  to  the  taxes  imposed 
by  this  section:  Provided,  That  the  collection  of  the  tax  herein  pre- 
scribed on  imported  still  wines,  including  vermouth,  and  sparkling 
wines,  including  champagne,  and  on  imported  liqueurs,  cordials  and 
similar  compounds,  may  be  made  within  the  discretion  of  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  by  assessment  instead  of  by  stamps. 

(f)  That  any  person  who  shall  evade  or  attempt  to  evade  the  tax 
imposed  by  this  section,  or  any  requirement  of  this  section  or  regu- 
lation issued  pursuant  thereof,  or  who  shall,  otherwise  than  provided 
in  this  section,  recover  or  attempt  to  recover  any  spirits  from  domes- 
tic or  imported  wine,  or  who  shall  rectify,  mix,  or  compound  with 
distilled  spirits  any  domestic  wines,  other  than  in  the  manufacture 
of  liqueurs,  cordials,  or  similar  compounds  taxable  under  the  provi- 
sions of  this  section,  shall,  on  conviction,  be  punished  for  each  such 
offense  by  a  fine  of  not  exceeding  $5,000,  or  imprisonment  for  not 
more  than  five  years,  or  both,  and  all  wines,  spirits,  liqueurs,  cordials, 
or  similar  compounds  as  to  which  such  violation  occurs  shall  be 
forfeited  to  the  United  States.  But  the  provision  of  this  subdivision 
of  this  section  and  the  provision  of  section  thirty-two  hundred  and 
forty-four  of  the  Revised  Statutes  of  the  United  States,  as  amended, 
relating  to  rectification,  or  other  internal-revenue  laws  of  the  United 
States,  shall  not  be  held  to  apply  to  or  prohibit  the  mixing  or  blend- 
ing of  wines  subject  to  tax  under  the  provisions  of  this  section  with 
each  other  or  with  other  wines  for  the  sole  purpose  of  perfecting  such 
wines  according  to  commercial  standards:  Provided,  That  nothing 
herein  contained  shall  be  construed  as  prohibiting  the  use  of  tax-paid 
grain  or  other  ethyl  alcohol  in  the  fortification  of  sweet  wines  as 
defined  in  section  fifty-three  of  this  Act. 

(g)  That  the  Commissioner  of  Internal  Revenue,  by  regulations 
to  be  approved  by  the  Secretary  of  the  Treasury,  may  require  the 
use  at  each  fruit  distillery  of  such  spirit  meters,  and  such  locks  and 
seals  to  be  aflixed  to  fermenters,  tanks,  or  other  vessels  and  to  such 
pipe  connections  as  may  in  his  judgment  be  necessary  or  expedient; 
and  the  said  commissioner  is  hereby  authorized  to  assign  to  any 
such  distillery  and  to  each  winery  where  wines  are  to  be  fortified 
such  number  of  gangers  or  storekeeper-gangers  in  the  capacity  of 
gangers  as  may  be  necessary  for  the  proper  supervision  of  the  manu- 
facture of  brandy  or  the  making  or  fortifying  of  wines  subject  to  tax 
imposed  by  this  section;  and  the  compensation  of  such  officers  shall 
not  exceed  $5  per  diem  while  so  assigned,  together  with  their  actual 
and  necessary  traveling  expenses,  and  also  a  reasonable  allowance  for 
their  board  bills,  to  be  fixed  by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  but  not  to  exceed 
$2.50  per  diem  for  said  board  bills. 

(h)  That  the  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  is  hereby  authorized  to  make  such 
allowances  for  unavoidable  loss  of  wines  while  on  storage  or  during 


MISCELLANEOUS  FEDER^AL  EXCISE  TAXES.  997 

cellar  treatment  as  in  his  judgment  may  be  just  and  proper,  and  to 
prepare  all  necessary  regulations  for  carrying  into  effect  the  provisions 
of  this  section. 

(i)  That  the  second  paragraph  of  section  thirty-two  hundred  and 
sixty-four,  Revised  Statutes  of  the  United  States  of  America,  as 
amended  by  section  five  of  the  Act  of  March  first,  eighteen  hundred 
and  seventy-nine,  and  as  further  amended  by  the  Act  of  Congress 
approved  June  twenty-second,  nineteen  hundred  and  ten,  be  amended 
so  as  to  read  as  follows: 

"In  all  surveys  forty-five  gallons  of  mash  or  beer  brewed  or  fer- 
mented from  grain  shall  represent  not  less  than  one  bushel  of  grain, 
and  seven  gallons  of  mash  or  beer  brewed  or  fermented  from  molasses 
shall  represent  not  less  than  one  gallon  of  molasses,  except  in  distil- 
leries operated  on  the  sour-mash  principle,  in  which  distilleries  sixty 
gallons  of  beer  brewed  or  fermented  from  grain  shall  represent  not 
less  than  one  bushel  of  grain,  and  except  that  in  distilleries  where  the 
filtration-aeration  process  is  used,  with  the  approval  of  the  Commis- 
sioner of  Internal  Revenue;  that  is,  where  the  mash  after  it  leaves 
the  mash  tub  is  passed  through  a  filtering  machine  before  it  is  run 
into  the  fermenting  tub,  and  only  the  filtered  liquor  passes  into  the 
fermenting  tub,  there  shall  hereafter  be  no  limitation  upon  the  num- 
ber of  gallons  of  water  which  may  be  used  in  the  process  of  mashing 
or  filtration  for  fermentation;  but  the  Commissioner  of  Internal  Rev- 
enue, with  the  approval  of  the  Secretary  of  the  Treasury,  in  order  to 
protect  the  revenue,  shall  be  authorized  to  prescribe  by  regulation, 
to  be  made  by  him,  such  character  of  survey  as  he  may  find  suitable 
for  distilleries  using  such  filtration-aeration  process.  The  provisions 
hereof  relating  to  filtration-aeration  process  shall  apply  only  to  sweet- 
mash  distilleries." 

Sec.  403.  That  under  such  regulations  as  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury 
may  prescribe,  alcohol  or  other  distilled  spirits  of  a  proof  strength  of 
not  less  than  one  hundred  and  eighty  degrees  intended  for  export 
free  of  tax  may  be  drawn  from  receiving  cisterns  at  any  distillery,  or 
from  storage  tanks  in  any  distillery  vv^arehouse,  for  transfer  to  tanks 
or  tank  cars  for  export  from  the  United  States,  and  all  provisions  of 
existing  law  relating  to  the  exportation  of  distilled  spirits  not  incon- 
sistent herewith  shall  apply  to  spirits  removed  for  export  under  the 
provisions  of  this  Act. 

Sec.  404.  That  section  thirty-two  hundred  and  thirty-five  of  the 
Revised  Statutes  as  amended  by  Act  of  June  third,  eighteen  hundred 
and  ninety-six.  and  as  further  amended  by  Act  of  March  second  nine- 
teen hundred  and  eleven,  be  further  amende-ffso  as  to  read  as  follows: 

"Sec.  32.55.  The  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  may  exempt  distillers  of 
brandy  made  exclusively  from  apples,  peaches,  grapes,  pears,  pine- 
apples,    oranges,    apricots,     berries,     plums,     pawpaws,     persimmons 


998  MISCELLANEOUS   FEDERAL   EXCISE   TAXES. 

prunes,  figs,  or  cherries  from  any  provision  of  this  title  relating  to  the 
manufacture  of  spirits,  except  as  to  the  tax  thereon,  when  in  his 
judgment  it  may  seem  expedient  to  do  so:  Provided,  That  where,  in 
manufacture  of  wine,  artificial  sweetening  has  been  used  the  wine  or 
the  fruit  pomace  residuum  may  be  used  in  the  distillation  of  brandy, 
as  such  use  shall  not  prevent  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  from  exempting 
such  distiller  from  any  provision  of  this  title  relating  to  the  manu- 
facture of  spirits,  except  as  to  the  tax  thereon,  when  in  his  judgment 
it  may  seem  expedient  to  do  so:  And  provided  further.  That  the  dis- 
tillers mentioned  in  this  section  may  add  to  not  less  than  five  hundred 
gallons  (or  ten  barrels)  of  grape  cheese  not  more  than  five  hundred 
gallons  of  a  sugar  solution  made  from  cane,  beet,  starch,  or  corn 
sugar,  ninety-five  per  centum  pure,  such  solution  to  have  a  saccharine 
strength  of  not  to  exceed  ten  per  centum,  and  may  ferment  the 
resultant  mixture  on  a  winery  or  distillery  premises,  and  such  fer- 
mented product  shall  be  regarded  as  distilling  material." 

Sec.  405.  That  distilled  spirits  known  commercially  as  gin  of  not 
less  than  eighty  per  centum  proof  may  at  any  time  within  eight  years 
after  entry  in  bond  at  any  distillery  be  bottled  in  bond  at  such  dis- 
tillery for  export  without  the  payment  of  tax,  under  such  rules  and 
regulations  as  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  may  prescribe. 

Sec.  406.  That  section  thirty-three  hundred  and  fifty-four  of  the 
Revised  Statutes  of  the  United  States  as  amended  by  the  Act  approved 
June  eighteenth,  eighteen  hundred  and  ninety,  be,  and  is  hereby, 
amended  to  read  as  follows: 

"Sec.  3354.  Every  person  who  withdraws  any  fermented  liquor 
from  any  hogshead,  barrel,  keg,  or  other  vessel  upon  which  the 
proper  stamp  has  not  been  affixed  for  the  purpose  of  bottling  the 
same,  or  who  carries  on  or  attempts  to  carry  on  the  business  of  bot- 
tling fermented  liquor  in  any  brewery  or  other  place  in  which  fer- 
mented liquor  is  made,  or  upon  any  premises  having  communication 
with  such  brewery,  or  any  warehouse,  shall  be  liable  to  a  fine  of  $500, 
and  the  property  used  in  such  bottling  or  business  shall  be  liable  to 
forfeiture:  Provided,  however,  That  this  section  shall  not  be  construed 
to  prevent  the  withdrawal  and  transfer  of  unfermented,  partially 
fermented,  or  fermented  liquors  from  any  of  the  vats  in  any  brewery 
by  way  of  a  pipe  line  or  other  conduit  to  another  building  or  place  for 
the  sole  purpose  of  bottling  the  same,  such  pipe  line  or  conduit  to  be 
constructed  and  operated  in  such  manner  and  with  such  cisterns, 
vats,  tanks,  valves,  cocks,  faucets,  and  gauges,  or  other  utensils  or 
apparatus,  either  on  the  premises  of  the  brewery  or  the  bottling  house, 
and  with  such  changes  of  or  additions  thereto,  and  such  locks,  seals, 
or  other  fastenings,  and  under  such  rules  and  regulations  as  shall  be 
from  time  to  time  prescribed  by  the  Commissioner  of  Internal 
Revenue,  subject  to  the  approval  of  the  Secretary  of  the  Treasury,  and 
all  locks  and  seals  prescribed  shall  be  provided  by  the  Commissioner 
of  Internal  Revenue  at  the  expense  of  the  United   States:     Provided 


MISCELLANEOUS   FEDERAL   EXCISE   TAXES.  999 

further.  That  the  tax  imposed  in  section  thirty-three  hundred  and 
thirty-nine  of  the  Revised  Statutes  of  the  United  States  shall  be  paid 
on  all  fermented  liquor  removed  from  a  brewery  to  a  bottling  house 
by  means  of  a  pipe  or  conduit,  at  the  time  of  such  removal,  by  the 
cancellation  and  defacement,  by  the  collector  of  the  district  or  his 
deputy,  in  the  presence  of  the  brewer,  of  the  number  of  stamps 
denoting  the  tax  on  the  fermented  liquor  thus  removed.  The 
stamps  thus  canceled  and  defaced  shall  be  disposed  of  and  accounted 
for  in  the  manner  directed  by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury.  And  any  viola- 
tion of  the  rules  and  regulations  hereafter  prescribed  by  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  in  pursuance  of  these  provisions,  shall  be  subject  to  the 
penalties  above  provided  by  this  section.  Every  owner,  agent,  or 
superintendent  of  any  brewery  or  bottling  house  who  removes,  or 
connives  at  the  removal  of,  any  fermented  liquor  through  a  pipe  line 
or  conduit,  without  payment  of  the  tax  thereon,  or  who  attempts  in 
any  manner  to  defraud  the  revenue  as  above,  shall  forfeit  all  the 
liquors  made  by  and  for  him,  and  all  the  vessels,  utensils,  and  ap- 
paratus used  in  making  the  same. 


SPECIAL   TAXES. 

Sec.  407.  That  on  and  after  January  first,  nineteen  hundred  and 
seventeen,  special  taxes  shall  be,  and  hereby  are,  imposed  annually, 
as  follows,  that  is  to  say: 

Every  corporation,  joint-stock  company  or  association,  now  or  here- 
after organized  in  the  United  States  for  profit  and  having  a  capital 
stock  represented  by  shares,  and  every  insurance  company,  now  or 
hereafter  organized  under  the  laws  of  the  United  States,  or  any  State 
or  Territory  of  the  United  States,  shall  pay  annually  a  special  excise 
tax  with  respect  to  the  carrying  on  or  doing  business  by  such  corpora- 
tion, joint-stock  company  or  association,  or  insurance  company, 
equivalent  to  50  cents  for  each  $1,000  of  the  fair  value  of  its  capital 
stock  and  in  estimating  the  value  of  capital  stock  the  surplus  and  undi- 
vided profits  shall  be  included:  Provided,  That  in  the  case  of  insurance 
companies  such  deposits  and  reserve  funds  as  they  are  required  by 
law  or  contract  to  maintain  or  hold  for  the  protection  of  or  payment 
to  or  apportionment  among  policyholders  shall  not  be  included.  The 
amount  of  such  annual  tax  shall  in  all  cases  be  computed  on  the 
basis  of  the  fair  average  value  of  the  capital  stock  for  the  preceding 
year:  Provided,  That  for  the  purpose  of  this  tax  an  exemption  of 
$99,000  shall  be  allowed  from  the  capital  stock  as  defined  in  this 
paragraph  of  each  corporation,  joint-stock  company  or  association,  or 
insurance  company:  Provided  further.  That  a  corporation,  joint-stock 
company  or  association,  or  insurance  company,  actually  paying  the 
tax  imposed  by  section  three  hundred  and  one  of  Title  III  of  this  Act 
shall  be  entitled  to  a  credit  as  against  the  tax  imposed  by  this  para- 
graph equal  to  the  amount  of  the  tax  so  actually  paid:  And  provided 
further.  That  this  tax  shall  not  be  imposed  upon  any  corporation,  joint- 


1000  MISCELLANEOUS   FEDERAL  EXCISE   TAXES. 

stock  company  or  association,  or  insurance  company  not  engaged  in 
business  during  the  preceding  taxable  year,  or  which  is  exempt  under 
the  provisions  of  section  eleven,  Title  I,  of  this  Act. 

Every  corporation,  joint-stoclf  company  or  association,  or  insur- 
ance company,  now  or  hereafter  organized  for  profit  under  the  laws 
of  any  foreign  country  and  engaged  in  business  in  the  United  States 
shall  pay  annually  a  special  excise  tax  with  respect  to  the  carrying  on 
or  doing  business  in  the  United  States  by  such  corporation,  joint- 
stock  company  or  association,  or  insurance  company,  equivalent  to 
50  cents  for  each  $1,000  of  the  capital  actually  invested  in  the  trans- 
action of  its  business  in  the  United  States:  Provided,  That  in  the 
case  of  insurance  companies  such  deposits  or  reserve  funds  as  they 
are  required  by  law  or  contract  to  maintain  or  hold  in  the  United 
States  for  the  protection  of  or  payment  to  or  apportionment  among 
policyholders,  shall  not  be  included.  The  amount  of  such  annual 
tax  shall  in  all  cases  be  computed  on  the  basis  of  the  average  amount 
of  capital  so  invested  during  the  preceding  year:  Provided,  That  for 
the  purpose  of  this  tax  an  exemption  from  the  amount  of  capital  so 
invested  shall  be  allowed  equal  to  such  proportion  of  $99,000  as  the 
amount  so  invested  bears  to  the  total  amount  invested  in  the  trans- 
action of  business  in  the  United  States  or  elsewhere:  Provided 
further.  That  this  exemption  shall  be  allowed  only  if  such  corporation, 
joint-stock  company  or  association,  or  insurance  company  makes 
return  to  the  Commissioner  of  Internal  Revenue,  under  regulations 
prescribed  by  him,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, of  the  amount  of  capital  invested  in  the  transaction  of  business 
outside  the  United  States:  And  provided  further,  That  a  corporation, 
joint-stock  company  or  association,  or  insurance  company  actually 
paying  the  tax  imposed  by  section  three  hundred  and  one  of  Title  III 
of  this  act,  shall  be  entitled  to  a  credit  as  against  the  tax  imposed  by 
this  paragraph  equal  to  the  amount  of  the  tax  so  actually  paid: 
And  provided  further,  That  this  tax  shall  not  be  imposed  upon  any 
corporation,  joint-stock  company  or  association,  or  insurance  com- 
pany not  engaged  in  business  during  the  preceding  taxable  year,  or 
which  is  exempt  under  the  provisions  of  section  eleven,  Title  I,  of 
this   Act. 

Second.  Brokers  shall  pay  $30.  Every  person,  firm,  or  company, 
whose  business  it  is  to  negotiate  purchases  or  sales  of  stocks,  bonds, 
exchange,  bullion,  coined  money,  bank  notes,  promissory  notes,  or 
other  securities  for  others,  shall  be  regarded  as  a  broker. 

Third.  Pawnbrokers  shall  pay  $50.  Every  person,  firm,  or  com- 
pany whose  business  or  occupation  it  is  to  take  or  receive,  by  way  of 
pledge,  pawn,  or  exchange,  any  goods,  wares,  or  merchandise,  or  any 
kind  of  personal  property  whatever,  as  security  for  the  repayment  of 
money  loaned  thereon,  shall  be  deemed  a  pawnbroken 

Fourth.  Ship  brokers  shall  pay  $20.  Every  person,  firm,  or  com- 
pany whose  business  it  is  as  a  broker  to  negotiate  freights  and  other 
business  for  the  owners  of  vessels,  or  for  the  shippers  or  consignors 
or  consignees  of  freight  carried  by  vessels,  shall  be  regarded  as  a 
ship  broker  under  this  section. 


MISCELL.VNEOUS   FEDERAL   EXCISE   TAXES.  1001 

Fifth.  Customhouse  brokers  shall  pay  $10.  Every  person,  firm, 
or  company  whose  occupation  it  is,  as  the  agent  of  others,  to  arrange 
entries  and  other  customhouse  papers,  or  transact  business  at  any 
port  of  entry  relating  to  the  importation  or  exportation  of  goods, 
wares,  or  merchandise,  shall  be  regarded  as  a  customhouse  broker. 

Sixth.  Proprietors  of  theaters,  museums,  and  concert  halls,  where 
a  charge  for  admission  is  made,  having  a  seating  capacity  of  not  more 
than  two  hundred  and  fifty,  shall  pay  $25;  having  a  seating  capacity 
of  more  than  two  hundred  and  fifty  and  not  exceeding  five  hundred, 
shall  pay  $50;  having  a  seating  capacity  exceeding  five  hundred  and 
not  exceeding  eight  hundred,  shall  pay  $75;  having  a  seating  capacity 
of  more  than  eight  hundred,  shall  pay  $100.  Every  edifice  used 
for  the  purpose  of  dramatic  or  operatic  or  other  representations, 
plays,  or  performances,  for  admission  to  which  entrance  money  is 
received,  not  including  halls  or  armories  rented  or  used  occasionally 
for  concerts  or  theatrical  representations,  shall  be  regarded  as  a 
theater:  Provided,  That  in  cities,  towns,  or  villages  of  five  thousand 
inhabitants  or  less  the  amount  of  such  payment  shall  be  one-half  of 
that  above  stated:  Provided  further.  That  whenever  any  such  edifice 
is  under  lease  at  the  passage  of  this  Act,  the  tax  shall  be  paid  by  the 
lessee,  unless  otherwise  stipulated  between  the  parties  to  said  lease. 

Seventh.  The  proprietor  or  proprietors  of  circuses  shall  pay  $100. 
Every  building,  space,  tent,  or  area  where  feats  of  horsemanship  or 
acrobatic  sports  or  theatrical  performances  not  otherwise  provided  for 
in  this  section  are  exhibited  shall  be  regarded  as  a  circus:  Provided, 
That  no  special  tax  paid  in  one  State,  Territory,  or  the  District  of 
Columbia  shall  exenxpt  exhibitions  from  the  tax  in  another  State, 
Territory,  or  the  District  of  Columbia,  and  but  one  special  tax  shall 
be  imposed  for  exhibitions  within  any  one  State,  Territory,  or  Dis- 
trict. 

Eighth.  Proprietors  or  agents  of  all  other  public  exhibitions  or 
shows  for  money  not  enumerated  in  this  section  shall  pay  $10:  Pro- 
vided, That  a  special  tax  paid  in  one  State,  Territory,  or  the  District 
of  Columbia  shall  not  exempt  exhibitions  from  the  tax  in  another 
State,  Territory,  or  the  District  of  Columbia,  and  but  one  special 
tax  shall  be  required  for  exhibitions  within  any  one  State,  Territory, 
or  the  District  of  Columbia:  Provided  further,  That  this  paragraph 
shall  not  apply  to  Chautauquas,  lecture  lyceums,  agricultural  or  in- 
dustrial fairs,  or  exhibitions  held  under  the  auspices  of  religious  or 
charitable  associations:  Provided  further.  That  an  aggregation  of 
entertainments,  known  as  a  street  fair,  shall  not  pay  a  larger  tax 
than  $100  in  any  State,  Territory,  or  in  the  District  of  Columbia. 

Ninth.  Proprietors  of  bowling  alleys  and  billiard  rooms  shall  pay 
$5  for  each  alley  or  table.  Every  building  or  place  where  bowls  are 
thrown  or  where  games  of  billiards  or  pool  are  played,  except  in 
private  homes,  shall  be  regarded  as  a  bowling  alley  or  a  billiard  room, 
respectively. 

Sec.  408.  That  on  and  after  January  first,  nineteen  hundred  and 
seventeen,    special    taxes   on    tobacco,    cigar,    and    cigarette    manufac- 


1002  MISCELLANEOUS   FEDERAL   EXCISE   TAXES. 

turers  shall  be,  and  hereby  are,  imposed  annually  as  follows,  the 
amount  of  such  annual  taxes  to  be  computed  in  all  cases  on  the  basis 
of  the  annual  sales  for  the  preceding  fiscal  year: 

,     Manufacturers  of  tobacco   whose  annual   sales  do   not   exceed   fifty 
thousand  pounds  shall  each  pay  $3; 

Manufacturers  of  tobacco  whose  annual  sales  exceed  fifty  thousand 
and  do  not  exceed  one  hundred  thousand  pounds  shall  each  pay  $6; 

Manufacturers  of  tobacco  whose  annual  sales  exceed  one  hundred 
thousand  and  do  not  exceed  two  hundred  thousand  pounds  shall  each 
pay  $12; 

Manufacturers  of  tobacco  whose  annual  sales  exceed  two  hundred 
thousand  pounds  shall  each  pay  at  the  rate  of  8  cents  per  thousand 
pounds,  or  fraction  thereof; 

Manufacturers  of  cigars  whose  annual  sales  do  not  exceed  fifty 
thousand  cigars  shall  each  pay  $2; 

Manufacturers  of  cigars  whose  annual  sales  exceed  fifty  thousand 
and  do  not  exceed  one  hundred   thousand   cigars  shall   each  pay   $3; 

Manufacturers  of  cigars  whose  annual  sales  exceed  one  hundred 
thousand  and  do  not  exceed  two  hundred  thousand  cigars  shall  each 
pay  $6; 

Manufacturers  of  cigars  whose  annual  sales  exceed  two  hundred 
thousand  and  do  not  exceed  four  hundred  thousand  cigars  shall  each 
pay  $12; 

Manufacturers  of  cigars  whose  annual  sales  exceed  four  hundred 
thousand  cigars  shall  each  pay  at  the  rate  of  5  cents  per  thousand 
cigars,  or  fraction  thereof; 

Manufacturers  of  cigarettes,  including  small  cigars  weighing  not 
more  than  three  pounds  per  thousand,  shall  each  pay  at  the  rate  of  3 
cents  for  every  ten  thousand  cigarettes,  or  fraction  thereof. 

In  arriving  at  the  amount  of  special  tax  to  be  paid  under  this  section, 
and  in  the  levy  and  collection  of  such  tax,  each  person,  firm,  or  corpora- 
tion engaged  in  the  manufacture  of  more  than  one  of  the  classes  of  ar- 
ticles specified  in  this  section  shall  be  considered  and  deemed  a  manu- 
facturer of  each  class  separately. 

Every  person  who  carries  on  any  business  or  occupation  for  which 
special  taxes  are  imposed  by  this  title,  without  having  paid  the  special 
tax  therein  provided,  shall,  besides  being  liable  to  the  payment  of  such 
special  tax,  be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  pay  a  fine  of  not  more  than  $500,  or  be  imprisoned  not  more 
than  six  months,  or  both,  in  the  discretion  of  the  court. 

Sec.  409.  That  all  administrative  or  special  provisions  of  law,  includ- 
ing the  law  relating  to  the  assessment  of  taxes,  so  far  as  applicable,  are 
hereby  extended  to  and  made  a  part  of  this  title,  and  every  person,  firm, 
company,  corporation,  or  association  liable  to  any  tax  imposed  by  this 
title,  shall  keep  such  records  and  render,  under  oath,  such  statements 
and  returns,  and  shall  comply  with  such  regulations  as  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  may  from  time  to  time  prescribe. 


MISCELLANEOUS   FEDERAL  .EXCISE   TAXES.  •  1003 

Sec.  410.  That  the  Act  approved  October  twenty-second,  nineteen  hun- 
dred and  fourteen  entitled  "An  Act  to  increase  the  internal  revenue,  and 
for  other  purposes,"  and  the  joint  resolution  approved  December  seven- 
teenth, nineteen  hundred  and  fifteen,  entitled  "Joint  resolution  extend- 
ing the  provisions  of  the  Act  entitled  'An  Act  to  increase  the  internal 
revenue,  and  for  other  purposes,'  approved  October  twenty-second,  nine- 
teen hundred  and  fourteen,  to  December  thirty-first,  nineteen 
hundred  and  sixteen,"  are  hereby  repealed,  except  sections  three 
and  four  of  such  Act  as  so  extended,  which  section  shall  remain  in  force 
till  January  first,  nineteen  hundred  and  seventeen,  and  except  that  the 
provisions  of  the  said  Act  shall  remain  in  force  for  the  assessment  and 
collection  of  all  special  taxes  imposed  by  sections  three  and  four  thereof, 
or  by  such  sections  as  extended  by  said  joint  resolution,  for  any  year  or 
part  thereof  ending  prior  to  January  first,  nineteen  hundred  and  seven- 
teen, and  of  all  other  taxes  imposed  by  such  Act,  or  by  such  Act  as  so 
extended,  accrued  prior  to  the  taking  effect  of  this  title,  and  for  the  im- 
position and  collection  of  all  penalties  or  forfeitures  which  have  accrued 
or  may  accrue  in  relation  to  any  of  such  taxes. 

Sec.  411.  That  the  Commissioner  of  Internal  Revenue,  subject  to 
regulation  prescribed  by  the  Secretary  of  the  Treasury,  may  make 
allowance  for  or  redeem  stamps,  issued,  under  authority  of  the  Act 
approved  October  twenty-second,  nineteen  hundred  and  fourteen,  en- 
titled "An  Act  to  increase  the  internal  revenue,  and  for  other  purposes," 
and  the  joint  resolution  approved  December  seventeenth,  nineteen  hun- 
dred and  fifteen,  entitled  "Joint  resolution  extending  the  provisions  of 
the  Act  entitled  'An  Act  to  increase  the  internal  revenue,  and  for  other 
purposes,'  approved  October  twenty-second,  nineteen  hundred  and  four- 
teen, to  December  thirty-first,  nineteen  hundred  and  sixteen,"  to  de- 
note the  payment  of  internal  revenue  tax,  and  which  have  not  been 
used,  if  presented  within  two  years  after  the  purchase  of  such  stamps. 

Sec.  412.  That  the  provisions  of  this  title  shall  take  effect  on  the 
day  following  the  passage  of  this  Act,  except  where  otherwise  in  this 
title  provided. 

Sec.  413.  That  all  internal  revenue  agents  and  inspectors  be  granted 
leave,  of  absence  with  pay,  which  shall  not  be  cumulative,  not  to  exceed 
thirty  days  in  any  calendar  year,  under  such  regulations  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  may  prescribe. 

Title  V  relates  to  the  imposition  of  duties  upon  dye  stuffs,  and  Title 
VI  relates  to  tariff  duties  upon  printing  paper.  Title  VII  authorizes  the 
creation  and  establishment  of  a  Tariff  Commission  and  prescribes  the 
duties  of  such  Commission.  Title  VIII  deals  with  the  subject  of  unfair 
competition,  defines  the  same  and  imposes  penalties  therefor  and  makes 
provisions  for  regulation  of  duties  during  the  existence  of  the  war 
"wherein  the  United  States  is  not  engaged."  For  concluding  section  of 
the  act  relating  to  the  separability  of  the  paragraphs  in  the  event  of 


1004  ACT    OF    MARCH    3,    1917. 

invalidity  being  established,  see  supra,  p.  982.     The  act  repealed  all 
provisions  of  any  act  inconsistent  with  the  act. 

THE    ACT    OF    MARCH    3,    1917. 

This  act  was  entitled  to  provide  increased  revenue  to  defray  the  ex- 
penses of  the  increased  appropriations  for  the  army  and  navy  and  the 
extension  of  fortifications  and  other  purposes. 

Title  I  of  the  act  concerning  the  special  preparedness  fund  was  re- 
pealed by  the  Act  of  October  3,  1917. 

Title  II  concerning  the  excess  profits  tax  was  also  amended  and  re- 
pealed by  the  Act  of  October  3,  1917,  see  infra,  p.  1016. 

Title  III  amending  Title  II  of  the  Act  of  September  8,  1916,  relating 
to  the  Estate  Tax,  see  supra,  p.  983. 

Title  IV  relating  to  the  issue  of  bonds  and  certificates  of  indebtedness, 
and  also  contained  a  provision  relating  to  the  administrative  provision 
of  the  Income  Tax.    See  section  26  of  Income  Tax  Act,  supra. 


THE  WAR  REVENUE  ACT. 

Page 

THE  WAR  REVENUE  ACT 1007 

Title  I— War  Income  Tax 1007 

Sec.  1.  War  normal  tax 1007 

Sec.  2.  War,  additional  tax  on  individuals 1007 

Sec.  3.     Assessments  and  collection  of  war  income  tax  on 

individuals 1008 

Sec.  4.  War  income  tax  on  corporations 1008 

Sec.  5.  Application  of  the  Act • 1009 

Title  II — War  excess  profits  tax 1009 

Title  III — ^War  tax  on  beverages 1016 

Title  rv — War  tax  on  cigars,  tobaccos  and  manufacturers 

thereof 1022 

Title  V — ^War  tax  on  facilities  furnished  by  public  utilities 

and  insurance 1023 

Title  VI— War  excise  taxes 1026 

Title  VII — On  admissions  and  dues 1028 

Title  VIII— War  stamp  taxes 1030 

(Schedule  A,  Stamp  taxes  on  specific  articles) 1032 

Title  IX — ^War  estate  tax  (see  supra,  p.  988)  1036 

Title  X — Administrative  provision  1036 

Title  XI— Postal  rates 1039 

Title  XII — Income  tax  amendments   (see  income  tax,  supra, 

p.  953) 1041 

Title  Xin — General  provisions 1041 


(1005) 


WAR  REVENUE  ACT  OF  1917 

AN  ACT 

To  provide  revenue  to  defray  war  expenses,  and   for  other  purposes. 

Be  it  enacted  "by  the  Senate  and  House  of  Representatives  of  the 
United  States  of  America  in  Congress  assembled, 

TITLE  I.— War  Income  Tax. 

Section  1.  That  in  addition  to  the  normal  tax  imposed  by  subdivi- 
sion (a)  of  section  one  of  the  Act  entitled  "An  Act  to  increase  the 
revenue,  and  for  other  purposes,"  approved  September  eight,  nineteen 
hundred  and  sixteen,  there  shall  be  levied,  assessed,  collected,  and 
paid  a  like  normal  tax  of  two  per  centum  upon  the  income  of  every 
individual,  a  citizen  or  resident  of  the  United  States,  received  in  the 
calendar  year  nineteen  hundred  and  seventeen  and  every  calendar 
year  thereafter. 

Sec.  2.  That  in  addition  to  the  additional  tax  imposed  by  subdivi- 
sion (&)  of  section  one  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  there  shall  be  levied,  assessed,  collected  and 
paid  a  like  additional  tax  upon  the  income  of  every  individual  re- 
ceived in  the  calendar  year  nineteen  hundred  and  seventeen  and  every 
calendar  year  thereafter,  as  follows: 

One  per  centum  per  annum  upon  the  amount  by  which  the  total  net 
income  exceeds  $5,000  and  does  not  exceed  $7,500; 

Two  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $7,500  and  does  not  exceed  $10,000; 

Three  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $10,000  and  does  not  exceed  $12,500; 

Four  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $12,500  and  does  not  exceed  $15,000; 

Five  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $15,000  and  does  not  exceed  $20,000; 

Seven  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $20,000  and  does  not  exceed  $40,000; 

Ten  per  centum  per  annum  upon  the  amount  by  which  the  total  net 
income  exceeds  $40,000  and  does  not  exceed  $60,000; 

Fourteen  per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $60,000  and  does  not  exceed  $80,000; 

Eighteen  per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $80,000  and  does  not  exceed  $100,000; 

Twenty-two  per  centum  per  annum  upon  the  amount  by  which  tho 
total  net  income  exceeds  $100,000  and  does  not  exceed  $150,000; 

(1007) 


1008  WAR   REVENUE  ACT   OF   1917. 

Twenty-five  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $150,000  and  does  not  exceed  $200,000; 

Thirty  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $200,000  and  does  not  exceed  $250,000; 

Thirty-four  per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $250,000  and  does  not  exceed  $300,000; 

Thirty-seven  per  centum  per  annum  upon  the  amount  by  which 
the  total  net  income  exceeds  $300,000  and  does  not  exceed  $500,000; 

Forty  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $500,000  and  does  not  exceed  $750,000; 

Forty-five  per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $750,000  and  does  not  exceed  $1,000,000; 

Fifty  per  centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $1,000,000. 

Sec.  3.  That  the  taxes  imposed  by  sections  one  and  two  of  this 
Act  shall  be  computed,  levied,  assessed,  collected  and  paid  upon  the 
same  basis  and  in  the  same  manner  as  the  similar  taxes  imposed  by 
section  one  of  such  Act  of  September  eighth,  nineteen  hundred  and 
sixteen,  except  that  in  the  case  of  the  tax  imposed  by  section  one  of 
this  Act  (a)  the  exemptions  of  $3,000  and  $4,000  provided  in  section 
seven  of  such  Act  of  September  eighth,  nineteen  hundred  and  sixteen, 
as  amended  by  this  Act,  shall  be,  respectively,  $1,000  and  $2,000,  and 
(6)  the  returns  required  under  subdivisions  (6)  and  (c)  of  section 
eight  of  such  Act,  as  amended  by  this  Act,  shall  be  required  in  the 
case  of  net  incomes  of  $1,000  or  over,  in  the  case  of  unmarried  per- 
sons, and  $2,000  or  over  in  the  case  of  married  persons,  instead  of 
$3,000  or  over,  as  therein  provided,  and  (c)  the  provisions  of  subdi- 
vision (c)  of  section  nine  of  such  Act,  as  amended  by  this  Act,  re- 
quiring the  normal  tax  of  individuals  on  income  derived  from  interest 
to  be  deducted  and  withheld  at  the  source  of  the  income  shall  not 
apply  to  the  new  two  per  centum  normal  tax  prescribed  in  section  one 
of  this  Act  until  on  and  after  January  first,  nineteen  hundred  and 
eighteen,  and  thereafter  only  one  two  per  centum  normal  tax  shall 
be  deducted  and  withheld  at  the  source  under  the  provisions  of  such 
subdivision  (c),  and  any  further  normal  tax  for  which  the  recipient 
of  such  income  is  liable  under  this  Act  or  such  Act  of  September 
eighth,  nineteen  hundred  and  sixteen,  as  amended  by  this  Act,  shall 
be  paid  by  such  recipient. 

Sec.  4.  That  in  addition  to  the  tax  imposed  by  subdivision  (a) 
of  section  ten  of  such  Act  of  September  eighth,  nineteen  hundred 
and  sixteen,  as  amended  by  this  Act,  there  shall  be  levied,  assessed, 
collected,  and  paid  a  like  tax  of  four  per  centum  upon  the  income 
received  in  the  calendar  year  nineteen  hundred  and  seventeen  and 
every  calendar  year  thereafter,  by  every  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company,  subject  to  the  tax  im- 
posed by  that  subdivision  of  that  section,  except  that  if  it  has  fixed 
its  own  fiscal  year,  the  tax  imposed  by  this  section  for  the  fiscal  year 
ending   during   the   calendar   year   nineteen   hundred    and   seventeen 


WAR   REVENUE   xVCT    OF    1917.  1009 

shall  be  levied,  assessed,  collected,  and  paid  only  on  that  proportion 
of  its  income  for  such  fiscal  year  which  the  period  between  January 
first,  nineteen  hundred  and  seventeen,  and  the  end  of  such  fiscal  year 
bears  to  the  whole  of  such  fiscal  year. 

The  tax  imposed  by  this  section  shall  be  computed,  levied,  assessed, 
collected,  and  paid  upon  the  same  incomes  and  in  the  same  manner 
as  the  tax  imposed  by  subdivision  (a)  of  section  ten  of  such  Act  of 
September  eighth,  nineteen  hundred  and  sixteen,  as  amended  by  this 
Act,  except  that  for  the  purpose  of  the  tax  imposed  by  this  section 
the  income  embraced  in  a  return  of  a  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company,  shall  be  credited  with  the 
amount  received  as  dividends  upon  the  stock  or  from  the  net  earnings 
of  any  other  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  which  is  taxable  upon  its  net  income  as  provided 
in  this  title. 

Sec.  5.  That  the  provisions  of  this  title  shall  not  extend  to  Porto 
Rico  or  the  Philippine  Islands,  and  the  Porto  Rican  or  Philippine 
Legislature  shall  have  power  by  due  enactment  to  amend,  alter, 
modify,  or  repeal  the  income  tax  laws  in  force  in  Porto  Rico  or  the 
Philippine  Islands,  respectively. 

TITLE  II.— War  Excess  Profits  Tax. 

Sec.  200.     That  when  used  in  this  title — 

The  term  "corporation"  includes  joint-stock  companies  or  associa- 
tions, and  insurance  companies; 

The  term  "domestic"  means  created  under  the  law  of  the  United 
States  or  of  any  State,  Territory,  or  District  thereof,  and  the  term 
"foreign"  means  created  under  the  law  of  any  other  possession  of 
the  United  States  or  of  any  foreign  country  or  government; 

The  term  "United  States"  means  only  the  States,  the  Territories 
of  Alaska  and  Hawaii,  and  the  District  of  Columbia; 

The  term  "taxable  year"  means  the  twelve  months  ending  December 
thirty-first,  excepting  in  the  case  of  a  corporation  or  partnership 
which  has  fixed  its  own  fiscal  year,  in  which  case  it  means  such  fiscal 
year.  The  first  taxable  year  shall  be  the  year  ending  December  thirty- 
first,  nineteen  hundred  and  seventeen,  except  that  in  the  case  of  a 
corporation  or  partnership  which  has  fixed  its  own  fiscal  year,  it 
shall  be  the  fiscal  year  ending  during  the  calendar  year  nineteen  hun- 
dred and  seventeen.  If  a  corporation  or  partnership,  prior  to  March 
first,  nineteen  hundred  and  eighteen,  makes  a  return  covering  its  own 
fiscal  year,  and  includes  therein  the  income  received  during  that  part 
of  the  fiscal  year  falling  within  the  calendar  year  nineteen  hundred 
and  sixteen,  the  tax  for  such  taxable  year  shall  be  that  proportion  of 
the  tax  computed  upon  the  not  income  during  such  full  fiscal  year 
which  the  time  from  January  first,  nineteen  hundred  and  seventeen, 
to  the  end  of  such  fiscal  year  bears  to  the  full  fiscal  year;  and 

The  term  "prewar  period"  means  the  calendar  years  nineteen  hun- 
dred and  eleven,  nineteen  hundred  and  twelve,  and  nineteen  hundred 
and  thirteen,  or,  if  a  corporation  or  partnership  was  not  in  existence 
or  an  individual  was  not  engaged  in  a  trade  or  business  during  the 


1010  WAR    REVENUE    ACT    OF    1917. 

whole  of  such  period,  then  as  many  of  such  years  during  the  whole 
of  which  the  corporation  or  partnership  was  in  existence  or  the  indi- 
vidual was  engaged  in  the  trade  or  business. 

The  terms  "trade"  and  "business"  include  professions  and  occupa- 
tions. 

The  term  "net  income"  means  in  the  case  of  a  foreign  corporation 
or  partnership  or  a  non-resident  alien  individual,  the  net  income 
received  from  sources  within  the  United  States. 

Sec.  201.  That  in  addition  to  the  taxes  under  existing  law  and 
under  this  Act  there  shall  be  levied,  assessed,  collected,  and  paid 
for  each  taxable  year  upon  the  income  of  every  corporation,  partner- 
ship, or  individual,  a  tax  (hereinafter  in  this  title  referred  to  as  the 
tax)  equal  to  the  following  percentages  of  the  net  income: 

Twenty  per  centum  of  the  amount  of  the  net  income  in  excess  of 
the  deduction  (determined  as  hereinafter  provided)  and  not  in  excess 
of  fifteen  per  centum  of  the  invested  capital  for  the  taxable  year; 

Twenty-five  per  centum  of  the  amount  of  the  net  income  in  excess 
of  fifteen  per  centum  and  not  in  excess  of  twenty  per  centum  of  such 
capital  ; 

Thirty-five  per  centum  of  the  amount  of  the  net  income  in  excess 
of  twenty  per  centum  and  not  in  excess  of  twenty-five  per  centum 
of  such  capital; 

Forty-five  per  centum  of  the  amount  of  the  net  income  in  excess 
of  twenty-five  per  centum  and  not  in  excess  of  thirty-three  per  centum 
of  such  capital;  and 

Sixty  per  centum  of  the  amount  of  the  net  income  in  excess  of 
thirty-three  per  centum  of  such  capital. 

For  the  purpose  of  this  title  every  corporation  or  partnership  not 
exempt  under  the  provisions  of  this  section  shall  be  deemed  to  be 
engaged  in  business,  and  all  the  trades  and  businesses  in  which  it  is 
engaged  shall  be  treated  as  a  single  trade  or  business,  and  all  its  in- 
come from  whatever  source  derived  shall  be  deemed  to  be  received 
from  such  trade  or  business. 

This  title  shall  apply  to  all  trades  or  businesses  of  whatever  de- 
scription, whether  continuously  carried  on  or  not,  except — 

(a)  In  the  case  of  ofRcersi  and  employees  under  the  United  States. 
or  any  State,  territory,  or  the  District  of  Columbia,  or  any  local 
sub-division  thereof,  the  compensation  or  fees  received  by  them  as 
such  officers  or  employees; 

(&)  Corporations  exempt  from  tax  under  the  provisions  of  section 
eleven  of  Title  I  of  such  Act  of  September  eighth,  nineteen  hundred 
and  sixteen,  as  amended  by  this  Act,  and  partnerships  and  indi- 
viduals carrying  on  or  doing  the  same  business,  or  coming  within  the 
same  description;  and 


iln  Lamar  v.  U.  S.  241  U.  S.  103,  60  L.  Ed.  912  (1916),  affirming 
227  Fed.  1019,  it  was  held  that  members  of  House  of  Representatives 
were  "officers  of  U.  S.,"  within  false  personation  statute.  Criminal 
Code,  Sec.  32. 


WAR   REVENUE    ACT    OF    1917.  1011 

(e)  Incomes  derived  from  the  business  of  life,  health,  and  acci- 
dent insurance  combined  in  one  policy  issued  on  the  weekly  premium 
payment  plan. 

Sec.  202.  That  the  tax  shall  not  be  imposed  in  the  case  of  the 
trade  or  business  of  a  foreign  corporation  or  partnership  or  a  non- 
resident alien  individual,  the  net  income  of  which  trade  or  business 
during  the  taxable  year  is  less  than  $3,000. 

Sec.  203.  That  for  the  purpose  of  this  title  the  deduction  shall  be 
as  follows,  except  as  otherwise  in  this  title  provided — 

(a)  In  the  case  of  a  domestic  corporation,  the  sum  of  (1)  an 
amount  equal  to  the  same  percentage  of  the  invested  capital  for  the 
taxable  year  which  the  average  amount  of  the  annual  net  income  of 
the  trade  or  business  during  the  prewar  period  was  of  the  invested 
capital  for  the  prewar  period  (but  not  less  than  seven  or  more  than 
nine  per  centum  of  the  invested  capital  for  the  taxable  year),  and  (2) 
$3,000; 

(&)  In  the  case  of  a  domestic  partnership  or  of  a  citizen  or  resi- 
dent of  the  United  States,  the  sum  of  (1)  an  amount  equal  to  the 
same  percentage  of  the  invested  capital  for  the  taxable  year  which 
the  average  amount  of  the  annual  net  income  of  the  trade  or  business 
during  the  prewar  period  was  of  the  invested  capital  for  the  prewar 
period  (but  not  less  than  seven  or  more  than  nine  per  centum  of  the 
invested  capital  for  the  taxable  year),  and   (2)  $6,000; 

(c)  In  the  case  of  a  foreign  corporation  or  partnership  or  of  a 
non-resident  alien  individual,  an  amount  ascertained  in  the  same 
manner  as  provided  in  subdivisions  (a)  and  (b),  without  any  ex- 
emption of  $3,000  or  $6,000. 

(d)  If  the  Secretary  of  the  Treasury  is  unable  satisfactorily  to 
determine  the  average  amount  of  the  annual  net  income  of  the  trade 
or  business  during  the  prewar  period,  the  deduction  shall  be  deter- 
mined in  the  same  manner  as  provided  in  section  two  hundred  and 
five. 

Sec.  204.  That  if  a  corporation  or  partnership  was  not  in  existence, 
or  an  individual  was  not  engaged  in  the  trade  or  business,  during 
the  whole  of  any  one  calendar  year  during  the  prewar  period,  the  de- 
duction shall  be  an  amount  equal  to  eight  per  centum  of  the  invested 
capital  for  the  taxable  year,  plus  in  the  case  of  a  domestic  corpora- 
tion $3,000,  and  in  the  case  of  a  domestic  partnership  or  a  citizen  or 
resident  of  the  United  States  $6,000. 

A  trade  or  business  carried  on  by  a  corporation,  partnership,  or 
individual,  although  formally  organized  or  reorganized  on  or  after 
January  second,  nineteen  hundred  and  thirteen,  which  is  substantially 
a  continuation  of  a  trade  or  business  carried  on  prior  to  that  date, 
shall,  for  the  purpose  of  this  title,  be  deemed  to  have  been  in  existence 
prior  to  that  date,  and  the  net  income  and  invested  capital  of  its  pre- 
decessor prior  to  that  date  shall  be  deemed  to  have  been  its  net  in- 
come and  invested  capital. 


1012  WAR   REVENUE    ACT    OP    1917. 

Sec.  205.  (a)  That  if  the  Secretary  of  the  Treasury,  upon  com- 
plaint finds  either  (1)  that  during  the  prewar  period  a  domestic 
corporation  or  partnership,  or  a  citizen  or  resident  of  the  United 
States,  had  no  net  income  from  the  trade  or  business,  or  (2)  that 
during  tlie  prewar  period  tlie  percentage,  which  tlie  net  income  was 
of  the 'invested  capital,  was  low  as  compared  with  the  percentage, 
which  tlie  net  income  during  such  period  of  representative  corpor- 
ations, partnerships,  and  individuals,  engaged  in  a  like  or  similar 
trade  or  business,  was  of  their  invested  capital,  then  the  deduction 
shall  be  the  sum  of  (1)  an  amount  equal  to  the  same  percentage  of 
its  invested  capital  for  the  taxable  year  which  the  average  deduction 
(determined,  in  the  same  manner  as  provided  in  section  two  hundred 
and  three,  without  including  the  $3,000  or  $6,000  therein  referred 
to)  for  such  year  of  representative  corporations,  partnerships  or 
individuals,  engaged  in  a  like  or  similar  trade  or  business,  is  of  their 
average  invested  capital  for  such  year,  plus  (2)  in  the  case  of  a  do- 
mestic corporation  $3,000,  and  in  the  case  of  a  domestic  partnership 
or  a  citizen  or  resident  of  the  United  States  $6,000. 

The  percentage  which  the  net  income  was  of  the  invested  capital 
in  each  trade  or  business  shall  be  determined  by  the  Commissioner 
of  Internal  Revenue,  in  accordance  with  the  regulations  prescribed 
by  him,  with  the  approval  of  the  Secretary  of  the  Treasury.  In  the 
case  of  a  corporation  or  partnership  which  has  fixed  its  own  fiscal 
year,  the  percentage  determined  for  the  calendar  year  ending  during 
such  fiscal  year  shall  be  used. 

(6)  The  tax  shall  be  assessed  upon  the  basis  of  the  deduction 
determined  as  provided  in  section  two  hundred  and  three,  but  the 
taxpayer  claiming  the  benefit  of  this  section  may  at  the  time  of 
making  the  return  file  a  claim  for  abatement  of  the  amount  by  which 
the  tax  so  assessed  exceeds  a  tax  computed  upon  the  basis  of  the 
deduction  determined  as  provided  in  this  section.  In  such  event, 
collection  of  the  part  of  the  tax  covered  by  such  claim  for  abate- 
ment shall  not  be  made  until  the  claim  is  decided,  but  if  in  the 
judgment  of  the  Commissioner  of  Internal  Revenue,  the  interests  of 
the  United  States  would  be  jeopardized  thereby  he  may  require 
the  claimant  to  give  a  bond  in  such  amount  and  with  such  sureties 
as  the  Commissioner  may  think  wise  to  safeguard  such  interests, 
conditioned  for  the  payment  of  any  tax  found  to  be  due,  with  the 
interest  thereon,  and  if  such  bond,  satisfactory  to  the  Commissioner 
is  not  given  within  such  time  as  he  prescribes,  the  full  amount  of 
tax  assessed  shall  be  collected  and  the  amount  overpaid,  if  any, 
shall  upon  final  decision  of  the  application  be  refunded  as  a  tax 
erroneously  or  illegally  collected. 

Sec.  206.  That  for  the  purposes  of  this  title"  the  net  income  of  a 
corporation  shall  be  ascertained  and  returned  (a)  for  the  calendar 
years  nineteen  hundred  and  eleven  and  nineteen  hundred  and  twelve 
upon  the  same  basis  and  in  the  same  manner  as  provided  in  section 
thirty-eight  of  the  Act  entitled  "An  Act  to  provide  revenue,  equalize 
duties,  and  encourage  the  industries  of  the  United  States,  and  for 
other  purposes,"   approved   August  fifth,   nineteen   hundred   and   nine, 


WAR   REVENUE   ACT    OF    1917.  1013 

except  that  income  taxes  paid  by  it  within  the  year  imposed  by  the 
authority  of  the  United  States  shall  be  included;  (b)  for  the  calendar 
year  nineteen  hundred  and  thirteen  upon  the  same  basis  and  in  the 
same  manner  as  provided  in  section  II  of  the  Act  entitled  "An  Act 
to  reduce  tariff  duties  and  to  provide  revenue  for  the  Government, 
and  for  other  purposes,"  approved  October  third,  nineteen  hundred 
and  thirteen,  except  that  income  taxes  paid  by  it  within  the  year 
imposed  by  the  authority  of  the  United  States  shall  be  included,  and 
except  that  the  amounts  received  by  it  as  dividends  upon  the  stock 
or  from  the  net  earnings  of  other  corporations,  joint-stock  companies 
or  associations,  or  insurance  companies,  subject  to  the  tax  imposed  by 
section  II  of  such  Act  of  October  third,  nineteen  hundred  and  thir^ 
teen,  shall  be  deducted;  and  (c)  for  the  taxable  year  upon  the 
same  basis  an<i  in  the  same  manner  as  provided  in  Title  I  of  the 
Act  entitled  "An  Act  to  increase  the  revenue,  and  for  other  pur- 
poses," approved  September  eighth,  nineteen  hundred  and  sixteen, 
as  amended  by  this  Act,  except  that  the  amounts  received  by  it  as 
dividends  upon  the  stock  or  from  the  net  earnings  of  other  corpora- 
tions, joint-stock  companies  or  associations,  or  insurance  companies, 
subject  to  the  tax  imposed  by  Title  I  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen,  shall  be  deducted. 

The  net  income  of  a  partnership  or  individual  shall  be  ascertained 
and  returned  for  the  calendar  years  nineteen  hundred  and  eleven, 
nineteen  hundred  and  twelve,  and  nineteen  hundred  and  thirteen, 
and  for  the  taxable  year,  upon  the  same  basis  and  in  the  same  manner 
as  provided  in  Title  I  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act,  except  that  the  credit 
allowed  by  subdivision  (&)  of  section  five  of  such  Act  shall  be 
deducted.  There  shall  be  allowed  (a)  in  the  case  of  a  domestic 
partnership  the  same  deductions  as  allowed  to  individuals  in  sub- 
division (a)  of  section  five  of  such  Act  of  September  eighth,  nineteen 
hundred  and  sixteen,  as  amended  by  this  Act;  and  (&)  in  the  case 
of  a  foreign  partnership  the  same  deductions  as  allowed  to  individuals 
in  subdivision   (a)   of  section  six  of  such  Act  as  amended  by  this  Act. 

Sec.  207.  That  as  used  in  this  title  the  term  "invested  capital" 
for  any  year  means  the  average  invested  capital  for  the  year,  as 
defined  and  limited  in  this  title,  averaged  monthly. 

As  used  in  this  title  "invested  capital"  does  not  include  stocks, 
bonds  (other  than  obligations  of  the  United  States),  or  other  assets', 
the  income  from  which  is  not  subject  to  the  tax  imposed  by  this 
title,  nor  money  or  other  property  borrowed,  and  means,  subject 
to  the  above  limitations: 

(a)  In  the  case  of  a  corporation  or  partnership:  (1)  actual 
cash  paid  in,  (2)  the  actual  cash  value  of  tangible  property  paid 
in  other  than  cash,  for  stock  or  shares  in  such  corporation  or  partner- 
ship, at  the  time  of  such  payment  (but  in  case  such 'tangible  property 
was  paid  prior  to  January  first,  nineteen  hundred  and  fourteen, 
the  actual  cash  value  of  such  property  as  of  January  first,  nineteen 
hundred  and  fourteen,  but  in  no  case  to  exceed  the  par  value  of  the 
original  stock  or  shares  specifically  i-ssued  therefor),  and   (3)   paid  in 


1014  WAR   REVENUE    ACT    OF    1917. 

or  earned  surplus  and  undivided  profits  used  or  employed  in  the 
business,  exclusive  of  undivided  profits  earned  during  the  taxable 
year;  Provided,  That  (a)  the  actual  cash  value  of  patents  and 
copyrights  paid  in  for  stock  or  shares  in  such  corporation  or  part- 
nership, at  the  time  of  such  payment,  shall  be  included  as  invested 
capital,  but  not  to  exceed  the  par  value  of  such  stock  or  shares  at  the 
time  of  such  payment,  and  (b)  the  good  will,  trade  marks,  trade 
brands,  the  franchise  of  a  corporation  or  partnership,  or  other  in- 
tangible property,  shall  be  included  as  invested  capital  if  the  cor- 
poration or  partnership  made  payment  bona  fide  therefor  specifically 
as  such  in  cash  or  tangible  property,  the  value  of  such  good  will, 
trade  mark,  trade  brand,  franchise,  or  intangible  property,  not  to 
exceed  the  actual  cash  or  actual  cash  value  of  the  tangible  property 
paid  therefor  at  the  time  of  such  payment;  but  good  will,  trade 
marks,  trade  brands,  franchise  of  a  corporation  or  partnership,  or 
other  intangible  property,  bona  fide  purchased,  prior  to  March  third, 
nineteen  hundred  and  seventeen,  for  and  with  interests  or  shares  in 
a  partnership  or  for  and  with  shares  in  the  capital  stock  of  a  corpora- 
tion (issued  prior  to  March  third,  nineteen  hundred  and  seventeen), 
in  an  amount  not  to  exceed,  on  March  third,  nineteen  hundred  and 
seventeen,  twenty  per  centum  of  the  total  interests  or  shares  in  the 
partnership  or  of  the  total  shares  of  the  capital  stock  of  the  cor- 
poration, shall  be  included  in  invested  capital  at  a  value  not  to  ex- 
ceed the  actual  cash  value  at  the  time  of  such  purchase,  and  in  case 
of  issue  of  stock  therefor  not  to  exceed  the  par  value  of  such  stock; 

(5)  In  the  case  of  an  individual,  (1)  actual  cash  paid  into  the 
trade  or  business,  and  (2)  the  actual  cash  value  of  tangible  prop- 
erty paid  into  the  trade  or  business,  other  than  cash,  at  the  time 
of  such  payment  (but  in  case  such  tangible  property  was  paid  in 
prior  to  January  first,  nineteen  hundred  and  fourteen,  the  actual 
cash  value  of  such  property  as  of  January  first,  nineteen  hundred 
and  fourteen),  and  (3)  the  actual  cash  value  of  patents,  copyrights, 
good  will,  trade  marks,  trade  brands,  franchises,  or  other  intan- 
gible property,  paid  into  the  trade  or  business,  at  the  time  of  such 
payment,  if  payment  was  made  therefor  specifically  as  such  in  cash 
or  tangible  property,  not  to  exceed  the  actual  cash  or  actual  cash  value 
of  the  tangible  property  bona  fide  paid  therefor  at  the  time  of  such 
payment. 

In  the  case  of  a  foreign  corporation  or  partnership  or  of  a  non- 
resident alien  individual  the  term  "invested  capital"  means  that 
proportion  of  the  entire  invested  capital,  as  defined  and  limited 
in  this  title,  which  the  net  income  from  sources  within  the  United 
States  bears  to  the  entire  net  income. 

Sec.  208.  That  in  case  of  the  reorganization,  consolidation,  or 
change  of  ownership  of  a  trade  or  business  after  March  third,  nine- 
teen hundred  and  seventeen,  if  an  interest  or  control  in  such  trade 
or  business  of  fifty  per  centum  or  more  remains  in  control  of  the 
same  persons,  corporations,  associations,  partnerships,  or  any  of  them, 
then  in  ascertaining  the  invested  capital  of  the  trade  or  business 
no  asset   transferred   or   received   from   the   prior   trade   or  business 


WAR  REVENUE  ACT  OP  1917.  1015 

shall  be  allowed  a  greater  value  than  would  have  been  allowed  under 
this  title  in  computing  the  invested  capital  of  such  prior  trade  or 
business  if  such  asset  had  not  been  so  transferred  or  received,  unless 
such  asset  was  paid  for  specifically  as  such,  in  cash  or  tangible 
property,  and  then  not  to  exceed  the  actual  cash  or  actual  cash  value 
of  the  tangible  property  paid  therefor  at  the  time  of  such  payment. 

Sec.  209.  That  in  the  case  of  a  trade  or  business  having  no  in- 
vested capital  or  not  more  than  a  nominal  capital  there  shall  be 
levied,  assessed,  collected,  and  paid,  in  addition  to  the  taxes  under 
existing  law  and  under  this  act,  in  lieu  of  the  tax  imposed  by  section 
two  hundred  and  one,  a  tax  equivalent  to  eight  per  centum  of  the 
net  income  of  such  trade  or  business,  in  excess  of  the  following  deduc- 
tions: in  the  case  of  a  domestic  corporation,  $3,000,  and  in  the  case 
of  a  domestic  partnership,  or  a  citizen  or  resident  of  the  United 
States,  $6,000,  in  the  case  of  all  other  trades  or  business,  no  deduc- 
tion. 

Sec.  210.  That  if  the  Secretary  of  the  Treasury  is  unable  in  any 
case  satisfactorily  to  determine  the  invested  capital,  the  amount  of 
the  deduction  shall  be  the  sum  of  (1)  an  amount  equal  to  the  same 
proportion  of  the  net  income  of  the  trade  or  business  received  during 
the  taxable  year  as  the  proportion  which  the  average  deduction  (de- 
termined in  the  same  manner  as  provided  in  section  two  hundred 
and  three,  without  including  the  $3,000  or  $6,000  therein  referred 
to)  for  the  same  calendar  year  of  representative  corporations,  part- 
nerships, and  individuals,  engaged  in  a  like  or  similar  trade  or  busi- 
ness, bears  to  the  total  net  income  of  the  trade  or  business  received 
by  such  corporations,  partnerships,  and  -individuals,  plus  (2)  in  the 
case  of  a  domestic  corporation  $3,000,  and  in  the  case  of  a  domestic 
partnership  or  a  citizen  or  resident  of  the  United  States  $6,000. 

For  the  purpose  of  this  section  the  proportion  between  the  deduc- 
tion and  the  net  income  in  each  trade  or  business  shall  be  determined 
by  the  Commissioner  of  Internal  Revenue  in  accordance  with  regula- 
tions prescribed  by  him,  with  the  approval  of  the  Secretary  of  the 
Treasury.  In  the  case  of  a  corporation  or  partnership  which  has  fixed 
its  own  fiscal  year,  the  proportion  determined  for  the  calendar  year 
ending  during  such  fiscal  year  shall  be  used. 

Sec.  211.  That  every  foreign  partnership  having  a  net  income  of 
$3,000  or  more  for  the  taxable  year,  and  every  domestic  partnership 
having  a  net  income  of  $6,000  or  more  for  the  taxable  year,  shall 
render  a  correct  return  of  the  income  of  the  trade  or  business  for  the 
taxable  year,  setting  forth  specifically  the  gross  income  for  such  year, 
and  the  deductions  allowed  in  this  title.  Such  returns  shall  be  ren- 
dered at  the  same  time  and  in  the  same  manner  as  is  prescribed  for 
income  tax  returns  under  Title  I  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen,  as  amended  by  this  Act. 

Sec.  212.  That  all  administrative,  special,  and  general  provisions 
of  law.  including  the  laws  in  relation  to  the  assessment,  remission, 
collection,   and   refund   of  internal   revenue   taxes  not   heretofore  spo- 


1016  WAR  REVENUE  ACT  OF  1917. 

cifically  repealed  and  not  inconsistent  witii  the  provisions  of  this 
title,  are  hereby  extended  and  made  applicable  to  all  the  provisions 
of  this  title  and  to  the  tax  herein  imposed,  and  all  provisions  of  Title 
I  of  such  Act  of  September  eighth,  nineteen  hundred  and  sixteen,  as 
amended  by  this  Act,  relating  to  returns  and  payment  of  the  tax 
therein  imposed,  including  penalties,  are  hereby  made  applicable  to 
the  tax  imposed  by  this  title. 

Sec.  213.  That  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  shall  make  all  necessary 
regulations  for  carrying  out  the  provisions  of  this  title,  and  may  re- 
quire any  corporation,  partnership,  or  individual,  subject  to  the  pro- 
visions of  this  title,  to  furnish  him  with  such  facts,  data,. and  infor- 
mation as  in  his  judgment  are  necessary  to  collect  the  tax  imposed 
by  this  title. 

Sec.  214.  That  Title  II  (sections  two  hundred  to  two  hundred 
and  seven,  inclusive)  of  the  Act  entitled  "An  Act  to  provide  increased 
revenue  to  defray  the  expenses  of  the  increased  appropriations  for 
the  Army  and  Navy,  and  the  extensions  of  fortifications,  and  for 
other  purposes,"  approved  March  third,  nineteen  hundred  and  seven- 
teen, is  hereby  repealed. 

Any  amount  heretofore  or  hereafter  paid  on  account  of  the  tax 
imposed  by  such  Title  II,  shall  be  credited  toward  the  payment  of 
the  tax  impssed  by  this  title,  and  if  the  amount  so  paid  exceeds  the 
amount  of  such  tax  the  excess  shall  be  refunded  as  a  tax  erroneously 
or  illegally  collected. 

Subdivision  (1)  of  section  three  hundred  and  one  of  such  Act  of 
September  eighth,  nineteen  hundred  and  sixteen,  is  hereby  amended 
so  that  the  rate  of  tax  for  the  taxable  year  nineteen  hundred  and 
seventeen  shall  be  ten  per  centum  instead  of  twelve  and  one-half 
per  centum  as  therein  provided. 

Subdivision  (2)  of  such  section  is  hereby  amended  to  read  as  fol- 
lows: 

"(2)  This  section  shall  cease  to  be  of  effect  on  and  after  January 
first,  nineteen  hundred  and  eighteen." 

TITLE   III.— Wak  Tax  ox   Bevehages. 

Sec.  300.  That  on  and  after  the  passage  of  this  Act  there  shall 
be  levied  and  collected  on  all  distilled  spirits  in  bond  at  that  time 
or  that  have  been  or  that  may  be  then  or  thereafter  produced  in  or 
imported  into  the  United  States,  except  such  distilled  spirits  as  are 
subject  to  the  tax  provided  in  section  three  hundred  and  three,  in 
addition  to  the  tax  now  imposed  by  law,  a  tax  of  $1.10  (or,  if  with- 
drawn for  beverage  purposes  or  for  use  in  the  manufacture  or  pro- 
duction of  any  article  used  or  intended  for  use  as  a  beverage,  a  tax 
of  $2.10)  on  each  proof  gallon,  or  wine  gallon  when  below  proof,  and 
a  proportionate  tax  at  a  like  rate  on  all  fractional  parts  of  such  proof 
or  wine  gallon,  to  be  paid  by  the  distiller  or  importer  when  withdrawn 
and  collected  under  the  provisions  of  existing  law. 


WAR  REVENUE  ACT  OF  1917.  1017 

That  in  aifldition  to  the  tax  under  existing  law  there  shall  be 
levied  and  collected  upon  all  perfumes  hereafter  imported  Into  the 
United  States  containing  distilled  spirits,  a  tax  of  $1.10  per  wine 
gallon,  and  a  proportionate  tax  at  a  like  rate  on  all  fractional  parts 
of  such  wine  gallon.  Such  tax  shall  be  collected  by  the  collector  of 
customs  and  deposited  as  internal  revenue  collections,  under  such 
rules  and  regulations  as  the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treasury,  may  prescribe. 

Sec.  301.  That  no  distilled  spirits  produced  after  the  passage  of 
this  Act  shall  be  imported  into  the  United  States  from  any  foreign 
country,  or  from  the  West  Indian  Islands  recently  acquired  from 
Denmark  (unless  produced  from  products  the  growth  of  such  islands, 
and  not  then  into  any  State  or  Territory  or  District  of  the  United 
States  in  which  the  manufacture  or  sale  of  intoxicating  liquor  is 
prohibited),  or  from  Porto  Rico,  or  the  Philippine  Islands.  Under 
such  rules,  regulations,  and  bonds  as  the  Secretary  of  the  Treasury 
may  prescribe,  the  provisions  of  this  section  shall  not  apply  to  dis- 
tilled spirits  imported  for  other  than  (1)  beverage  purposes  or  (2) 
use  in  the  manufacture  or  production  of  any  article  used  or  intended 
for  use  as  a  beverage. 

Sec.  302.  That  at  registered  distilleries  producing  alcohol,  or  other 
high-proof  spirits,  packages  may  be  filled  with  such  spirits  reduced 
to  not  less  than  one  hundred  proof  from  the  receiving  cisterns  and 
tax  paid  without  being  entered  into  bonded  warehouse.  Such  spirits 
may  be  also  transferred  from  the  receiving  cisterns  at  such  dis- 
tilleries, by  means  of  pipe  lines,  direct  to  storage  tanks  in  the  bonded 
warehouse  and  may  be  warehoused  in  such  storage  tanks.  Such 
spirits  may  be  also  transferred  in  tanks  or  tank  cars  to  general 
bonded  warehouses  for  storage  therein,  either  in  storage  tanks  in 
such  warehouses  or  in  the  tanks  in  which  they  were  transferred. 
Such  spirits  may  also  be  transferred  after  tax  payment  from  receiving 
cisterns  or  warehouse  storage  tanks  to  tanks  or  tank  cars  and  may 
be  transported  in  such  tanks  or  tank  cars  to  the  premises  of  rectifiers 
of  spirits.  The  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  is  hereby  empowered  to  prescribe 
all  necessary  regulations  relating  to  the  drawing  off,  transferring, 
gauging,  storing  and  transporting  of  such  spirits;  the  records  to  be 
kept  and  returns  to  be  made;  the  size  and  kind  of  packaged  and  tanks 
to  be  used;  the  marking,  branding,  numbering  and  stamping  of  such 
packages  and  tanks;  the  kinds  of  stamps,  if  any,  to  be  used;  and 
the  time  and  manner  of  paying  the  tax;  the  kind  of  bond  and  the 
penal  sum  of  same.  The  tax  prescribed  by  law  must  be  paid  before 
such  spirits  are  removed  from  the  distillery  premises,  or  from  general 
bonded  warehouse  in  the  case  of  spirits  transferred  thereto,  except  as 
otherwise  provided  by  law. 

Undor  such  regulations  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  may  prescribe, 
distilled  spirits  may  hereafter  be  drawn  from  receiving  cisterns  and 
deposited  in  distillery  warehouses  without  having  affixed  to  the 
packages  containing  the  same  distillery   warehouse  stamps,  and  such 


1018  WAR   REVENUE   ACT    OP    1917. 

packages,  when  so  deposited  in  warehouse,  may  be  withdrawn  there- 
from on  the  original  gauge  where  the  same  have  remained  in  such 
warehouse  for  a  period  not  exceeding  thirty  days  from  the  date  of 
deposit. 

Under  such  regulations  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  may  prescribe, 
the  manufacturer,  warehousing,  withdrawal,  and  shipment,  under  the 
provisions  of  existing  law,  of  ethyl  alcohol  for  other  than  (1)  bever- 
age purposes  or  (2)  use  in  the  manufacture  or  production  of  any  ar- 
ticle used  or  intended  for  use  as  a  beverage  and  denatured  alcohol, 
may  be  exempted  from  the  provisions  of  section  thirty-two  hundred 
and  eighty-three.  Revised  Statutes  of  the  United  States. 

Under  such  regulations  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  may  prescribe, 
manufacturers  of  ethyl  alcohol  for  other  than  beverage  purposes 
may  be  granted  permission  under  the  provisions  of  section  thirty- 
two  hundred  and  eighty-five,  Revised  Statutes  of  the  United  States, 
to  fill  fermenting  tubs  in  a  sweet-mash  distillery  not  oftener  than 
once  in  forty-eight  hours. 

Sec.  303.  That  upon  all  distilled  spirits  produced  in  or  imported 
into  the  United  States  upon  which  the  tax  now  imposed  by  law  has 
been  paid,  and  which,  on  the  day  this  Act  is  passed,  are  held  by  a 
retailer  in  a  quantity  in  excess  of  fifty  gallons  in  the  aggregate,  or 
by  any  other  person,  corporation,  partnership,  or  association  in  any 
quantity,  and  which  are  intended  for  sale,  there  shall  be  levied, 
assessed,  collected,  and  paid  a  tax  of  $1.10  (or,  if  intended  for  sale 
for  beverage  purposes  or  for  use  in  the  manufacture  or  production 
of  any  article  used  or  intended  for  use  as  a  beverage,  a  tax  of  $2.10) 
on  each  proof  gallon,  and  a  proportionate  tax  at  a  like  rate  on  all 
fractional  parts  of  such  proof  gallon:  Provided,  That  the  tax  on  such 
distilled  spirits  in  the  custody  of  a  court  of  bankruptcy  in  insolvency 
proceedings  on  June  first,  nineteen  hundred  and  seventeen,  shall  be 
paid  by  the  person  to  whom  the  court  delivers  such  distilled  spirits  at 
the  time  of  such  delivery,  to  the  extent  that  the  amount  thus  delivered 
exceeds  the  fifty  gallons  herein  before  provided. 

Sec.  304.  That  in  addition  to  the  tax  now  imposed  or  imposed 
by  this  Act  on  distilled  spirits  there  shall  be  levied,  assessed,  col- 
lected, and  paid  a  tax  of  15  cents  on  each  proof  gallon  and  a  pro- 
portionate tax  at  a  like  rate  on  all  fractional  parts  of  such  proof 
gallon  on  all  distilled  spirits  or  wines  hereafter  rectified,  purified,  or 
refined  in  such  manner,  and  on  all  mixtures  hereafter  produced  in 
such  manner,  that  the  person  so  rectifying,  purifying,  refining,  or 
mixing  the  same  is  a  rectifier  within  the  meaning  of  section  thirty- 
two  hundred  and  forty-four.  Revised  Statutes,  as  amended,  and  on 
all  such  articles  in  the  possession  of  the  rectifier  on  the  day  this  Act 
is  passed:  Provided,  That  this  tax  shall  not  apply  to  gin  produced 
by  the  redistillation  of  a  pure  spirit  over  juniper  berries  and  other 
aromatics. 

When  the  process  of  rectification  is  completed  and  the  tax  pre- 
scribed by  this  section  has  been  paid,  it  shall  be  unlawful  for  the 


WAR  REVENUE  ACT  OF  1917.  1019 

rectifier  or  other  dealer  to  reduce  in  proof  or  increase  in  volume  such 
spirits  or  wine  by  the  addition  of  water  or  other  substance;  nothing 
herein  contained  shall,  however,  prevent  a  rectifier  from  using  again 
in  the  process  of  rectification  spirits  already  rectified  and  upon  which 
the  tax  has  theretofore  been  paid. 

Tlie  tax  imposed  by  this  section  shall  not  attach  to  cordials  or 
liqueurs  on  which  a  tax  is  imposed  and  paid  under  the  Act  entitled 
"An  Act  to  increase  the  revenue,  and  for  other  purposes,"  approved 
September  eighth,  nineteen  hundred  and  sixteen,  nor  to  the  mixing 
and  blending  of  wines,  where  such  blending  is  for  the  sole  purpose 
of  perfecting  such  wines  according  to  commercial  standards,  nor  to 
blends  made  exclusively  of  two  or  more  pure  straight  whiskies  aged 
in  wood  for  a  period  not  less  than  four  years  and  without  the  addition 
of  coloring  or  flavoring  matter  or  any  other  substance  than  pure 
water  and  if  not  reduced  below  ninety  proof:  Provided,  That  such 
blended  whiskies  shall  be  exempt  from  tax  under  this  section  only 
when  compounded  under  the  immediate  supervision  of  a  revenue 
officer,  in  such  tanks  and  under  such  conditions  and  supervision  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Sec- 
retary of  the  Treasury  may  prescribe. 

All  distilled  spirits  taxable  under  this  section  shall  be  subject  to 
uniform  regulations  concerning  the  use  thereof  in  the  manufacture, 
blending,  compounding,  mixing,  marking,  branding,  and  sale  of  whis- 
key and  rectified  spirits,  and  no  discrimination  whatsoever  shall  be 
made  by  reason  of  a  difference  in  the  character  of  the  material  from 
which  same  may  have  been  produced. 

The  business  of  a  rectifier  of  spirits  shall  be  carried  on,  and  the 
tax  on  rectified  spirits  shall  be  paid,  under  such  rules,  regulations, 
and  bonds  as  may  be  prescribed  by  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury. 

Any  person  violating  any  of  the  provisions  of  this  section  shall  be 
deemed  to  be  guilty  of  a  misdemeanor  and,  upon  conviction,  shall 
be  fined  not  more  than  $1,000  or  imprisoned  not  more  than  two  years. 
H-e  shall,  in  addition,  be  liable  to  double  the  tax  evaded,  together 
with  the  tax,  to  be  collected  by  assessment  or  on  any  bond  given. 

Sec.  305.  That  hereafter  collectors  of  internal  revenue  shall  not 
furnish  wholesale  liquor  dealers'  stamps  in  lieu  of  and  in  exchange  for 
stamps  for  rectified  spirits  unless  the  package  covered  by  stamp  for 
rectified  spirits  is  to  be  broken  into  smaller  packages. 

The  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  is  authorized  to  discontinue  the  use  of  the 
following  stamps  whenever  in  his  judgment  the  interests  of  the  Gov- 
ernment will  be  subserved   thereby: 

Distillery  warehouse,  special  bonded  warehouse,  special  bonded  re- 
warehouse,  general  bonded  warehouse,  general  bonded  retransfer,  tran.s- 
fer  brandy,  export  tobacco,  export  cigars,  export  oleomargarine  and 
export  fermented  liquor  stamps. 

Sec.  306.  That  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  is  hereby  authorized  to  re- 
quire  at   distilleries,   breweries,   rectifying   houses,   and   wherever  else 


1020  WAR  REVENUE  ACT  OF  1917. 

in  his  judgment  such  action  may  be  deemed  advisable,  the  installation 
of  meters,  tanks,  pipes,  or  any  other  apparatus  for  the  purpose  of  pro- 
tecting the  revenue,  and  such  meters,  tanlvs  and  pipes  and  all  neces- 
sary labor  incident  thereto  shall  be  at  the  expense  of  the  person,  cor- 
poration, partnership,  or  association  on  whose  premises  the  installa- 
tion is  required.  Any  such  person,  corporation,  partnership,  or  asso- 
ciation refusing  or  neglecting  to  install  such  apparatus  when  so  re- 
quired by  the  commissioner  shall  not  be  permitted  to  conduct  business 
on  such  premises. 

Sec.  807.  That  on  and  after  the  passage  of  this  Act  there  shall  be 
levied  and  collected  on  all  beer,  lager  beer,  ale,  porter,  and  other 
similar  fermented  liquor,  containing  one-half  per  centum  or  more  of 
alcohol,  brewed  or  manufactured  and  sold,  or  stored  in  warehouse,  or 
removed  for  consumption  or  sale,  within  the  United  States,  by  what- 
ever name  such  liquors  may  be  called,  in  addition  to  the  tax  now 
imposed  by  law,  a  tax  of  $1.50  for  every  barrel  containing  not  more 
than  thirty-one  gallons,  and  at  a  like  rate  for  any  other  quantity 
or  for  the  fractional  parts  of  a  barrel  authorized  and  defined  by  law. 

Sec.  308.  That  from  and  after  the  passage  of  this  Act  taxable  fer- 
mented liquors  may  be  conveyed  without  payment  of  tax  from  the 
brewery  premises  where  produced  to  a  contiguous  industrial  distillery 
of  either  class  established  under  the  Act  of  October  third,  nineteen 
hundred  and  thirteen,  to  be  used  as  distilling  material,  and  the  residue 
from  such  distillation,  containing  less  than  one-half  of  one  per  centum 
of  alcohol  by  volume,  which  is  to  be  used  in  making  beverages,  inay 
be  manipulated  by  cooling,  flavoring,  carbonating,  settling,  and  filter- 
ing on  the  distillery  premises  or  elsewhere. 

The  removal  of  the  taxable  fermented  liquor  from  the  brewery 
to  the  distillery  and  the  operation  of  the  distillery  and  removal  of 
the  residue  therefrom  shall  be  under  the  supervision  of  such  officer 
or  officers  as  the  Commissioner  of  Internal  Revenue  shall  deem  proper, 
and  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  is  hereby  authorized  to  make  such  regu- 
lations from  time  to  time  as  may  be  necessary  to  give  force  and  effect 
to  this  section  and  to  safeguard  the  revenue. 

Sec.  309.  That  upon  all  still  wines,  including  vermuth,  and  upon 
all  champagne  and  other  sparkling  wines,  liqueurs,  cordials,  artificial 
or  imitation  wines  or  compounds  sold  as  wine,  produced  in  or  im- 
ported into  the  United  States,  and  hereafter  removed  from  the  cus- 
tom-house, place  of  manufacture,  or  from  bonded  premises  for  sale 
or  consumption,  there  shall  be  levied  and  collected,  in  addition  to 
the  tax  now  imposed  by  law  upon  such  articles,  a  tax  equal  to  such 
tax,  to  be  levied,  collected,  and  paid  under  the.  provisions  of  existing 
law. 

Sec.  310.  That  upon  all  articles  specified  in  section  three  hundred 
and  nine  upon  which  the  tax  now  imposed  by  law  has  been  paid  and 
which  are  on  the  day  this  Act  is  passed  held  in  excess  of  twenty-five 
gallons  in  the  aggregate  of  such  articles  and  intended  for  sale,  there 


WAR  REVENUE  ACT  OF  1917.  1021 

shall  be  levied,  collected,  and  paid  a  tax  equal  to  the  tax  imposed  by 
such  section. 

Sec.  311.  That  upon  all  grape  brandy  or  wine  spirits  withdrawn 
by  a  producer  of  wines  from  any  fruit  distillery  or  special  bonded 
warehouse  under  subdivision  (c)  of  section  four  hundred  and  two 
of  the  Act  entitled  "An  Act  to  increase  the  revenue,  and  for  other 
purposes,"  approved  September  eighth,  nineteen  hundred  and  six- 
teen, there  shall  be  levied,  assessed,  collected,  and  paid  in  addition  to 
the  tax  therein  imposed,  a  tax  equal  to  double  such  tax,  to  be  as- 
sessed, collected,  and  paid  under  the  provisions  of  existing  law. 

Sec.  312.  That  upon  all  sweet  wines  held  for  sale  by  the  producer 
thereof  upon  the  day  this  Act  is  passed  there  shall  be  levied,  assessed!, 
collected,  and  paid  an  additional  tax  equivalent  to  KX  cents  per  proof 
gallon  upon  the  grape  brandy  or  wine  spirits  used  in  the  fortification 
of  such  wine,  and  an  additional  tax  of  20  cents  per  proof  gallon  shall 
be  levied,  assessed,  collected,  and  paid  upon  all  grape  brandy  or  wine 
spirits  withdrawn  by  a  producer  of  sweet  wines  for  the  purpose  of 
fortifying  such  wines  and  not  so  used  prior  to  the  passage  of  this 
Act. 

Sec.  313.  That  there  shall  be  levied,  assessed,  collected,  and  paid — 
(a)  Upon  all  prepared  syrups  or  extracts  (intended  for  use  in  the 
manufacture  or  production  of  beverages,  commonly  known  as  soft 
drinks,  by  soda  fountains,  bottling  establishments,  and  other  similar 
places)  sold  by  the  manufacturer,  producer,  or  importer  thereof,  if 
so  sold  for  not  more  than  $1.30  per  gallon,  a  tax  of  5  cents  per  gallon; 
if  so  sold  for  more  than  $1.30  and  not  more  than  $2  per  gallon,  a 
tax  of  8  cents  per  gallon;  if  so  sold  for  more  than  $2  and  not  more 
than  $3  per  gallon,  a  tax  of  10  cents  per  gallon;  if  so  sold  for  more 
than  $3  and  not  more  than  $4  per  gallon,  a  tax  of  15  cents  per  gallon; 
and  if  so  sold  for  more  than  $4  per  gallon,  a  tax  of  20  cents  per  gallon; 
and 

(&)  Upon  all  fermented  grape  juice,  soft  drinks,  or  artificial 
mineral  waters  (not  carbonated),  and  fermented  liquors  containing 
less  than  one-half  per  centum  of  alcohol,  sold  by  the  manufacturer, 
producer,  or  importer  thereof,  in  bottles  or  other  closed  containers, 
and  upon  all  ginger  ale,  root  beer,  sarsaparilla,  pop,  and  other  car- 
bonated waters  or  beverages,  manufactured  and  sold  by  the  manu- 
facturer, producer,  or  importer  of  the  carbonic  acid  gas  used  in  car- 
bonating  the  same,  a  tax  of  1  cent  per  gallon;   and 

(r)  Upon  all  natural  mineral  waters  or  table  waters,  sold  by  the 
producer,  bottler,  or  importer  thereof,  in  bottles  or  other  closed  con- 
tainers, at  over  10  cents  per  gallon,  a  tax  of  1  cent  per  gallon. 

Sec.  314.  That  each  such  manufacturer,  producer,  bottler,  or  im- 
porter shall  make  monthly  returns  under  oath  to  the  collector  of  in- 
ternal revenue  for  the  district  in  which  is  located  the  principal  place 
of  business,  containing  such  information  necessary  for  the  assess- 
ment of  the  tax,  and  at  such  times  and  in  such  manner,  as  the  Com- 
missioner of  Internal  Revenue,  with  tlic  approval  of  the  Secretary  of 
the  Treasury,  may  by  regulation  prescribe. 


1022  WAR  REVENUE  ACT  OF  1917. 

Sec.  315.  That  upon  all  carbonic  acid  gas  in  drums  or  other  con- 
tainers (intended  for  use  in  the  manufacture  or  production  of  car- 
bonated water  or  other  drinks)  sold  by  the  manufacturer,  producer, 
or  importer  thereof,  there  shall  be  levied,  assessed,  collected,  and 
paid  a  tax  of  5  cents  per  pound.  Such  tax  shall  be  paid  by  the 
purchaser  to  the  vendor  thereof  and  shall  be  collected,  returned,  and 
paid  to  the  United  States  by  such  vendor  in  the  same  manner  as 
provided  in  section  five  hundred  and  three. 

TITLE   IV. — War   Tax    on    Cigars,    Tobacco,   and    Manufacttjres 

Thereof. 

Sec.  400.  That  upon  cigars  and  cigarettes,  which  shall  be  manu- 
factured and  sold,  or  removed  for  consumption  or  sale,  there  shall  be 
levied  and  collected,  in  addition  to  the  taxes  now  imposed  by  existing 
law,  the  following  taxes,  to  be  paid  by  the  manufacturer  or  importer 
thereof:  (a)  on  cigars  of  all  descriptions  made  of  tobacco,  or  any 
substitute  therefor,  and  weighing  not  more  than  three  pounds  per 
thousand,  25  cents  per  thousand;  (ft)  on  cigars  made  of  tobacco,  or 
any  substitute  therefor,  and  weighing  more  than  three  pounds  per 
thousand,  if  manufactured  or  imported  to  retail  at  4  cents  or  more 
each,  and  not  more  than  7  cents  each,  $1  per  thousand;  (c)  if  manu- 
factured or  imported  to  retail  at  more  than  7  cents  each  and  not  more 
than  15  cents  each,  $3  per  thousand;  id)  if  manufactured  or  imported 
to  retail  at  more  than  15  gents  each  and  not  more  than  20  cents  each, 
$5  per  thousand;  (e)  if  manufactured  or  imported  to  retail  at  more 
than  20  cents  each,  $7  per  thousand:  Provided,  That  the  word  "re- 
tail as  used  in  this  section  shall  mean  the  ordinary  retail  price  of  a 
single  cigar,  and  that  the  Commissioner  of  Internal  Revenue  may,  by 
regulation,  require  the  manufacturer  or  importer  to  affix  to  each  box 
or  container  a  conspicuous  label  indicating  by  letter  the  clause  of  this 
section  under  which  the  cigars  therein  contained  have  been  tax-paid, 
which  must  correspond  with  the  tax-paid  stamp  on  said  box  or  con- 
tainer; (/)  on  cigarettes  made  of  tobacco,  or  any  substitute  therefor, 
made  in  or  imported  into  the  United  States,  and  weighing  not  more 
than  three  pounds  per  thousand,  80  cents  per  thousand;  weighing  more 
than  three  pounds  per  thousand,  $1.20  per  thousand. 

Every  manufacturer  of  cigarettes  (including  small  cigars  weighing 
not  more  than  three  pounds  per  thousand)  shall  put  up  all  the 
cigarettes  and  such  small  cigars  that  he  manufactures  or  has  manu- 
factured for  him,  and  sells  or  removes  for  consumption  or  use,  in 
packages  or  parcels  containing  five,  eight,  ten,  twelve,  fifteen,  sixteen, 
twenty,  twenty-four,  forty,  fifty,  eighty,  or  one  hundred  cigarettes 
each,  and  shall  securely  affix  to  each  of  said  packages  or  parcels  a 
suitable  stamp  denoting  the  tax  thereon  and  shall  properly  cancel  the 
same  prior  to  such  sale  or  removal  for  consumption  or  use  under  such 
regulations  as  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  shall  prescribe;  and  all 
cigarettes  imported  from  a  foreign  country  shall  be  packed,  stamped, 
and,  the  stamps  canceled  in  a  like  manner,  in  addition  to  the  import 
stamp  indicating  inspection  of  the  custom-house  before  they  are 
withdrawn  therefrom. 


WAR   REVENUE   ACT    OF    1917.  1023 

Sec.  401.  That  upon  all  tobacco  and  snuff  hereafter  manufactured 
and  sold,  or  removed  for  consumption  or  use,  there  shall  be  levied  and 
collected,  in  addition  to  the  tax  now  imposed  by  law  upon  such 
articles,  a  tax  of  5  cents  per  pound,  to  be  levied,  collected,  and  paid 
under  the  provisions  of  existing  law. 

In  addition  to  the  packages  provided  for  under  existing  law,  manu- 
factured tobacco  and  snuff  may  be  put  up  and  prepared  by  the  manu- 
facturer for  sale  or  consumption,  in  packages  of  the  following  de- 
scription: Packages  containing  one-eighth,  three-eighths,  five-eighths, 
seven-eighths,  one  and  one-eighth,  one  and  three-eighths,  one  and  five- 
eighths,  one  and  seven-eighths,  and  five  ounces. 

Sec.  402.  That  sections  four  hundred,  four  hundred  and  one,  and 
four  hundred  and  four,  shall  take  effect  thirty  days  after  the  passage 
of  this  act:  Provided,  That  after  the  passage  of  this  Act  and  before 
the  expiration  of  the  aforesaid  thirty  days,  cigarettes  and  manufac- 
tured tobacco  and  snuff  may  be  put  up  in  the  packages  now  provided 
for  by  law  or  in  the  packages  provided  for  in  sections  four  hundred 
and  four  hundred  and  one. 

Sec.  403.  That  there  shall  also  be  levied  and  collected,  upon  all 
manufactured  tobacco  &nd  snuff  in  excess  of  one  hundred  pounds  or 
upon  cigars  or  cigarettes  in  excess  of  one  thousand,  which  were 
manufactured  or  imported,  and  removed  from  factory  or  custom-house 
prior  to  the  passage  of  this  Act,  bearing  tax-paid  stamps  affixed  to 
such  articles  for  the  payment  of  the  taxes  thereon,  and  which  are, 
on  the  day  after  this  Act  is  passed,  held  and  intended  for  sale  by  any 
person,  corporation,  partnership,  or  association,  and  upon  all  manu- 
factured tobacco,  snuff,  cigars,  or  cigarettes,  removed  from  factory  or 
tustoms-house  after  the  passage  of  this  Act  but  prior  to  the  time  when 
th#  tax  imposed  by  section  four  hundred  or  section  four  hundred  and 
one  upon  such  articles  takes  effect,  an  additional  tax  equal  to  one- 
half  the  tax  imposed  by  such  sections  upon  such  articles. 

Sec.  404.  That  there  shall  be  levied,  assessed,  and  collected  upon 
cigarette  paper  made  up  into  packages,  books,  sets,  or  tubes,  made 
up  in  or  imported  into  the  United  States  and  intended  for  use  by  the 
smoker  in  making  cigarettes  the  following  taxes:  On  each  package, 
book,  or  set,  containing  more  than  twenty-five,  but  not  more  than 
fifty  papers,  one-half  of  1  cent;  containing  more  than  fifty  but  not 
more  than  one  hundred  papers,  1  cent;  containing  more  than  one 
hundred  papers,  1  cent  for  each  one  hundred  papers  or  fractional  part 
thereof;  and  upon  tubes,  2  cents  for  each  one  hundred  tubes  or  frac- 
tional part  thereof. 

TITLE  v.— Wab  Tax  on  Facilities  Fubnished   By   Public   Utilities 

AND    IXSUBANCE. 

Sec.  500.  That  from  and  after  the  first  day  of  November,  nineteen 
hundred  and  seventeen,  there  shall  be  levied,  assessed,  collected  and 
paid  (a)  a  tax  equivalent  to  three  per  centum  of  the  amount  paid  for 
the   transportation   by   rail   or   water   or   by   any    form   of  mechanical 


1024  WAR   REVENUE   ACT    OP    1917. 

motor  power  when  in  competition  with  carriers  by  rail  or  water  of 
property  by  freight  consigned  from  one  point  in  tlie  United  States  to 
another;  (&)  a  tax  of  1  cent  for  each  20  cents,  or  fraction  thereof, 
paid  to  any  person,  corporation,  partnership,  or  association,  engaged 
in  the  business  of  transporting  parcels  or  packages  by  express  over 
regular  routes  between  fixed  terminals,  for  the  transportation  of  any 
package,  parcel,  or  shipment  by  express  from  one  point  in  the  United 
States  to  another:  Provided,  That  nothing  herein  contained  shall  be 
construed  to  require  the  carrier  collecting  such  tax  to  list  separately 
in  any  bill  of  lading,  freight  receipt,  or  other  similar  document,  the 
amount  of  the  tax  herein  levied,  if  the  total  amount  of  the  freight  and 
tax  be  therein  stated;  (c)  a  tax  equivalent  to  eight  per  centum  of  the 
amount  paid  for  the  transportation  of  persons  by  rail  or  water,  or  by 
any  form  of  mechanical  motor  power  on  a  regular  established  line 
when  in  competition  with  carriers  by  rail  or  water,  from  one  point 
in  the  United  States  to  another  or  to  any  point  in  Canada  or  Mexico, 
where  the  ticket  therefor  is  sold  or  issued  in  the  United  States,  not 
including  the  amount  paid  for  commutation  or  season  tickets  for  trips 
less  than  thirty  miles,  or  for  transportation  the  fare  for  which  does 
not  exceed  35  cents,  and  a  tax  equivalent  to  ten  per  centum  of  the 
amount  paid  for  seats,  berths,  and  staterooms  in  parlor  cars,  sleeping 
cars,  or  on  vessels.  If  a  mileage  book  used  for  such  transportation  or 
accommodation  has  been  purchased  before  this  section  takes  effect, 
or  if  cash  fare  be  paid  the  tax  imposed  by  this  section  shall  be  col- 
lected from  the  person  presenting  the  mileage  book,  or  paying  the 
cash  fare,  by  the  conductor  or  other  agent,  when  presented  for  such 
transportation  or  accommodation,  and  the  amount  so  collected  shall 
be  paid  to  the  United  States  in  such  manner  and  at  such  times  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  prescribe;  if  a  ticket  (other  than  a  mileage 
book)  is  bought  and  partially  used  before  this  section  goes  into  effect 
it  shall  not  be  taxed,  but  if  bought  but  not  so  used  before  this  section 
takes  effect,  it  shall  not  be  valid  for  passage  until  the  tax  has  been 
paid  and  such  payment  evidenced  on  the  ticket  in  such  manner  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  by  regulation  prescribe;  (d)  a  tax  equivalent  to 
five  per  centum  of  the  amount  paid  for  the  transportation  of  oil  by 
pipe  line;  (e)  a  tax  of  5  cents  upon  each  telegraph,  telephone,  or 
radio,  dispatch,  message,  or  conversation,  which  originates  within  the 
United  States,  and  for  the  transmission  of  which  a  charge  of  15  cents 
or  more  is  imposed:  Provided,  That  only  one  payment  of  such  tax 
shall  be  required,  notwithstanding  the  lines  or  stations  of  one  or  more 
persons,  corporations,  partnerships,  or  associations  shall  be  used  for 
the  transmission  of  such  dispatch,  message,  or  conversation. 

Sec.  501.  That  the  taxes  imposed  by  section  five  hundred  shall  be 
paid  by  the  person,  corporation,  partnership,  or  association  paying 
for  the  services  or  facilities  rendered. 

In  case  such  carrier  does  not,  because  of  its  ownership  of  the 
commodity  transported,  or  for  any  other  reason,  receive  the  amount 
which  as  a  carrier  it  would  otherwise  charge,  such  carrier  shall  pay  a 
tax  equivalent  to   the   tax  which   would   be   imposed   upon  the   trans- 


WAR  REVENUE   ACT   OP   1917.  1025 

portation  of  such  commodity  if  the  carrier  received  payment  for  such 
transportation:  Provided,  That  in  case  of  a  carrier  which  on  May  first, 
nineteen  hundred  and  seventeen,  had  no  rates  or  tariffs  on  file  with 
the  proper  Federal  or  State  authority,  the  tax  shall  be  computed  on 
the  basis  of  the  rates  or  tariffs  of  other  carriers  for  like  services  as 
ascertained  and  determined  by  the  Commissioner  of  Internal  Revenue: 
Provided,  further,  That  nothing  in  this  or  the  preceding  section  shall 
be  construed  as  imposing  a  tax  (a)  upon  the  transportation  of  any 
commodity  which  is  necessary  for  the  use  of  the  carrier  in  the  conduct 
of  its  business  as  such  and  is  intended  to  be  so  used  or  has  been  so 
used;  or  (b)  upon  the  transportation  of  company  material  transported 
by  one  carrier,  which  constitutes  a  part  of  a  railroad  system,  for  an- 
other carrier  which  is  also  a  part  of  the  same  system. 

Sec.  502.  That  no  tax  shall  be  Imposed  under  section  fire  hundred 
upon  any  payment  received  for  services  rendered  to  the  United  States, 
or  any  State,  Territory,  or  the  District  of  Columbia.  The  right  to 
exemption  under  this  section  shall  be  evidenced  in  such  manner  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Sec- 
retary of  the  Treasury,  may  by  regulation  prescribe. 

Sec.  503.  That  each  person,  corporation,  partnership,  or  associa- 
tion receiving  any  payments  referred  to  in  section  five  hundred  shall 
collect  the  amount  of  the  tax,  if  any,  imposed  by  such  section  from 
the  person,  corporation,  partnership,  or  association  making  such  pay- 
ments, and  shall  make  monthly  returns  under  oath,  in  duplicate,  and 
pay  the  taxes  so  collected  and  the  taxes  imposed  upon  it  under  para- 
graph two  of  section  five  hundred  and  one  to  the  collector  of  internal 
revenue  of  the  district  in  which  the  principal  office  or  place  of  busi- 
ness is  located.  Such  returns  shall  contain  such  information,  and  be 
made  in  such  manner,  as  the  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treasury,  may  by  regulation  pre- 
scribe. 

Sec.  504.  That  from  and  after  the  first  day  of  November,  nineteen 
hundred  and  seventeen,  there  shall  be  levied,  assessed,  collected,  and 
paid  the  following  taxes  on  the  issuance  of  insurance  policies: 

(a)  Life  insurance:  A  tax  equivalent  to  8  cents  on  each  $100  or 
fractional  part  thereof  of  the  amount  for  which  any  life  is  insured 
under  any  policy  of  insurance,  or  other  instrument,  by  whatever  name 
the  same  is  called:  Provided,  That  on  all  policies  for  life  insurance 
only  by  which  a  life  is  insured  not  in  excess  of  $500,  issued  on  the 
industrial  or  weekly  payment  plan  of  insurance,  the  tax  shall  be  forty 
per  centum  of  the  amount  of  the  first  weekly  premium:  Provided 
further.  That  policies  of  reinsurance  shall  be  exempt  from  the  tax 
Imposed  by  this  subdivision; 

(h)  Marine,  inland,  and  fire  insurance:  A  tax  equivalent  to  1  cent 
on  each  dollar  or  fractional  part  thereof  of  the  premium  charged  un- 
der each  policy  of  insurance  or  other  instrument  by  whatever  name 
the  same  is  called  whereby  insurance  is  made  or  renewed  upon  prop- 
erty of  any  description   (including  rents  or  profits),  whether  against 


1026  WAR   REVENUE   ACT    OP    1917. 

peril  by  sea  or  inland  waters,  or  by  fire  or  lightning,  or  other  peril: 
Provided,  That  policies  of  reinsurance  shall  be  exempt  from  the  tax 
imposed  by  this  subdivision. 

(c)  Casualty  insurance:  A  tax  equivalent  to  1  cent  on  each  dollar 
or  fractional  part  thereof  of  the  premium  charged  under  each  policy 
of  insurance  or  obligation  of  the  nature  of  indemnity  for  loss,  dam- 
age, or  liability  (except  bonds  taxable  under  subdivision  two  of 
Schedule  A  of  Title  VIII)  issued  or  executed  or  renewed  by  any  per- 
son, corporation,  partnership,  or  association,  transacting  the  business 
of  employer's  liability,  workmen's  compensation,  accident,  health,  tor- 
nado, plate  glass,  steam  boiler,  elevator,  burglary,  automatic  sprink- 
ler, automobile,  or  other  branch  of  insurance  (except  life  insurance, 
and  insurance  described  and  taxed  in  the  preceding  subdivision) : 
Provided,  That  policies  of  reinsurance  shall  be  exempt  from  the  tax 
imposed  by  this  subdivision; 

(d)  Policies  issued  by  any  person,  corporation,  partnership,  or  asso- 
ciation, whose   income  is  exempt  from  taxation  under  Title  I   of  the  • 
Act,  entitled  "An  Act  to  increase  the  revenue,  and  for  other  purposes," 
approved   September   eighth,   nineteen   hundred   and   sixteen,   shall   be 
exempt  from  the  taxes  imposed  by  this  section. 

Sec.  505.  That  every  person,  corporation,  partnership,  or  associa- 
tion, issuing  policies  of  insurance  upon  the  issuance  of  which  a  tax  is 
imposed  by  section  five  hundred  and  four,  shall,  within  the  first  fifteen 
days  of  each  month,  make  return  under  oath,  in  duplicate,  and  pay 
such  tax  to  the  collector  of  Internal  Revenue  of  the  district  in  which 
the  principal  office  or  place  of  business  of  such  person,  corporation, 
partnership,  or  association  is  located.  Such  returns  shall  contain  such 
information  and  be  made  in  such  manner  as  the  Commissioner  of  In- 
ternal Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
may  by  regulation  prescribe. 

TITLE  VI.— Wak  Excise  Taxes. 

Sec.  600.    That  there  shall  be  levied,  assessed,  collected,  and  paid — 

(a)  Upon  all  automobiles,  automobile  trucks,  automobile  wagons, 
and  motorcycles,  sold  by  the  manufacturer,  producer,  or  importer,  a 
tax  equivalent  to  three  per  centum  of  the  price  for  which  so  sold;  and 

(5)  Upon  all  piano  players,  graphophones,  phonographs,  talking 
machines,  and  records  used  in  connection  with  any  musical  instru- 
ment, piano  player,  graphophone,  phonograph,  or  talking  machine, 
sold  by  the  manufacturer,  producer,  or  importer,  a  tax  equivalent  to 
three  per  centum  of  the  price  for  which  so  sold;  and 

(c)  Upon  all  moving-picture  films  (which  have  not  been  exposed) 
sold  by  the  manufacturer  or  importer,  a  tax  equivalent  to  one-fourth 
of  1  cent  per  linear  foot;  and 

{d)  Upon  all  positive  moving-picture  films  (containing  a  picture 
ready  for  projection)  sold  or  leased  by  the  manufacturer,  producer,  or 
importer,  a  tax  equivalent  to  one-half  of  1  cent  per  linear  foot;  and 


WAR  REVENUE  ACT  OF  1917.  1027 

(e)  Upon  any  article  commonly  or  commercially  known  as  jewelry, 
whether  real  or  imitation,  sold  by  the  manufacturer,  producer,  or  im- 
porter thereof,  a  tax  equivalent  to  three  per  centum  of  the  price  for 
which  so  sold;   and 

(/)  Upon  all  tennis  rackets,  golf  clubs,  baseball  bats,  lacrosse  sticks, 
balls  of  all  kinds,  including  baseballs,  foot  balls,  tennis,  golf,  lacrosse, 
billiard  and  pool  balls,  fishing  rods  and  reels,  billiard  and  pool  tables, 
chess  and  checker  boards  and  pieces,  dice,  games  and  parts  of  games, 
except  playing  cards  and  children's  toys  and  games,  sold  by  the  manu- 
facturer, producer,  or  importer,  a  tax  equivalent  to  three  per  centum 
of  the  price  for  which  so  sold;  and 

(g)  Upon  all  perfumes,  essences,  extracts,  toilet  waters,  cosmetics, 
petroleum  jellies,  hair  oils,  pomades,  hair  dressings,  hair  restoratives, 
hair  dyes,  tooth  and  mouth  washes,  dentifrices,  tooth  pastes,  aromatic 
cachous,  toilet  soaps  and  powders,  or  any  similar  substance,  article, 
or  preparation  by  whatsoever  name  known  or  distinguished,  upon  all 
of  the  above  which  are  used  or  applied  or  intended  to  be  used  or  ap- 
plied for  toilet  purposes,  and  which  are  sold  by  the  manufacturer, 
importer,  or  producer,  a  tax  equivalent  to  two  per  centum  of  the  price 
for  which  so  sold;  and 

(h)  Upon  all  pills,  tablets,  powders,  tinctures,  troches  or  lozenges 
sirups,  medicinal  cordials  or  bitters,  anodynes,  tonics,  plasters,  lini- 
ments, salves,  ointments,  pastes,  drops,  waters  (except  those  taxed 
under  section  three  hundred  and  thirteen  of  this  Act),  essences,  spirits, 
oils,  and  all  medicinal  preparations,  compounds,  or  compositions 
whatsoever,  the  manufacturer  or  producer  of  which  claims  to  have 
any  private  formula,  secret,  or  occult  art  for  making  or  preparing  the 
same,  or  has  or  claims  to  have  any  exclusive  right  or  title  to  the  mak- 
ing or  preparing  the  same,  or  which  are  prepared,  uttered,  vended,  or 
exposed  for  sale  under  any  letters  patent,  or  trade  mark,  or  which,  if 
prepared  by  any  formula,  published  or  unpublished,  are  held  out  or 
recommended  to  the  public  by  the  makers,  vendors,  or  proprietors 
thereof  as  proprietary  medicines  or  medicinal  proprietary  articles  or 
preparations,  or  as  remedies  or  specifics  for  any  disease,  diseases,  or 
affection  whatever  affecting  the  human  or  animal  body,  and  which  are 
sold  by  the  manufacturer,  producer,  or  importer,  a  tax  equivalent  to 
two  per  centum  of  the  price  for  which  so  sold;  and 

(i)  Upon  all  chewing  gum  or  substitute  therefor  sold  by  the  man- 
ufacturer, producer,  or  importer,  a  tax  equivalent  to  two  per  centum 
of  the  price  for  which  so  sold;  and 

(j)  Upon  all  cameras  sold  by  the  manufacturer,  producer,  or  im- 
porter, a  tax  equivalent  to  three  per  centum  of  the  price  for  which  so 
sold. 

Sec.  GOl.  That  each  manufacturer,  producer,  or  importer  of  any  of 
the  articles  enumerated  in  section  six  hundred  shall  make  monthly 
returns  under  oath  in  duplicate  and  pay  the  taxes  imposed  on  such 
articles  by  this  title  to  the  collector  of  internal  revenue  for  the  dis- 
trict in  which  Is  located  the  principal  place  of  business.     Such  returns 


1028  WAR  REVENUE  ACT   OF   1917. 

shall  contain  such  information  and  be  made  at  such  times  and  in  such 
manner  as  the  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  may  by  regulations  prescribe. 

Sec.  602.  That  upon  all  articles  enumerated  in  subdivisions  (a), 
(&),  (e),  '(/),  ig),  {h),  (i),  or  (j)  of  section  six  hundred,  which  on 
the  day  this  Act  is  passed  are  held  and  intended  for  sale  by  any  per- 
son, corporation,  partnership,  or  association,  other  than  (1)  a  retailer 
who  is  not  also  a  wholesaler,  or  (2)  the  manufacturer,  producer,  or 
importer  thereof,  there  shall  be  levied,  assessed,  collected,  and  paid, 
a  tax  equivalent  to  one-half  the  tax  imposed  by  each  such  subdivision 
upon  the  sale  of  the  articles  therein  enumerated.  This  tax  shall 
be  paid  by  the.  person,  corporation,  partnership,  or  association  so  hold- 
ing such  articles. 

The  taxes  imposed  by  this  section  shall  be  assessed,  collected,  and 
paid  in  the  same  manner  as  provided  in  section  ten  hundred  and  two 
in  the  case  of  additional  taxes  upon  articles  upon  which  the  tax  im- 
posed by  existing  law  has  been  paid. 

Nothing  in  this  section  shall  be  construed  to  impose  a  tax  upon 
articles  sold  and  delivered  prior  to  May  ninth,  nineteen  hundred  and 
seventeen,  where  the  title  is  reserved  in  the  vendor  as  security  for  the 
payment  of  the  purchase  money. 

Sec.  603.  That  on  the  day  this  Act  takes  effect,  and  thereafter  on 
July  first  in  each  year,  and  also  at  the  time  of  the  original  purchase 
of  a  new  boat  by  a  user,  if  on  any  other  date  than  July  first,  there 
shall  be  levied,  assessed,  collected,  and  paid,  upon  the  use  of  yachts, 
pleasure  boats,  power  boats,  and  sailing  boats,  of  over  five  net  tons, 
and  motor  boats  with  fixed  engines,  not  used  exclusively  for  trade  or 
national  defense,  or  not  built  according  to  plans  and  specifications 
approved  by  the  Navy  Department,  an  excise  tax  to  be  based  on  each 
yacht  or  boat,  at  rates  as  follows:  Yachts,  pleasure  boats,  power 
boats,  motor  boats  with  fixed  engines,  and  sailing  boats,  of  over  five 
net  tons,  length  not  over  fifty,  feet,  50  cents  for  each  foot,  length  over 
fifty  feet  and  not  over  one  hundred  feet,  $1  for  each  foot,  length  over 
one  hundred  feet,  $2  for  each  foot;  motor  boats  of  not  over  five  net 
tons  with  fixed  engines,  $5. 

In  determining  the  length  of  such  yachts,  pleasure  boats,  power 
boats,  motor  boats  with  fixed  engines,  and  sailing  boats,  the  measure- 
ment of  over-all  length  shall  govern. 

In  the  case  of  a  tax  imposed  at  the  time  of  the  original  purchase 
of  a  new  boat  on  any  other  date  than  July  first,  the  amount  to  be  paid 
shall  be  the  same  number  of  twelfths  of  the  amount  of  the  tax  as  the 
number  of  calendar  months,  including  the  month  of  sale,  remaining 
prior  to  the  following  July  first. 

TITLE  VII. — ^War  Tax  on  Admissions  and  Dues. 

Sec.  700.  That  from  and  after  the  first  day  of  November,  nineteen 
hundred  and  seventeen,  there  shall  be  levied,  assessed,  collected,  and 
paid,  (a)  a  tax  of  1  cent  for  each  10  cents  or  fraction  thereof  of  the 
amount  paid  for  admission  to  any  place,  including  admission  by  sea- 


WAR   REVENUE   ACT    OF    1917.  1029 

son  ticket  or  subscription,  to  be  paid  by  tlie  person  paying  for  such 
admission:  Provided,  That  the  tax  on  admission  of  children  under 
twelve  years  of  age  where  an  admission  charge  for  such  children  is 
made  shall  in  every  case  be  1  cent;  and  (&)  in  the  case  of  persons  (ex- 
cept bona  tide  employees,  municipal  oflBcers  on  oflBcial  business,  and 
children  under  twelve  years  of  age)  admitted  free  to  any  place  at  a 
time  when  and  under  circumstances  under  which  an  admission  charge 
is  made  to  other  persons  of  the  same  class,  a  tax  of  1  cent  for  each 
10  cents  or  fraction  thereof  of  the  price  so  charged  to  such  other  per- 
sons for  the  same  or  similar  accommodations,  to  be  paid  by  the  per- 
sons so  admitted;  and  (c)  a  tax  of  1  cent  for  each  10  cents  or  frac- 
tion thereof  paid  for  admission  to  any  public  performance  for  profit 
at  any  cabaret  or  other  similar  entertainment  to  which  the  charge  for 
admission  is  wholly  or  in  part  included  in  the  price  paid  for  refresh- 
ment, service,  or  merchandise;  the  amount  paid  for  such  admission 
to  be  computed  under  rules  prescribed  by  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury,  such  tax 
to  be  paid  by  the  person  paying  for  such  refreshment,  service,  or 
merchandise.  In  the  case  of  persons  having  the  permanent  use  of 
boxes  or  seats  in  an  opera  house  or  any  place  of  amusement  or  a  lease 
for  the  use  of  such  box  or  seat  in  such  opera  house  or  place  of  amuse- 
ment there  shall  be  levied,  assessed,  collected,  and  paid  a  tax  equiva- 
lent to  ten  per  centum  of  the  amount  for  which  a  similar  box  or  seat 
is  sold  for  performance  or  exhibition  at  which  the  box  or  seat  is  used 
or  reserved  by  or  for  the  lessee  or  holder.  These  taxes  shall  not  be 
imposed  in  the  case  of  a  place  the  maximum  charge  for  admission  to 
■which  is  5  cents,  or  in  the  case  of  shows,  rides,  and  other  amusements, 
(the  maximum  charge  for  admission  to  which  is  ten  cents)  within  out- 
door general  amusement  parks,  or  in  the  case  of  admissions  to  such 
parks. 

No  tax  shall  be  levied  under  this  title  in  respect  to  any  admissions 
all  the  proceeds  of  which  inure  exclusively  to  the  benefit  of  rellgous, 
educatonal,  or  charitable  institutions,  societies,  or  organizations,  or 
admissions  to  agricultural  fairs  none  of  the  profits  of  which  are  dis- 
tributed to  stockholders  or  members  of  the  association  conducting  the 
same. 

The  term  "admission"  as  used  in  this  title  includes  seats  and  tables, 
reserved  or  otherwise,  and  other  similar  accommodations,  and  the 
charges  made  therefor. 

Sec.  701.  That  from  and  after  the  first  day  of  November,  nineteen 
hundred  and  seventeen,  there  shall  be  levied,  assessed,  collected,  and 
paid,  a  tax  equivalent  to  ten  per  centum  of  any  amount  paid  as  dues 
or  membership  fees  (including  initiation  fees),  to  any  social,  ath- 
letic, or  sporting  club  or  organization,  where  such  dues  or  fees  are  in 
excess  of  $12  per  year;  such  taxes  to  be  paid  by  the  person  paying 
such  dues  or  fees:  provided,  that  there  shall  be  exempted  from  the 
provisions  of  this  section  all  amounts  paid  as  dues  or  fees  to  a  fra- 
ternal beneficiary  society,  order,  or  association,  operating  under  the 
lodge  system  or  for  the  exclusive  benefit  of  the  members  of  a  fraternity 
itself  operating  under  the  lodge  system,  and  providing  for  the  pay- 


1030  WAR   REVENUE   ACT    OP    1917. 

ment  of  life,  sick,  accident,  or  other  benefits  to  the  members  of  such 
society,  order,  or  association  or  their  dependents. 

Sec.  702.  That  every  person,  corporation,  partnership,  or  associa- 
tion (a)  receiving  any  payments  for  such  admission,  dues,  or  fees 
shall  collect  the  amount  of  the  tax  imposed  by  section  seven  hundred 
or  seven  hundred  and  one  from  the  person  making  such  payments,  or 
(&)  admitting  any  person  free  to  any  place  for  admission  to  which  a 
charge  is  made  shall  collect  the  amount  of  the  tax  imposed  by  section 
seven  hundred  from  the  person  so  admitted,  and  (c)  in  either  case 
shall  make  returns  and  payments  of  the  amounts  so  collected,  at  the 
same  time  and  in  the  same  manner  as  provided  in  section  five  hun- 
dred and  three  of  this  Act. 

TITLE  VIII.— Wab  Stamp  Taxes. 

Sec.  800.  That  on  and  after  the  first  day  of  December,  nineteen  hun- 
dred and  seventeen,  there  shall  be  levied,  collected,  and  paid,  for  and 
in  respect  of  the  several  bonds,  debentures,  or  certificates  of  stock  and 
of  indebtedness,  and  other  documents,  instruments,  matters,  and  things 
mentioned  and  described  in  Schedule  A  of  this  title,  or  for  or  in  re- 
spect of  the  vellum,  parchment,  or  paper  upon  which  such  instruments, 
matters,  or  things,  or  any  of  them,  are  written  or  printed,  by  any  per- 
son, corporation,  partnership,  or  association  who  makes,  signs,  issues, 
sells,  removes,  consigns,  or  ships  the  same,  or  for  whose  use  or  ben- 
efit the  same  are  made,  signed,  issued,  sold,  removed,  consigned,  or 
shipped,  the  several  taxes  specified  in  such  schedule. 

Sec.  801.  That  there  shall  not  be  taxed  under  this  title  any  bond, 
note,  or  other  instrument,  issued  by  the  United  States,  or  by  any  for- 
eign Government,  or  by  any  State,  Territory  or  the  District  of  Co- 
lumbia, or  local  subdivision  thereof,  or  municipal  or  other  corpora- 
tion exercising  the  taxing  power,  when  issued  in  the  exercise  of  a 
strictly  governmental,  taxing,  or  municipal  function;  or  stocks  and 
bonds  issued  by  co-operative  building  and  loan  associations  which  are 
organized  and  operated  exclusively  for  the  benefit  of  their  members 
and  make  loans  only  to  their  shareholders,  or  by  mutual  ditch  or  irri- 
gating companies. 

Sec.  802.     That  whoever— 

(a)  Makes,  signs,  issues,  or  accepts,  or  causes  to  be  made,  signed, 
issued,  or  accepted,  any  instrument,  document,  or  paper  of  any  kind 
or  description  whatsoever  without  the  full  amount  of  tax  thereon 
being  duly  paid; 

(&)  Consigns  or  ships,  or  causes  to  be  consigned  or  shipped,  by 
parcel  post  any  parcel,  package,  or  article  without  the  full  amount  of 
tax  being  duly  paid; 

(c)  Manufactures  or  imports  and  sells,  or  offers  for  sale,  or  causes 
to  be  manufactured  or  imported  and  sold,  or  offered  for  sale,  any  play- 
ing cards,  package,  or  other  article  without  the  full  amount  of  tax 
being  duly  paid; 


WAR   REVENUE   ACT    OP    1917.  1031 

(d)  Makes  use  of  an  adhesive  stamp  to  denote  any  tax  imposed  by 
this  title  without  canceling  or  obliterating  such  stamp  as  prescribed 
in  section  eight  hundred  and  four; 

Is  guilty  of  a  misdemeanor  and  upon  conviction  thereof  shall  pay  a 
fine  of  not  more  than  $100  for  each  offense. 

Sec.  803.     That  whoever — 

(a)  Fraudulently  cuts,  tears,  or  removes  from  any  vellum,  parch- 
ment, paper,  instrument,  writing,  package,  or  article,  upon  which  any 
tax  is  imposed  by  this  title,  any  adhesive  stamp  or  the  impression  of 
any  stamp,  die,  plate,  or  other  article  provided,  made,  or  used  in  pur- 
suance of  this  title;  (&)  Fraudulently  uses,  joins,  fixes,  or  places  to, 
with,  or  upon  any  vellum,  parchment,  paper,  instrument,  writing, 
package,  or  article,  upon  which  any  tax  is  imposed  by  this  title,  (1) 
any  adhesive  stamp,  or  the  impression  of  any  stamp,  die,  plate,  or 
other  article,  which  has  been  cut,  torn,  or  removed  from  any  other 
vellum,  parchment,  paper,  instrument,  writing,  package,  or  article, 
upon  which  any  tax  is  imposed  by  this  title  or  (2)  any  adhesive 
stamp  or  the  impression  of  any  stamp,  die,  plate,  or  other  article  of 
insufllcient  value;  or  (3)  any  forged  or  counterfeit  stamp,  or  the  im- 
pression of  any  forged  or  counterfeited  stamp,  die,  plate,  or  other 
article; 

(c)  Willfully  removes,  or  alters  the  cancellation,  or  defacing  marks 
of,  or  otherwise  prepares,  any  adhesive  stamp,  with  intent  to  use,  or 
cause  the  same  to  be  used,  after  it  has  been  already  used,  or  know- 
ingly or  willfully  buys,  sells,  offers  for  sale,  or  gives  away,  any  such 
washed  or  restored  stamp  to  any  person  for  use,  or  knowingly  uses 
the  same; 

(d)  Knowingly  and  without  lawful  excuse  (the  burden  of  proof 
of  such  excuse  being  on  the  accused)  has  in  possession  any  washed, 
restored,  or  altered  stamp,  which  has  been  removed  from  any  vellum, 
parchment,  paper,  instrument,  writing,  package,   or  article, 

is  guilty  of  a  misdemeanor,  and  upon  conviction  shall  be  punished 
by  a  fine  of  not  more  than  $1,000,  or  by  imprisonment  for  not  more 
than  five  years,  or  both,  in  the  discretion  of  the  court,  and  any  such 
reused,  canceled,  or  counterfeit  stamp  and  the  vellum,  parchment, 
document,  paper,  package,  or  article  upon  which  it  is  placed  or  im- 
pressed shall  be  forfeited  to  the  United  States. 

Sec.  804.  That  whenever  an  adhesive  stamp  is  used  for  denoting 
any  tax  imposed  by  this  title,  except  as  hereinafter  provided,  the  per- 
son, corporation,  partnership,  or  association,  using  or  aflSxing  the 
same  shall  write  or  stamp  or  cause  to  be  written  or  stamped  there- 
upon the  initials  of  his  or  its  name  and  the  date  upon  which  the  same 
is  attached  or  used,  so  that  the  same  may  not  again  be  used:  Pro- 
vidrri.  That  the  Commissioner  of  Internal  Revenue  may  prescribe 
.such  other  method  for  the  cancellation  of  such  stamps  as  he  may  deem 
expedient. 

Sec.  805.  (a)  That  the  Commissioner  of  Internal  Revenue  shall 
cause  to  be  prepared  and  distributed  for  the  payment  of  the  taxes  pre- 


1032  WAR   REVENUE   ACT    OF    1917. 

scribed  in  this  title  suitable  stamps  denoting  the  tax  on  the  docu- 
ment, articles,  or  things  to  which  the  same  may  be  affixed,  and  shall 
prescribe  such  method  for  the  affixing  of  said  stamps  in  substitution 
for  or  in  addition  to  the  method  provided  in  this  title,  as  he  may  deem 
expedient. 

(6)  The  Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  is  authorized  to  procure  any  of  the 
stamps  provided  for  in  this  title  by  contract  whenever  such  stamps 
can  not  be  speedily  prepared  by  the  Bureau  of  Engraving  and  Print- 
ing; but  this  authority  shall  expire  on  the  first  day  of  January,  nine- 
teen hundred  and  eighteen,  except  as  to  imprinted  stamps  furnished 
under  contract,  authorized  by  the  Commissioner  of  Internal  Revenue. 

(c)  All  internal-revenue  laws  relating  to  the  assessment  and  col- 
lection of  taxes  are  hereby  extended  to  and  made  a  part  of  this  title, 
so  far  as  applicable,  for  the  purpose  of  collecting  stamp  taxes  omitted 
through  mistake  or  fraud  from  any  instrument,  document,  paper,  writ- 
ing, parcel,  package,  or  article  named  herein. 

Sec.  806.  That  the  Commissioner  of  Internal  Revenue  shall  furnish 
to  the  Postmaster  General  without  prepayment  a  suitable  quantity  of 
adhesive  stamps  to  be  distributed  to  and  kept  on  sale  by  the  various 
postmasters  in  the  United  States.  The  Postmaster  General  may  re- 
quire each  such  postmaster  to  give  additional  or  increased  bond  as 
postmaster  for  the  value  of  the  stamps  so  furnished,  and  each  such 
postmaster  shall  deposit  the  receipts  from  the  sale  of  such  stamps 
to  the  credit  of  and  render  accounts  to  the  Postmaster  General  at  such 
times  and  in  such  form  as  he  may  by  regulations  prescribe.  The  Post- 
master General  shall  at  least  once  monthly  transfer  all  collections 
from  this  source  to  the  Treasury  as  internal-revenue  collections. 

Sec.  807.  That  the  collectors  of  the  several  districts  shall  furnish 
without  prepayment  to  any  assistant  treasurer  or  designated  deposi- 
tory of  the  United  States  located  in  their  respective  collection  dis- 
tricts a  suitable  quantity  of  adhesive  stamps  for  sale.  In  such  cases 
the  collector  may  require  a  bond,  with  sufficient  sureties,  to  an 
amount  equal  to  the  value  of  the  adhesive  stamps  so  furnished,  con- 
ditioned for  the  faithful  return,  whenever  so  required,  of  all  quanti- 
ties or  amounts  undisposed  of,  and  for  the  payment  monthly  of  all 
quantities  or  amounts  sold  or  not  remaining  on  hand.  The  Secre- 
tary of  the  Treasury  may  from  time  to  time  make  such  regulations 
as  he  may  find  necessary  to  insure  the  safe-keeping  or  prevent  the 
illegal  use  of  all  such  adhesive  stamps. 

SCHEDULE  A.— Stamp  Taxes. 

1.  Bonds  of  indebtedness:  Bonds,  debentures,  or  certificates  of 
indebtedness  issued  on  and  after  the  first  day  of  December,  nineteen 
hundred  and  seventeen,  by  any  person,  corporation,  partnership  or  asso- 
ciation, on  each  $100  of  face  value  or  fraction  thereof,  5  cents:  Pro' 
vided,  That  every  renewal  of  the  foregoing  shall  be  taxed  as  a  new 
issue:     Provided  further,  That  when  a  bond  conditioned  for  the  re- 


WAR   REVENUE   xVCT    OF    1917.  1033 

payment  or  payment  of  money  is  given  in  a  penal  sum  greater  than 
the  debt  secured,  the  tax  shall  be  based  upon  the  amount  secured. 

2.  Bonds,  indemnity  and  surety:  Bonds  for  indemnifying  any  per- 
son, corporation,  partnership,  or  corporation  who  shall  have  become 
bound  or  engaged  as  surety,  and  all  bonds  for  the  due  execution  or 
performance  of  any  contract,  obligation,  or  requirement,  or  the  duties 
of  any  office  or  position,  and  to  account  for  money  received  by  virtue 
thereof,  and  all  other  bonds  of  any  description,  except  such  as  may 
be  required  in  legal  proceedings,  not  otherwise  provided  for  in  this 
schedule,  50  cents:  Provided,  That  where  a  premium  is  charged  for 
the  execution  of  such  bonds  the  tax  shall  be  paid  at  the  rate  of  one 
per  centum  on  each  dollar  or  fractional  part  thereof  of  the  premium 
charged:  Provided  -further,  That  policies  of  reinsurance  shall  be  ex- 
empt from  the  tax  Imposed  by  this  subdivision. 

3.  Capital  stock,  issue:  On  each  original  issue,  whether  on  organ- 
ization or  reorganization,  of  certificates  of  stock  by  any  association, 
company,  or  corporation,  on  each  $100  of  face  value  or  fraction  thereof, 
5  cents:  Provided,  That  where  capital  stock  is  issued  without  face 
value,  the  tax  shall  be  5  cents  per  share,  unless  the  actual  value  is  in 
excess  of  $100  per  share,  in  which  case  the  tax  shall  be  5  cents  on 
each  $100  of  actual  value  or  fraction  thereof. 

The  stamps  representing  the  tax  imposed  by  this  subdivision  shall 
be  attached  to  the  stock  books  and  not  to  the  certificates  issued. 

4.  Capital  stock,  sales  or  transfers:  On  all  sales,  or  agreements 
to  sell,  or  memoranda  of  sales  or  deliveries  of,  or  transfers  of  legal 
titles  to  shares  of  certificates  of  stock  in  any  association,  company,  or 
corporation,  whether  made  upon  or  shown  by  the  books  of  the  associa- 
tion, company,  or  corporation,  or  by  any  assignment  in  blank,  or  by 
any  delivery,  or  by  any  paper  or  agreement  or  memorandum  or  other 
evidence  of  transfer  or  sale,  whether  entitling  the  holder  in  any 
manner  to  the  benefit  of  such  stock  or  not,  on  each  $100  of  face  value 
or  fraction  thereof,  2  cents,  and  where  such  shares  of  stock  are  with- 
out par  value,  the  tax  shall  be  2  cents  on  the  transfer  or  sale  or  agree- 
ment to  sell  on  each  share,  unless  the  actual  value  thereof  is  in  excess 
of  $100  per  share,  in  which  case  the  tax  shall  be  2  cents  on  each  $100 
of  actual  value  or  fraction  thereof:  Provided,  That  it  is  not  intended 
by  this  title  to  impose  a  tax  upon  an  agreement  evidencing  a  deposit 
of  stock  certificates  as  collateral  security  for  money  loaned  thereon, 
which  stock  certificates  are  not  actually  sold,  nor  upon  such  stock 
certificates  so  deposited:  Provided  further.  That  the  tax  shall  not  be 
imposed  upon  deliveries  or  transfers  to  a  broker  for  sale,  nor  upon 
deliveries  or  transfers  by  a  broker  to  a  customer  for  whom  and  upon 
whose  order  he  has  purchased  same,  but  such  deliveries  or  transfers 
shall  be  accompanied  by  a  certificate  setting  forth  the  facts:  Pro- 
vided further.  That  in  case  of  sale  where  the  evidence  of  transfer  is 
shown  only  by  the  books  of  the  company  the  stamp  shall  be  placed 
upon  such  books;  and  where  the  change  of  ownership  is  by  transfer 
of  the  certificate  the  stamp  shall  be  placed  upon  the  certificate;  and. 
in  cases  of  an  agreement  to  sell  or  where  the  transfer  is  by  delivery 
of  the  certificate  assigned  in  blank  there  shall  be  made  and  deli\M<Bd 


1034  WAR   REVENUE    ACT    OP    1917. 

by  the  seller  to  the  buyer  a  bill  or  memorandum  of  such  sale,  to  which 
the  stamp  shall  be  affixed;  and  every  bill  or  memorandum  of  sale  or 
agreement  to  sell  before  mentioned  shall  show  the  date  thereof,  the 
name  of  the  seller,  the  amount  of  the  sale,  and  the  matter  or  thing 
to  which  it  refers.  Any  person  or  persons  liable  to  pay  the  tax  as 
herein  provided,  or  anyone  who  acts  in  the  matter  as  agent  or  broker 
for  such  person  or  persons  who  shall  make  any  such  sale,  or  who 
shall  in  pursuance  of  any  such  sale  deliver  any  stock  or  evidence  of 
the  sale  of  any  stock  or  bill  or  memorandum  thereof,  as  herein  re- 
quired, without  having  the  proper  stamps  affixed  thereto  with  intent 
to  evade  the  foregoing  provisions  shall  be  deemed  guilty  of  a  misde- 
meanor, and  upon  conviction  thereof  shall  pay  a  fine  of  not  exceeding 
$1,000,  or  be  imprisoned  not  more  than  six  months,  or  both,  at  the  dis- 
cretion of  the  court. 

5.  Produce,  sales  of,  on  exchange:  Upon  each  sale,  agreement  of 
sale,  or  agreement  to  sell,  including  so-called  transferred  or  scratch 
sales,  any  products  or  merchandise  at  any  exchange,  or  board  of  trade, 
or  other  similar  place,  for  future  delivery,  for  each  $100  in  value  of 
the  merchandise  covered  by  said  sale  or  agreement  of  sale  or  agree- 
ment to  sell,  2  cents,  and  for  each  additional  $100  or  fractional  part 
thereof  in  excess  of  $100,  2  cents:  Provided,  That  on  every  sale  or 
agreement  of  sale  or  agreement  to  sell  as  aforesaid  there  shall  be 
made  and  delivered  by  the  seller  to  the  buyer  a  bill,  memorandum, 
agreement,  or  other  evidence  of  such  sale,  agreement  of  sale,  or  agree- 
ment to  sell,  to  which  there  shall  be  affixed  a  lawful  stamp  or  stamps 
in  value  equal  to  the  amount  of  the  tax  on  such  sale:  Provided  fur- 
ther. That  sellers  of  commodities  described  herein,  having  paid  the 
tax  provided  by  this  subdivision,  may  transfer  such  contracts  to  a 
clearing  house  corporation  or  association,  and  such  transfer  shall  not 
be  deemed  to  be  a  sale,  or  agreement  of  sale,  or  an  agreement  to  sell 
within  the  provisions  of  this  Act,  provided  that  such  transfer  shall  not 
vest  any  beneficial  interest  in  such  clearing  house  association  but 
shall  be  made  for  the  sole  purpose  of  enabling  such  clearing  house 
association  to  adjust  and  balance  the  accounts  of  the  members  of  said 
clearing  house  association  on  their  several  contracts.  And  every  such 
bill,  memorandum,  or  other  evidence  of  sale  or  agreement  to  sell  shall 
show  the  date  thereof,  the  name  of  the  seller,  the  amount  of  the  sale, 
and  the  matter  or  thing  to  which  it  refers;  and  any  person  or  per- 
sons liable  to  pay  the  tax  as  herein  provided,  or  anyone  who  acts  in 
the  matter  as  agent  or  broker  for  such  person  or  persons,  who  shall 
make  any  such  sale  or  agreement  of  sale,  or  agreement  to  sell,  or  who 
shall,  in  pursuance  of  any  such  sale,  agreement  of  sale,  or  agreement 
to  sell,  deliver,  any  such  products  or  merchandise  without  a  bill,  mem- 
orandum, or  other  evidence  thereof  as  herein  required,  or  who  shall 
deliver  such  bill,  memorandum,  or  other  evidence  of  sale,  or  agree- 
ment to  sell,  without  having  the  proper  stamps  affixed  thereto,  with 
intent  to  evade  the  foregoing  provisions,  shall  be  deemed  gaiilty  of  a 
misdemeanor,  and  upon  conviction  thereof  shall  pay  a  fine  of  not 
exceeding  $1,000,  or  be  imprisoned  not  more  than  six  months,  or  both, 
at  the  discretion  of  the  court. 

That  no  bill,  memorandum,  agreement,  or  other  evidence  of  such 


WAR  REVENUE  ACT  OF  1917.  1035 

sale,  or  agreement  of  sale,  or  agreement  to  sell,  in  case  of  cash  sales 
of  products  or  merchandise  for  immediate  or  prompt  delivery  which 
in  good  faith  are  actually  intended  to  be  delivered  shall  be  subject  to 
this  tax. 

6.  Drafts  or  checks  payable  otherwise  than  at  sight  or  on  demand, 
promissory  notes,  except  bank  notes  issued  for  circulation,  and  for 
each  renewal  of  the  same,  for  a  sum  not  exceeding  $100,  2  cents;  and 
for  each  additional  $100  or  fractional  part  thereof,  2  cents. 

Conveyance:  Deed,  instrument,  or  writing,  whereby  any  lands, 
tenements,  or  other  realty  sold  shall  be  granted,  assigned,  transferred, 
or  otherwise  conveyed  to,  or  vested  in,  the  purchaser  or  purchasers, 
or  any  other  person  or  persons,  by  his,  her,  or  their  direction,  when 
the  consideration  or  value  of  the  interest  or  property  conveyed,  ex- 
clusive of  the  value  of  any  lien  or  encumbrance  remaining  thereon 
at  the  time  of  sale,  exceeds  $100  and  does  not  exceed  $500,  50  cents; 
and  for  each  additional  $500  or  fractional  part  thereof,  50  cents:  Pro- 
vided. That  nothing  contained  in  this  paragraph  shall  be  so  con- 
strued as  to  impose  a  tax  upon  any  instrument  or  writing  given  to 
secure  a  debt. 

8.  Entry  of  any  goods,  wares,  or  merchandise  at  any  custom- 
house, either  for  consumption  or  warehousing,  not  exceeding  $100  in 
value,  25  cents;  exceeding  $100  and  not  exceeding  $500  in  value,  50 
cents;  exceeding  $500  in  value,  $1. 

9.  Entry  for  the  withdrawal  of  any  goods  or  merchandise  from  cus- 
toms bonded  warehouse,  50  cents. 

10.  Passage  ticket,  one  way  or  round  trip,  for  each  passenger,  sold 
or  issued  in  the  United  States  for  passage  by  any  vessel  to  a  port  or 
place  not  in  the  United  States,  Canada,  or  Mexico,  if  costing  not  ex- 
ceeding $30,  $1;  costing  more  than  $30  and  not  exceeding  $60,  $3;  cost- 
ing more  than  $60,  $5-  Provided,  That  such  passage  tickets,  costing 
$10  or  less,  shall  be  exempt  from  taxation. 

11.  Proxy  for  voting  at  any  election  for  officers,  or  meeting  for  the 
transaction  of  business,  of  any  incorporated  company  or  association, 
except  religious,  educational,  charitable,  fraternal,  or  literary  socie- 
ties, or  public  cemeteries,  10  cents. 

12.  Power  of  attorney  granting  authority  to  do  or  perform  some 
act  for  or  in  behalf  of  the  grantor,  which  authority  is  not  otherwise 
vested  in  the  grantee,  25  cents:  Provided,  That  no  stamps  shall  be 
required  upon  any  papers  necessary  to  be  used  for  the  collection  of 
claims  from  the  United  States  or  from  any  State  for  pensions,  back 
pay.  bounty,  or  for  property  lost  in  the  military  or  naval  service  or 
upon  powers  of  attorney  required  in  bankruptcy  cases. 

13.  Playing  cards:  Upon  every  pack  of  playing  cards  containing 
not  more  than  fifty-four  cards,  manufactured  or  imported,  and  sold. 
or  removed  for  consumption  or  sale,  after  the  passage  of  this  Act,  a 
tax  of  5  cents  per  pack  in  addition  to  the  tax  Imposed  under  existing 
law, 


1036  WAR    REVENUE    ACT    OP    1917. 

14.  Parcel-post  packages:  Upon  every  parcel  or  package  trans- 
ported from  one  point  in  the  United  States  to  another  by  parcel  post 
on  which  the  postage  amounts  to  25  cents  or  more,  a  tax  of  1  cent  for 
each  25  cents  or  fractional  part  thereof  charged  for  such  transporta- 
tion, to  be  paid  by  the  consignor. 

No  such  parcel  or  package  shall  be  transported  until  a  stamp  or 
stamps  representing  the  tax  due  shall  have  been  affixed  thereto. 

TITLE  rX.— War  Estate  Tax. 

(For  the  provision  under  this  title  imposing  an  additional  tax  on 
inheritances,  that  is,  on  estates,  see  supra,  p.  988. 

TITLE  X. — Admini.'5trative  Provisions. 

Sec.  1000.  That  there  shall  be  levied,  collected,  and  paid  in  the 
United  States,  upon  articles  coming  into  the  United  States  from  the 
West  Indian  Islands  acquired  from  Denmark,  a  tax  equal  to  the  in- 
ternal-revenue tax  imposed  in  the  United  States  upon  like  articles  of 
domestic  manufacture;  such  articles  shipped  from  said  islands  to  the 
United  States  shall  be  exempt  from  the  payment  of  any  tax  imposed 
by  the  internal-revenue  laws  of  said  islands:  Provided,  That  there 
shall  be  levied,  collected,  and  paid  in  said  islands,  upon  articles  im- 
ported from  the  United  States,  a  tax  equal  to  the  internal-revenue  tax 
imposed  in  said  islands  upon  like  articles  there  manufactured;  and 
such  articles  going  into  said  islands  from  the  United  States  shall  be 
exempt  from  payment  of  any  tax  imposed  by  the  internal-revenue 
laws  of  the  United  States. 

Sec.  1001.  That  all  administrative,  special,  or  stamp  provisions  of 
law,  including  the  law  relating  to  the  assessment  of  taxes,  so  far  as 
applicable,  are  hereby  extended  to  and  made  a  part  of  this  Act,  and 
every  person,  corporation,  partnership,  or  association  liable  to  any 
tax  imposed  by  this  Act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements  and  returns,  and  shall 
comply  with  such  regulations  as  tne  Commissioner  of  Internal  Reve- 
nue, with  the  approval  of  the  Secretary  of  the  Treasury,  may  from 
time  to  time  prescribe. 

Sec.  1002.  That  where  additional  taxes  are  imposed  by  this  Act 
upon  articles  or  commodities,  upon  which  the  tax  imposed  by  existing 
law  has  been  paid,  the  person,  corporation,  partnership,  or  associa- 
tion required  by  this  Act  to  pay  the  tax  shall,  within  thirty  days 
after  its  passage,  make  return  under  oath  in  such  form  and  under 
such  regulations  as  the  Commissioner  of  Internal  Revenue  with  the 
approval  of  the  Secretary  of  the  Treasury  shall  prescribe.  Payment 
of  the  tax  shown  to  be  due  may  be  extended  to  a  date  not  exceeding 
seven  months  from  the  passage  of  this  Act,  upon  the  filing  of  a  bond 
for  payment  in  such  form  and  amount  and  with  such  sureties  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  may  prescribe. 


WAR  REVENUE  ACT  OF  1917.  1037 

Sec.  1003.  That  in  all  cases  where  the  method  of  collecting  the  tax 
imposed  by  this  Act  is  not  specifically  provided,  the  tax  shall  be  col- 
lected in  such  manner  as  the  Commissioner  of  Internal  Revenue  with 
the  approval  of  the  Secretary  of  the  Treasury  may  prescribe.  All 
administrative  and  penalty  provisions  of  Title  VIII  of  this  Act,  in  so 
far  as  applicable,  shall  apply  to  the  collection  of  any  tax  which  the 
Commissioner  of  Internal  Revenue  determines  or  prescribes  shall  be 
paid  by  stamp. 

Sec.  1004.  That  whoever  fails  to  make  any  return  required  by  this 
Act  or  the  regulations  made  under  authority  thereof  within  the  time 
prescribed  or  who  makes  any  false  or  fraudulent  return,  and  whoever 
evades  or  attempts  to  evade  any  tax  imposed  by  this  Act  or  fails  to 
collect  or  truly  to  account  for  and  pay  over  any  such  tax,  shall  be 
subject  to  a  penalty  of  not  more  than  $1,000,  or  to  imprisonment  for 
not  more  than  one  year,  or  both,  at  the  discretion  of  the  court,  and 
in  addition  thereto  a  penalty  of  double  the  tax  evaded,  or  not  col- 
lected, or  accounted  for  and  paid  over,  to  be  assessed  and  collected 
in  the  same  manner  as  taxes  are  assessed  and  collected,  in  any  case 
in  which  the  punishment  is  not  otherwise  specifically  provided. 

Sec.  1005.  That  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  is  hereby  authorized  to 
make  all  needful  rules  and  regulations  for  the  enforcement  of  the  pro- 
visions of  this  Act. 

Sec.  1006.  That  where  the  rate  of  tax  imposed  by  this  Act,  payable 
by  stamps,  is  an  increase  over  previously  existing  rates,  stamps  on 
hand  in  the  collectors'  offices  and  in  the  Bureau  of  Internal  Revenue 
may  continue  to  be  used  until  the  supply  on  hand  is  exhausted,  but 
shall  be  sold  and  accounted  for  at  the  rates  provided  by  this  Act,  and 
assessment  shall  be  made  against  manufacturers  and  other  taxpayers 
having  such  stamps  on  hand  on  the  day  this  Act  takes  effect  for  the 
difference  between  the  amount  paid  for  such  stamps  and  the  tax  due 
at  the  rates  provided  by  this  Act. 

Sec.  1007.  That  (a)  if  any  person,  corporation,  partnership,  or 
association  has  prior  to  May  ninth,  nineteen  hundred  and  seventeen, 
made  a  bona  fide  contract  with  a  dealer  for  the  sale,  after  the  tax 
takes  effect,  of  any  article  (or  in  the  case  of  moving  picture  films, 
such  a  contract  with  a  dealer,  exchange,  or  exhibitor,  for  the  sale  or 
lease  thereof)  upon  which  a  tax  is  imposed  under  Title  III,  IV,  or  VI, 
or  under  subdivision  thirteen  of  Schedule  A  of  Title  VIII,  or  under 
this  section,  and  (h)  if  such  contract  does  not  permit  the  adding  of 
the  whole  of  such  tax  to  the  amount  to  be  paid  under  such  contract, 
then  the  vendee  or  lessee  shall,  in  lieu  of  the  vendor,  or  lessor,  pay 
so  much  of  such  tax  as  is  not  so  permitted  to  be  added  to  the  contract 
price. 

The  taxes  payable  by  the  vendee  or  lessee  under  this  section  shall 
be  paid  to  the  vendor  or  lessor  at  the  time  the  sale  or  lease  is  con- 
summated, and  collected,  returned,  and  paid  to  the  United  States  by 


1038  WAR   REVENUE    ACT    OP    1917. 

such  vendor  or  lessor  in  the  same  manner  as  provided  in  section  five 
hundred  and  three. 

The  term  "dealer"  as  used  in  this  section  includes  a  vendee  who 
purchases  any  article  with  intent  to  use  it  in  the  manufacture  or 
production  of  another  article  intended  for  sale. 

Sec.  1008.  That  in  the  payment  of  any  tax  under  this  Act  not 
payable  by  stamp  a  fractional  part  of  a  cent  shall  be  disregarded 
unless  it  amounts  to  one-half  cent  or  more,  in  which  case  it  shall  be 
increased  to  one  cent. 

Sec.  1009.  That  the  Secretary  of  the  Treasury,  under  rules  and 
regulations  prescribed  by  him,  shall  permit  taxpayers  liable  to  income 
and  excess  profits  taxes  to  make  payments  in  advance  in  installments 
or  in  whole  of  an  amount  not  in  excess  of  the  estimated  taxes  which 
will  be  due  from  them,  and  upon  determination  of  the  taxes  actually 
due  any  amount  paid  in  excess  shall  be  refunded  as  taxes  erroneously 
collected:  Provided,  That  when  payment  is  made  in  installments  at 
least  one-fourth  of  such  estimated  tax  shall  be  paid  before  the  expira- 
tion of  thirty  days  after  the  close  of  the  taxable  year,  at  least  an 
additional  one-.fourth  within  two  months  after  the  close  of  the  taxable 
year,  at  least  an  additional  one-fourth  within  four  months  after  the 
close  of  the  taxable  year,  and  the  remainder  of  the  tax  due  on  or 
before  the  time  now  fixed  by  law  for  such  payment:  Provided 
further.  That  the  Secretary  of  the  Treasury,  under  rules  and  regu- 
lations prescribed  by  him,  may  allow  credit  against  such  taxes  so 
paid  in  advance  of  an  amount  not  exceeding  three  per  centum  per 
annum  calculated  upon  the-  amount  so  paid  from  the  date  of  such 
payment  to  the  date  now  fixed  by  law  for  such  payment;  but  no  such 
credit  shall  be  allowed  on  payments  in  excess  of  taxes  determined 
to  be  due,  nor  on  payments  made  after  the  expiration  of  four  and 
one-half  months  after  the  close  of  the  taxable  year.  All  penalties 
provided  by  existing  law  for  failure  to  pay  tax  when  due  are  hereby 
made  applicable  to  any  failure  to  pay  the  tax  at  the  time  or  times 
required  in  this  section. 

Sec.  1010.  That,  under  rules  and  regulations  prescribed  by  the 
Secretary  of  the  Treasury,  Collectors  of  Internal  Revenue  may  re- 
ceive, at  par  and  accrued  interest,  certificates  of  indebtedness  issued 
under  section  six  of  the  Act  entitled  "An  Act  to  authorize  an  issue  of 
bonds  to  meet  expenditures  for  the  national  security  and  defense,  and, 
for  the  purpose  of  assisting  in  the  prosecution  of  the  war,  to  extend 
credit  to  foreign  governments,  and  for  other  purposes,"  approved 
April  twenty-fourth,  nineteen  hundred  and  seventeen,  and  any  sub- 
sequent Act  or  Acts,  and  uncertified  checks  in  payment  of  income  and 
excess  profits  taxes,  during  such  time  and  under  such  regulations  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Sec- 
retary of  the  Treasury,  shall  prescribe;  but  if  a  check  so  received 
is  not  paid  by  the  bank  on  which  it  is  drawn  the  person  by  whom  such 
check  has  been  tendered  shall  remain  liable  for  the  payment  of  the 
tax  and  for  all  legal  penalties  and  additions  the  same  as  if  such 
check  had  not  been  tendered. 


WAR   REVENUE    ACT    OF    19l7.  1039 

TITLE   IX.— Postal  Rates. 

Sec.  1100.  That  the  rate  of  postage  on  all  mail  matterof  the  first 
class,  except  postal  cards,  shall,  thirty  days  after  the  passage  of  this 
Act  be,  in  addition  to  the  existing  rate,  1  cent  for  each  ounce  or 
fraction  thereof:  Provided,  That  the  rate  of  postage  on  drop  letters 
of  the  first  class  shall  be  2  cents  an  ounce  or  fraction  thereof.  Postal 
cards,  and  private  mailing  or  post  cards  when  complying  with  the  re- 
quirements of  existing  law,  shall  be  transmitted  through  the  mails  at 
1  cent  each  in  addition  to  the  existing  rate. 

That  letters  written  and  mailed  by  soldiers,  sailors,  and  marines 
assigned  to  duty  in  a  foreign  country  engaged  in  the  present  war 
may  be  mailed  free  of  postage,  subject  to  such  rules  and  regulations 
as  may  be  prescribed  by  the  Postmaster  General. 

Sec.  1101.  That  on  and  after  July  first,  nineteen  hundred  and 
eighteen,  the  rates  of  postage  on  publications  entered  as  second  class 
matter  (including  sample  copies  to  the  extent  of  ten  per  centum  of 
the  weight  of  copies  mailed  to  subscribers  during  the  calendar  year) 
when  sent  by  the  publisher  thereof  from  the  post  office  of  publication 
or  other  post  office,  or  when  sent  by  a  news  agent  to  actual  subscribers 
thereto,  or  to  other  news  agents  for  the  purpose  of  sale: 

(o)  In  the  case  of  the  portion  of  such  publication  devoted  to  mat- 
ter other  than  advertisements,  shall  be  as  follows:  (1)  on  and  after 
July  first,  nineteen  hundred  and  eighteen,  and  until  July  first,  nine- 
teen hundred  and  nineteen,  IVt  cents  per  pound  or  fraction  thereof; 

(2)  on  and  after  July  first,  nineteen  hundred  and  nineteen,  1 14  cents 
per  pound  or  fraction  thereof; 

(6)  In  the  case  of  the  portion  of  such  publication  devoted  to 
advertisements  the  rates  per  pound  or  fraction  thereof  for  delivery 
within  the  several  zones  applicable  to  fourth-class  matter  shall  be 
as  follows  (but  where  the  space  devoted  to  advertisements  does  not 
exceed  five  per  centum  of  the  total  space,  the  rate  of  postage  shall  be 
the  same  as  if  the  whole  of  such  publication  was  devoted  to  matter 
other  than  advertisements):  (1)  on  and  after  July  first,  nineteen 
hundred  and  eighteen,  and  until  July  first,  nineteen  hundred  and  nine- 
teen, for  the  first  and  second  zones,  1^,4  cents;  for  the  third  zone,  IV2 
cents;  for  the  fourth  zone,  2  cents;  for  the  fifth  zone,  214  cents;  for 
the  sixth  zone,  2^2  cents;  for  the  seventh  zone,  3  cents;  for  the  eighth 
zone,  314  cents;  (2)  on  and  after  July  first,  nineteen  hundred  and 
nineteen,  and  until  July  first,  nineteen  hundred  and  twenty,  for  the 
first  and  second  zones,  1^^  cents;  for  the  third  zone,  2  cents;  for  the 
fourth  zone,  3  cents;  for  the  fifth  zone  314  cents;  for  the  sixth  zone, 
4  cents;   for  the  seventh  zone,  5  cents;  for  the  eighth  zone,  514  cents; 

(3)  on  and  after  July  first,  nineteen  hundred  and  twenty  and  until 
July  first,  nineteen  hundred  and  twenty-one,  for  the  first  and  second 
zones,  1%  cents;  for  the  third  zone,  2iA  cents;  for  the  fourth  zone,  4 
cent.s;  for  the  fifth  zone,  4%  cents;  for  the  sixth  zone,  5%  cents;  for 
the  seventh  zone,  7  cents;  for  the  eighth  zone,  7%  cents;  (4)  on  and 
after  July  first,  nineteen  hundred  and  twenty/one,  for  the  first  and 
second  zones,  2  cents;  for  the  third  zone,  3  cents;   for  the  fourth  zone, 


1040  WAR   REVENUE   ACT    OF    1917. 

5  cents;  for  the  fifth  zone,  6  cents;  for  the  sixth  zone,  7  cents;  for  the 
seventh  zone,  9  cents;  for  the  eighth  zone,  10  cents; 

(c)  With  the  first  mailing  of  each  issue  of  each  such  publication, 
the  publisher  shall  file  with  the  postmaster  a  copy  of  such  issue,  to- 
gether with  a  statement  containing  such  information  as  the  Post- 
master General  may  prescribe  for  determining  the  postage  chargeable 
thereon. 

Sec.  1102.  That  the  rate  of  postage  on  daily  newspapers,  when  the 
same  are  deposited  in  a  letter  carrier  office  for  delivery  by  its 
carriers,  shall  be  the  same  as  now  provided  by  law;  and  nothing 
in  this  title  shall  affect  existing  law  as  to  free  circulation  and  existing 
rates  on  second-class  mail  matter  within  the  county  of  publication: 
Provided,  That  the  Postmaster  General  may  hereafter  require  pub- 
lishers to  separate  or  make  up  to  zones  in  such  a  manner  as  he  may 
direct  all  mail  matter  of  the  second  class  when  offered   for  mailing. 

Sec.  1103.  That  in  the  case  of  newspapers  and  periodicals  entitled 
to  be  entered  as  second-class  matter  and  maintained  by  and  in  the 
interest  of  religious,  educational,  scientific,  philanthropic,  agricultural, 
labor,  or  fraternal  organizations  or  associations,  not  organized  for 
profit  and  none  of  the  net  income  of  which  inures  to  the  benefit  of 
any  private  stockholder  or  individual,  the  second-class  postage  rates 
shall  be,  irrespective  of  the  zone  in  which  delivered  (except  when  the 
same  are  deposited  in  a  letter-carrier  office  for  delivery  by  its  car- 
riers, in  which  case  the  rates  shall  be  the  same  as  now  provided  by 
law),  1%  cents  a  pound  or  fraction  thereof  on  and  after  July  first, 
nineteen  hundred  and  eighteen,  and  until  July  first,  nineteen  hundred 
and  nineteen,  and  on  and  after  July  first,  nineteen  hundred  and  nme- 
teen,  I14  cents  a  pound  or  fraction  thereof.  The  publishers  of  such 
newspapers  or  periodicals  before  being  entitled  to  the  foregoing  rates 
shall  furnish  to  the  Postmaster  General,  at  such  times  and  under 
such  conditions  as  he  may  prescribe,  satisfactory  evidence  that  none 
of  the  net  income  of  such  organization  inures  to  the  benefit  of  any 
private  stockholder  or  individual.  , 

Sec.  1104.  That  where  the  total  weight  of  any  one  edition  or  issue 
of  any  publication  mailed  to  any  one  zone  does  not  exceed  one  pound 
the  rate  of  postage  shall  be  1  cent. 

Sec.  1105.  The  zone  rates  provided  by  this  title  shall  relate  to 
the  entire  bulk  mailed  to  any  one  zone  and  not  to  individually  ad- 
dressed packages. 

Sec.  1106.  That  where  a  newspaper  or  periodical  is  mailed  by  other 
than  the  publisher  or  his  agent  or  a  news  agent  or  dealer,'  the  rate 
shall  be  the  same  as  now  provided  by  law^. 

Sec.  1107.  That  the  Postmaster  General,  on  or  before  the  tenth 
day  of  each  month,  shall  pay  into  the  general  fund  of  the  Treasury 
an  amount  equal  to  the  difference  between  the  estimated  amount  re- 
ceived during  the  preceding  month  for  the  transportation  of  first 
class  matter  through  the  mails  and  the  estimated  amount  which 
would  have  been  received  under  the  provisions  of  the  law  in  force  at 
the  time  of  the  passage  of  this  Act. 


WAR  REVENUE  ACT  OP  1917.  1041 

Sec.  1108.  That  the  salaries  of  postmasters  at  offices  of  the  first, 
second,  and  third  classes  shall  not  be  increased  after  July  first,  nine- 
teen hundred  and  seventeen,  during  the  existence  of  the  present  war. 
The  compensation  of  postmasters  at  offices  of  the  fourth  class  shall 
continue  to  be  computed  on  the  basis  of  the  present  rates  of  postage. 

Sec.  1109.  That  where  postmasters  at  offices  of  the  third  class  have 
been  since  May  first,  nineteen  hundred  and  seventeen,  or  hereafter 
are  granted  leave  without  pay  for  military  purposes,  the  Postmaster 
General  may  allow,  in  addition  to  the  maximum  amounts  which  may 
now  be  allowed  such  offices  for  clerk  hire,  in  accordance  with  law  an 
amount  not  to  exceed  fifty  per  centum  of  the  salary  of  the  postmaster. 

Sec.  1110.  That  section  five  of  the  Act  approved  March  third, 
nineteen  hundred  and  seventeen,  entitled  "An  Act  making  appropria- 
tions for  the  Post  Office  Department  for  the  year  ending  June  thirtieth, 
nineteen  hundred  and  eighteen,"  shall  not  be  construed  to  apply  to 
ethyl  alcohol  for  governmental,  scientific,  medicinal,  mechanical,  manu- 
facturing and  industrial  purposes,  and  the  Postmaster  General  shall 
prescribe  suitable  rules  and  regulations  to  carry  into  effect  this  sec- 
tion in  connection  with  the  Act  of  which  it  is  amendatory,  nor  shall 
said  section  be  held  to  prohibit  the  use  of  the  mails  by  regularly  or- 
dained ministers  of  religion;  or  by  officers  of  regularly  established 
churches,  for  ordering  wines  for  sacramental  uses,  or  by  manufact- 
urers and  dealers  for  quoting  and  billing  such  wines  for  such  pur- 
poses only. 

TITLE  XII. — Income  Tax  Amendments. 

For  the  provisions  of  this  title  amending  certain  sections  of  the  In- 
come Tax  Act  and  adding  certain  other  sections,  see  the  corresponding 
sections  of  the  Income  Tax,  supra,  p.  953. 

TITLE  XIIL— General  Provisions. 

Sec.  1300.  That  if  any  clause,  sentence,  paragraph,  or  part  of  this 
Act  shall  for  any  reason  be  adjudged  by  any  court  of  competent  juris- 
diction to  be  invalid,  such  judgment  shall  not  affect,  impair  or  in- 
validate the  remainder  of  said  Act,  but  shall  be  confined  in  its  operation 
to  the  clause,  sentence,  paragraph  or  part  thereof  directly  involved  in 
controversy  in  which  such  judgment  shall  have  been  rendered. 

Sec.  1301.  Title  I  of  the  Act  entitled  "An  Act  to  provide  Increased 
revenue  to  defray  the  expenses  of  the  increased  appropriations  for 
the  army  and  navy  and  the  extension  of  fortifications,  and  for  other 
purposes,  approved  March  3,  1917,  be,  and  the  same  is  hereby,  re- 
pealed. 

Sec.  1302.  That  unless  otherwise  herein  specially  provided,  this  Act 
shall  take  effect  on  the  day  following  its  passage. 


TABLE  OF  CASES 


(References  are  to  pages.) 


Aberdeen      Bank      v.       Chehalis 

County,    166   U.   S.    440.  308 

Achison   v.    Huddleson,    12    How. 

(U.   S.)    293.  17 

Adams  v.  Nashville,  95  U.  S.  19, 

299,  300 
Adams   v.    Pullman    Co.,    189   U. 

S.   429.  233 

Adams    v.    Shelbyville,    154    Ind. 

467.  460 

Adams  Express  Co.  v.  Kentucky, 

166    U.    S.    171.  277,    288,   505 

Adams  Express  Co.  v.  Ohio,   165 

U.    S.    194,    166    U.    S.    217. 

271,    505,   621 
Adams   Express    Co.   v.    Poe,    61 

Fed.    470.  275 

Adkins  v.  Richmond,   98  Va.   91.  145 
Ag-er  &  Lord  Tie  Co.  v.  Ky.,  202 

U.    S.    409.  197 

Albany    City    National    Bank    v. 
Maher,    9    Fed.    884.  376,  377 

Albertson  v.   Wallace,    81   N.   C. 
479.  137 

Albright  v.  First  National  Bank, 

86     Pac.     548.  28« 

Albuquerque    National    Bank    v. 

Perea,    5    N.    Mex.    664,    147    U. 

S.    87,  290,   714 

Alexander    v.    Gordon,    101    Fed. 

92,   41  C.  C.  A.  228  386 

Allen  V.   City  of  Davenport,   132 
Fed.    209.  44g 

Allen  V.   Drew,    44  Vt.   174.  416 

Allen  V.   Jay,    60  Me.   124.  406 

Allen  V.  National  State  Bank,  92 
Md.    509.  502 


Allen   V.    Pullman    Car   Co.,    189 

U.    S.    658.  709,   710 

Allen   V.    Pullman   Car   Co.,    191 

U.  S.   171.  188,  233 

Almy  V.  California,  24  How.   (U. 

S.)  169,  111 

Ambrosini  v.  U.   S.,  187  U.  S.   1, 

105    Fed.    239.  662 

American    Coal    Co.    V.    County 

Commissioners,     59     Md.     185, 

194.  294 

American      Fertilizing      Co.      V. 

Board  of  Agriculture,   43   Fed. 

609.  132 

American  Harrow  Co.  v.  Shaffer, 

68  Fed.  750.  151,  157 

American  Mfg.   Co.  V.  St.   Louis, 

238  Mo.   268.  854 

American    Refrigerator    Transit 

Co.  V.  Hall,   174  U.   S.   70.  241 

Am.  Smelt.  &  R.  Co.  v.  Colo.,  204 

U.   S.    103.  175 

Am.  Steel  &  W.  Co.  v.  Speed,  192 

U.  S.  500.  115,  147,  70( 

American   Sugar  Refining  Co.  v. 

Louisiana,    179    U.    S.    89.  H4 

American  Transit  Co.  v.  Thomas, 

63  Pac.  Rep.   410.  382 

Amery  v.  Keokuk,  72  Iowa  710.  450 
Ames  v.  People,  25  Colo.  508.  140 
Amy    v.     Supei-vi.sors,     11    Wall. 

136.  742 

Anderson    v.    42    Broadway,    239 

U.    S.    69.  641 

Anderson  v.  Morris  &  E.  R.  Co., 

216   Fed.   83.  181 

Anniston  v.   Southern  R.  R.  Co., 

112    Ala.    557.  228 

Antoni   V.    Greenhow.    107   U.    S. 
7C9.  55 


(1043) 


1044 


TABLE    OP    CASES 


(References  are  to  pages.) 


Appeal  of  Gallup,   76   Conn.   617.  795 
Armour  v.  Roberts,  151  Fed.  846.  750 

Armour  P.  Co.  v.  Lacy,  200  U.  S. 
226.  147 

Arizona  ex  rel.  Gaines  v.  Copper 
Q.    M.    Co.,    233    U.    S.    87. 

390,  391,   778 

Arkansas  B.  &  L.  Ass'n  v.  Mad- 
den,   175   U.   S.    269.  709 

Arkansas    v.    Kansas    &    Texas 
Coal  Co.,   183  U.   S.   185.  696 

Armstrong  v.  Athens  County,  16 
Pet.    281.  82 

Arnold  v.  Yanders,  56  Ohio  417.  160 

Arnson    v.     Murphy,     109    IT.     S. 
238.  762 

Arnson    v.    Murphy,    115    U.    S. 
579.  754 

Arrowsmith  v.   Harmonning',   118 
U.  S.   194.  336,   579 

Asher  v.    Texas,    128   U.    S.    129. 

143,  721 

Asher,  In  re,  23  Texas  App.  662.  145 

Ashley  v.  Ryan,   153  U.  S.   436.     192 

Assessment,  In  re,   4  So.  Dak.   6.  578 

Asylum  v.   New  Orleans,   105   U. 
S.    362.  52 

Atchison   T.    &   S.   F.   Ry.   Co.   v. 
Bd.    of   Com.,    225    Fed.    978.        710 

Atchison   T.    &    S.    F.    Ry.    Co.   v. 
Clark,    60  Kan.   826.  594 

Atchison   T.    &   S.   F.   Ry.    Co.   v. 
Matthews,   174  U.   S.   96.  567 

Atchison   T.   &   S.   F.   Ry.    Co.   v. 
O'Connor,    223    U.    S.    280. 

188,   189,   559 

A.  T.  &  S.  F.  R.  R.  Co.  V.  Sulli- 
van,   173   Fed.    456.        277,    621,   622 

Atlantic  &  Pac.  T.   Co.  v.  Phila- 
delphia,   190    U.    S.    160.  234 

Augusta,    City   of,    v.    McKibben, 
22  Ky.  Law  Rep.  122.  460 

Austin    V.    Alderman,     14    Allen, 
359,   also   7  Wall.  .694.  291 

Austin    V.    Tennessee,    179    TJ.    S. 
343.  116 

Ayers,  In  re,  123   U.   S.   443. 

726,   728.   741 


B 

Bacon  v.  Bd.  of  State  Tax  Com., 

85   N.   W.    Rep.    307.  528 

Bacon  v.   111.,   227   U.   S.   504.  125 

Bagnall  v.  State,  25  Wis.  112.  313 

Baker  v.  Grice,  169  U.  S.  284.  722 
Baker  v.  King  County,   17  Wash. 

622.  287 

Baker    v.    Lexington,    21    Ky.    L. 

R.    809.  83 

Bailey  v.  Maguire,  22  Wall.  215.  88 
Baldwin  v.   State,   89  Md.  587.  509 

Baldwin     Locomotive     Works     v. 

McCosh,    221    Fed.    59.  967 

Ball  V.  Halsell,  161  U.  S.  72.  763 
Ball    v.    Ridge    Copper    Co.,    118 

Mich.    7.  382 

Ballard  v.  Hunter,  204  U.  S.  241. 

365,   475 
Baltic   M.    Co.    v.    Mass.,    231    U. 

S.    68.  188,   557 

Baltimore    v.    Bait.    S.    &    D.    D. 

Co.,    97    Md.    97,    231    U.    S.    68. 

37,  837 
Baltimore  v.  Scharf,  54  Md.  499.  435 
Baltimore    &    Ohio    R.    R.    Co.    v. 

Baugh,    149    U.    S.    368.  737 

Bamberger  v.   Schoolfield,  160  U. 

S.    149.  180 

Bancroft       v.       Wycomico       Co. 

Comrs.,     135    Fed.     977.  87,   720 

Bank  v.  Mayor,  7  Wall.  16.  14 

Bank  v.  Supervisors,  7  Wall.  26.  14 
Bank    v.     Tennessee,     104    U.     S. 

293.  87 

Bank    of    Augusta    v.    Earle,    13 

Pet.    519.  16S 

Bank  of  Commerce  v.  New  York 

City,    2    Black.    620.  18 

Bank  of  Commerce  v.  Seattle, 
166    U.    S.    463.  303 

Bank  of  Commerce  v.  Tennessee, 
104   U.    S.    493.  87 

Bank  of  Commerce  v.  Tennessee, 
163   U.   S.    416.  89 

Bank  of  Kentucky  v.  Kentucky, 
207    U.    S.    258.  77 


TABLE   OF   CASES 


1045 


(References  are  to  pages.) 


Bank   of   Redemption   v.    Boston, 

125  U.  S.  60.  293,   306 

Bank  Tax  Case,   2  "Wall.   200.  18 

Bannon      v.      Burns,      39      Fed. 

892.  24,  3S2 

Barber  Asphalt  Co.  v.  Rich,   169 

Mo.    376.  456 

Barbier   v.    Connolly,    113   U.    S. 

27,  31.  550 

Barrett  v.  Holmes,  102  U.  S.  561.  385 
Barrett  v.  N.  Y.,  232  U.  S.  415.  229 
Barron    v.    Burnside,    121    U.    S. 

186.  17J 

Bartmeyer  v.  Iowa,  IS  Wall.  129.  515 
Bartlett  v.  Wilson,  59  Vt.  23.  35 J 
Bassett    v.    Utah    Cop.    Co.,    219 

Fed.   811.  S74 

Bauman  v.  Ross,   167  U.   S.  548. 

440,  443,  465 
Baxter  v.  Thomas,  4  Okla.  605.  145 
Beach  v.   Buck,   164  Ind.   37.  496 

Beck  V.   Obst,   12  Bush.   268.  445 

Beer  v.   Massachusetts,    97  U.   S. 

25.  515 

Beers  v.  Glynn,  211  U.  S.  477.  573 
Beeson   v.    Johns,    124    U.    S.    56. 

585,   716 
Bellingham     Bay,     etc.,     Co.     v. 

New  Whatcomb,  172  U.  S.  314. 

365,   440,   446 
Bell's   Gap.   R.   R.   Co.   v.   Penn- 
sylvania,   134    U.    S.    232. 

498,  499,  576 
Bennett  v.  Davis,  90  Me.  102.  379 
Berryman    v.    Whitman    Col.    222 

U.    S.    333.  69 

Betman    v.    Warwick,    108    Fed. 

46.  662 

Billings  V.  People,  189  111.  472.  570 
Birmingham     v.     Klein,     89     Ala. 

461.  435 

Blackstone   v.    Miller,    188   U.    S. 

189.  541 

Blair    v.     Cuming-    Co.,     Ill     111. 

363.  390 

Blake  v.  McClung,  172  U.  .S.   239, 

261.  338 


Bliss,  In  re,  63  N.  H.  135.     137,  140 

Bloomington  v.  Bourland,  137 
111.    534.  145 

Board  of  Agriculture  v.  Red 
"C"  Oil  Mfg.  Co.,  172  Fed. 
695.  132 

Board  of  Assessors  v.  Comptior 
Ntl.  D'Eschompte  d  Paris,  191 
U.   S.   388.  495 

Board  of  Assessors  v.  Liverpool 
I.   Co.,    122   La.    98.  493 

Board  of  Assessors  v.  N.  T.  L.  I. 
Co.,  216  U.  S.  516,  158  Fed. 
462.  492 

Board  of  Assessors  v. .  Orient  L 
Co.,    124    La.    72.  498 

Board  of  Assessors  v.  Pullman's 
Palace    Car    Co.,     8    C.    C.    A. 
.    490,   60  Fed.  37.  241 

Board  of  Commissioners  v.  King, 
14   C.   C.  A.   421,   67   Fed.   202.     735 

Board  of  Commissioners  v.  First 
Nat'l  Bank,  57  N.  E.  Rep. 
728.      (Ind.)  324 

Board  of  Commissioners  v. 
Lucas,  93  U.  S.  108.  80 

Board  of  Commissioners  of  Rice 
County  V.  Faribault,  23  Minn. 
280.  324 

Board  of  Directors  v.  Collins,  46 
Neb.   411.  428 

Board  of  Directors  of  Chicago 
Theol.  Sem.  v.  Raymond,  188 
U.   S.   662.  63 

Board  of  Education  v.  Illinois, 
203  U.  S.  553,  216  111.  23.  578 

Board  of  Liquidation  v.  Louis- 
iana,   179   U.    S.    622.  62 

Board  of  Liquidation  v.  Mc- 
Comb,    92    U.    S.    531.  726 

Board  of  Selectmen  v.  Spalding, 
8   La.  Ann.   87.  203 

Board  of  Supervisors  v.  Railroad 
Co.,   44   111.    229.  607 

Boardman  v.  County  Supervis- 
ors,   ,S5   N.    Y.    359,    363.  531 

Bogart  V.  The  State  (Ohio  Com. 
PI.),    20    Weekly    L.    Bui.    458.      234 


1046 


TABLE  OF   CASES 


(References  are  to  pages.) 


'530 
203 

407 

695 

51» 


Bonaparte  v.  Tax  Court,   104  U. 

S.    592. 
Booth  V.  Lloyd,   33  Fed.  598. 
Booth    V.    Woodbury,    32    Conn. 

118. 
Borgrmeier    v.    Idler,    159    U.    S. 

408. 
Borland    v.    Boston,    132    Mass. 

89. 

Boston  V.  Beal,  5  C.  C.  A.  26,  55 

Fed.    26.  287 

Bothwell  V.  Bingham  Co.,  237  U. 

S.   642.  22 

Botkin  V.    K.    C.    Ft.    S.,   etc.,  K. 

R.   Co.,   95  Kan.   261.  190,   237 

Bowman  v.   Railway  Co.,   125  U. 

S.    508.  109 

Boyd  V.  Selma,   16  L.  R.  A.   729.  531 
Boyer  v.    Boyer,    113   U.    S.    689. 

300,  302 
Bradley  v.    Bauder,    36   Ohio    St. 

28.  528 

Bradley  v.    People,    4  Wall.    459. 

295,  297 
Branch  v.  City  of  Charleston,  92 

U.    S.    677.  98 

Brennan  v.   Titusville,   153  U.   S. 

289.  144,   147 

Bressler    v.    Wayne    County,    32 

Neb.   834.  311 

Bridg-e  Proprietors  v.  Hoboken 
Co.,  1  Wall.   116.  S9 

Bridge  Co.,  Ex  parte,  62  Ark. 
461.  607 

Briggs  V.  Johnson  County,  4  Dil- 
lon, 148.  404 

Bristol  V.  Washington  County, 
177    U.    S.    133.  488 

Broadnax  v.  Mo.,  219  U.  S.  284, 
228    Mo.    25. 

Broadway  Baptist  Church  v.  Mc- 
Atee,   8  Bush.   508. 

Bronson  v.  Kinzie,  1  How.  (U, 
S.)    311. 

Bronson,  In  re,  150  N.  T.   1. 

Brooks   V.    State    (Texas),    58    S. 

W.    Rep.    1033. 
Brown  v.  Houston,  114  U.  S.  622, 

630.  113,  672 


590 


445 


75 

540 


286 


Brown  v.  Maryland,  12  Wheaton 
419.  100,    105,    106,    107,   112 

Brown,  Ex  parte,  48  Fed.  435.         153 

Brown  Foreman  Co.  v.  Ky.,   217 
U.    S.    563,   125   Ky.    402.  590 

Brushaver  v.   U.    P.    R.    R.    Co., 

240  U.  S.  1.  641,  714 

Buck  V.  Beach,  206  U.  S.  392.  496 
Buck  V.  Miller,  147  Ind.  586.  491 
Buffalo   V.    Reavey,   55   N.    T.    S. 

792.  1J8 

Buie   V.    Commissioners   of  Fay- 

etteville,   79   N.   C.   267.  291,   292 

BuUen  v.  Wise,  240  U.  S.  625.  539 
Burgess  v.    Seligman,    107   U.    S. 

20.  737 

Burlington'  Township    v.     Beas- 

ley,   94  U.  S.  310.  396 

Burroughs  v.  Smith,  95  Va.  694.  311 
Burr's    Estate,    In   re,    38    N.    T. 

Supp.    811.  539 

Buzard    v.    Houston,    119    U.    S. 
347.  708 

c 

Cahen  v.  Brewster,  203  U.  S.  543, 

115  La.  377.  538,   574 

Cairo  v.    Stewart,    197  U.    S.    60, 

49.  591 

Caldwell  v.  N.  C,  187  U.  S.  621.  162 
California  v.  C.  P.  R.  R.  Co.,  127 

U.    S.    1.  377 

California  v.    Pacific  R.    R.    Co., 

127    U.    S.    3.  34 

California    &    Or.    Land    Co.    v. 

Gowan,    48    Fed.    771.  612,   716 

Campbell  v.    State  of  California, 

200    U.    S.    87.  573 

Canal  &  Banking  Co.  v.  New  Or- 
leans, 99  U.  S.  97.  740 
Cannon  &  New  Orleans,  20  Wall. 

577.  212 

Cardwell     v.      American     Bridge 

Co.,    113   U.    S.    205.  205 

Carey   Mfg.    Co.    v.    Acme    F.    C. 

Co.,    187   U.    S.    427.  697 


TABLE  OP   CASES 


1047 


(References  are  to  pages.) 


Carey   v.    Houston   &   Texas   Ry. 

Co.,    150   U.    S.    171.  692 

Carpenter    v.     Pennsylvania,     17 

How.    (U.  S.)    456.  78 

Carrier  v.  Gordon,  21  Ohio  605.  123 
Carroll   v.    Alsup    (Tenn.),    64    S. 

W.   Rep.    193.  587 

Carroll   v.    Safford,    3    How.    (U. 

S.)    441.  22 

Carrollton    v.    Bazzette,    159    111. 
284.  154 

Carson     v.     Brockton     Sewerage 

Co.,   182   U.   S.   398.  440,   441 

Carstairs  v.    Cochran,    193   U.   S. 

10.  486 

Carter  v.  Texas,  177  U.  S.  442.  699 
Carthag-e  v.  First  National  Bank 

of  Carthage,    71   Mo.   508.  286 

Carthage  v.  Frederick,  122  N.  Y. 

268.  438 

Cass   Farm    Co.    v.    Detroit,    124 

Mich.   433.  460,   463 

Castillo  V.  McConnico,   168  U.  S. 

674.  348,   382 

Catlin  V.  Hull,  21  Vt.  152.  489 

Caverly  Gould  Co.  v.  Springfield, 

83   Vt.    396.  925 

Central  of  Ga.  v.  Wright,  207  U. 

S.   127.  358 

Central  Land  Co.  v.  Laidley,  159 

U.  S.  103.  336,   706,   738 

Central  Pacific  R.  R.  Co.  v.  Cali- 
fornia,  162  U.   S.   91.  34 
Central  P.  R.  R.  Co.  v.  Nevada, 

162  U.    S.   512.  25 

Central   R.    R.    Co.    v.    Assessors, 

48   N.   J.   L.    1.  602 

Central  R.   R.   &  Banking  Co.  v. 
Georgia,   92  U.   S.   665.  93 

^  Central  R.  R.   Co.  of  Georgia,  v. 

Wright,    166    Fed.    153.  510,   530 

Central    R.    R.    Co.    of   N.    J.    v. 

Jersey  C,  209  U.  S.   472.  484 

Central  Trust  Co.  v.  Wabash  Ry. 
Co.,   26   Fed.   11.  729 

Chadwick    v.    Kelley,    187    U.    S. 
540.  444 


Chamberlain,   Ex  parte,  55   Fed. 

704.  509 

Champaign      County      Bank     v. 

Smith,    7    Ohio   St.    42.  73 

Champion    v.    Ames,    188    U.    S. 

301.  672 

Chanslor    v.    Kelsey,    205    U.    S. 

466.  98,   538 

Chapman  v.   Zobelein,    237   U.   S. 

135.  388 

Chappell    V.    United    States,    160 

U.    S.    510.  24 

Charles  v.  Marion  City,   98  Fed. 

166.  459 

Charleston    v.    Peoples    National 

Bank.  5   S.  C.   103.  293 

Charleston     National     Bank     v. 
Melton,    171    Fed.    743. 

291,   296,   326,   715 
Charlotte    R.    R.    Co.    v.    Gibbes. 

142   U.   S.    386.  337,   562 

Cheaney    v.    Hooser,    9    B.    Mon. 

roe,    330,    p.    341.  393 

Cheatham   v.    United    States,    92 

U.    S.    85.  753 

Cheeseborough  v.   U.    S.,    192   U. 

S.  253.  754 

Cherokee  Tobacco  Case,  11  Wall. 

616.  680 

Chesapeake  &  Ohio  R.  R.  Co.  y. 

Miller,    114    U.    S.    176.  90 

Chicago  v.  Blair,  149  111.  310.  437 
Chicago  V.  O'Brien,  111  111.  532.  438 
Chicago  V.  Larned,  34  111.  203.  809 
Chicago  B.  &  K.  Ry.  Co.  v.  Guf- 

fey,    120   U.    S.    569.  89 

C.  B.  &  Q.  R.  R.  Co.  V.  Babcock. 

204    U.    S.    585.  245,   710,  716 

Chicago  B.  &  Q.  R.  R.  Co.  v. 
Board  of  Commissioners,  54 
Kan.   781.  6O8 

C.  B.  &  Q.  R.  R.  Co.  V.  Board  of 
Commi.ssioners   of   Norton    Co., 
67  Fed.   413,   14   C.   C.  A.   458.     715 
C.    B.    &   Q.   R.   R.   Co.   V.   Board 

of  Sup.,   183   Fed.   291.  427 

Chicago  B.  &  Q.  R.  R.  Co.  v.  Chi- 
cago,   166    U.    S.    226,    233. 

348.   349.   698 


1048 


TABLE   OF    CASES 


(References  are  to  pages.) 


Chicag-o  B.  &  Q.  R.  R.  Co.  v. 
Commissioners  Republic  City, 
67  Fed.  411  and  14  C.  C.  A. 
456.  608 

Chicago  Tlieolog'ical  Seminary  v. 
Raymond,    188    U.    S.    662.  63 

Chicago  &  N.  W.  R.  R.  Co.  v. 
Chicago,   164  U.   S.   454.  698 

Chicago  Union  Traction  Co.  v. 
State  Board  of  Equalization, 
112  Fed.  607,  207  U.  S.  20,  114 
Fed.   557.  613,    614,   810 

Chilvers  v.   People,    11  Mich.   43.      203 

Chinese  Exclusion  Case,  130  U. 
S.   581.  660 

Chisholm  v.  Georgia,  2  Dallas 
(U.  S.)    419.  724 

C.  C.  C.  &  St.  L,.  Ry.  Co.  v.  Por- 
ter,  210   y.   S.    177.  452 

Choat  V.  Trapp,  224  U.  S.  664.  31 

Choctaw,  etc.,  R.  R.  Co.  v.  Har- 
rison,   235  U.   S.    292.  27 

Christensen,  In  re,  85  Cal.   208.     159 

Christy  Street  Com.  Co.  v.  U.  S., 
136    Fed.    236.        754,   759,   760,   761 

Church  V.  Rowell,  49  Me.  367.         519 

Cincinnati,  C.  C.  &  St.  L.  R.  Co. 
V.   Backus,   154  U.   S.   439,    445. 

231,   263,   275 

Citizens'  Bank  v.  Parker,  192  U. 
S.   73.  67 

Citizens'  National  Bank  v.  Ken- 
tucky,   217    U.    S.    443.  314 

Citizens*  National  Bank  v.  Lof- 
tin,    85   Ind.   341.  323 

Citizens'  Savings  Bank  v. 
Owensboro,   173  U.   S.   636.  61 

Citizens'  Street  Ry.  Co.  v.  Com- 
mon  Council,    125    Mich.    673. 

533,   841 

Citizens'  Tel.  Co.  V.  Fuller,  229 
U.   S.   322.  580 

City  Counselor  of  Augusta  v. 
Timmerman,    227    Fed.    171.         718 

City  National  Bank  v.  Paducah, 
1   Nat.   Bank   Cases,    30.  323 

City  and  County  of  Den.  v.  Don. 
doner,   33   Colo.   104.  451 


City   of   Cleveland  v.   U.    S.,    166 

Fed.    677.  78,  624 

City  of   Covington  v.    Southgate, 

15  B.    Monroe    491.  393 
City  of  Dee  Summit  v.   Jewel  T. 

Co.,    217   Fed.    968.  695 

City  of  New  York  v.   C.  B.   &  Q. 

Ry.    Co.,    56   Neb.   572.  228 

City  of  Springfield  v.  First  Nat'l 

Bank,    87   Mo.    441.  290 

Clark  V.  McGhee,  31  C.  C.  A.  321, 

87    Fed.    789.  729 

Clark  V.  Mobile,   67  Ala.   217.  170 

Clark    V.     Titusville,     184    U.     S. 

329.  574 

Claybrook  v.  City  of  Owensboro, 

16  Fed.   297.  591 

Cleanage  v.  Norwood,  C.  C,  137 
Fed.    962.  441 

Clearwater  Timber  Co.   v.    Scho- 

schone    Co.,    155    Fed.    612. 

26,   377,   720 
Clements  National   Bank  v.    Vt., 

84  Vt.  167,  232  U.  S.  120.      312,  924 

Cleveland  Trust  Co.  v.  Lander, 
62  Ohio  St.   266.  310 

Clyde  S.  S.  Co.  v.  City  Council 
of  Charleston,   76   Fed.   46.  201 

Coates  V.  Campbell,  37  Minn. 
498.  406 

Cocheco  Co.  v.  Stratford,  51  N. 
H.    455.  607 

Cochran  v.  Carstairs,  95  Md.  488.  486 
Coe  v.   Errol,   116  U.   S.   517. 

123,   240,   485,   537,  655 
Coe  v.   Simmons,   3  Pa.  Dist.   Ct. 

.  792.  137 

Coit  V.   Sutton,   102  Mich.   324.  165 

Cole  V.  La  Grange,  113  U.  S.  1.  396 
Cole   V.    Randolph,    31    La.    Ann. 

535.  154  \ 

Cole  Co.  V.  Mitler,  236  111.  194.     809 

Collector  v.  Day,   11  Wall.   113.     661 

Colo.  V.  Am.  S.  &  R.  Co.,  34 
Colo.    240.  175 

Colorado  Central  Mining  Co.  v. 
Turck,   150  U.   S.   138,   143.  696 


TABLE   OF    CASES 


1049 


(References  are  to  pages.) 


Columbus     Southern    R.     Co.     v. 

Wright,    151   U.   S.    470.  561 

Commercial    Bank   v.    Chambers, 

182  U.  S.  556.  294,  303 

Commercial    Pub.    Co.    v.    Beck- 

with,   188  U.   S.   567.  700 

Commonwealth  v.  American  Bell 

Tel.   Co.,    129   Pa.   217.  182 

Commonwealth  v.  Bank,  2  Pear- 
son, 386.  298 
Commonwealth    v.     Brush    Elec. 

Light   Co.,    145    Pa.    147.  89 

Commonwealth   v.    Central   D.    & 

P.   Co.,   145   Pa.    121.  3S 

Commonwealth  v.  Clark,  195  Pa- 
st. 634.  587 
Commonwealth     v.     Crane,     158 

Mass.   218.  667 

Commonwealth  v.  Delaware  Div. 

Canal   Co.,   123   Pa.   St.   594.  498 

Commonwealth  v.  Edg'erton  Coal 

Co.,   164   Pa.  St.   284.  587 

Commonwealth    v.    Electric    Co., 

151  Pa.   265.  38 

Commonwealth    v.    Harmel,    166 

Pa.   89.  140,   158 

Commonwealth    v.    Hartman,    7 

Pa.    118.  404 

Commonwealth   v.   Myer,    92   Va. 
809.  137 

Commonwealth    v.    Newhall,    164 
Mass.    338.  158 

Commonwealth  v.  Ober,  12  Cush. 

(Mass.)     493.  152 

Commonwealth   v.    Petty,    96   Ky. 

452.  36 

Commonwealth     v.      Schollenber- 
ger,    156   Pa.   201.  118 

Commonwealth  v.   Smith,    92  Ky. 

38.  225 

Commonwealth    v.     Snyder,     182 

Pa.  St.  630.  138 

Commonwealth    v.    Standard    Oil 
Co..  101  Pa.  119.  182,   184,   508 

Com.   of  Pa.  V.   Del.  Div.  C.   Co., 
123  Pa.  594.  580 

Commonwealth  of  Pa.  v.   Fid.   & 
Dep.   Co.   of  Md.,   240   Pa.   67.       37 


Conde    v.    City    of    Schenectady, 

164   N.    Y.    258.  460 

Connecticut  Mutual  Life  Ins.  Co. 

V.   Eaton,    218   Fed.    206.  967 

Connolly    v.    Union    Sewer    Pipe 

Co.,    184   U.   S.,   p.    558. 

344,   549,   565 
Conway  v.   Taylor,   1  Black.    (U. 

S.)    603.  205 

Cook  V.  Marshall  Co.,   196  U.   S. 

26L  119,   590 

Cook  V.    Pennsylvania,    97   U.    S. 

566,    574.  101,   121 

Cooley  V.  Board  of  Wardens,   12 

How.    (U.  S.)    299.  109,   216 

Cooper     Manufacturing     Co.     v. 

Ferguson,    113   U.   S.    727.  180 

Co-operative   Building   and   Loan 

Ass'n   v.    State,    156    Ind.    463.     370 
Cope,    In  re.  Estate   of,    191    Pa. 

1.  573 

Copper  Queen  Con.  Mining  Co. 
V.   Arizona,   206  U.   S.   474.  619 

Corbus  V.  Alaska  Treadwell  G. 
M.   Co.,    187   U.   S.   445.  723 

Corry  v.  Campbell,  154  U.  S.  629.  445 

Corson    v.    Maryland,    120    U.    S. 

502.  143 

Cosier    v.     McMullan,     22    Mont. 

484.  31 

Cottel  V.   Union   Pac.  R.   R.   Co., 

201  Fed.   39.  720,   722 

Cotting    V.    Kansas    City    Stock 

Yards,    183    U.    S.    79.  346 

Coulter  V.  L.  &  N.  R.  R.  Co.,  196 

U.    S.    599.  556,   616,   620 

Coulter   V.    Stafford.    6    C.    C.    A. 

18,    56    Fed.    564.  80,   698 

Coulter   V.    Ware,    127   Fed.    897. 

277,   724 

Coulter  V.  Wells  Fargo  Co.,  127 
Fed.    912.  694 

County  V.   Miller,    7   Kan.    479.       396 

County  Commissioner.s  of  Fred- 
ei'ick  (^o.  V.  Fai'iners'  &  Me- 
chanics'   Bank.    48    Md.    117.        323 

County  of  Hennepin  v.  Rogers, 
124    Minn.    536.  514,   591,  781 


1050 


TABLE  OF   CASES 


(References  are  to  pages.) 


County  of  Lancaster  v.  Lancas- 
ter County  National  Bank,  2 
National    Bank   Cases    415.  324 

Covington  v.  First  National 
Bank,   191  U.   S.   100.  313 

Covington  v.  Kentucky,  173  U.  S. 
231.  79,   82,  217 

Covington  v.  National  Bank,  198 
U.    S.    100.  66 

Covington  Bridge  Co.  v.  Ken- 
tucky,  154  U.   S.   204,   211,   205,   206 

Covington  City  National  Bank  v. 
Covington,    21   Fed.    484.  287 

Cowley  V.  Spokane,  99  Fed.  840. 

459 

Cox  V.  Texas,  202  U.  S.  440,  95 
S.  W.   734.  591 

Coy  V.  Title  G.  T.  Co.,  220  Fed. 
90.  509 

Crain  v.  Gen.  Oil  Co.,  117  Tenn. 
82.  125 

Crane  Co.  v.  Looney,  218  Fed. 
260.  169 

County  Commissioners  v.  Ban- 
croft,   203  U.   S.   112.  87,   720 

Crandall  v.  Nevada,   6  Wall.   35. 

135,   235 

Cribbs  v.   Benedict,   64  Ark.   555.  585 

Cross  V.  Harrison,  16  How.  (U. 
S.)   164.  651 

Cross  Lake  Shooting  &  Fishing 
Club  V.   La.,   224  U.   S.   632.  66 

Crown  Cork  Seal  Co.  v.  Mary- 
land,   87    Md.    687.  19 

Croy  V.  Obion  County,  104  Tenn. 
425.  152 

Crutcher  v.  Kentucky,  141  U.  S. 
47,   57.  225,    672 

Cullman  v.   Arndt,   125   Ala.   581.  159 

Cumberland  &  Pennsylvania  R. 
R.  Co.  V.  Maryland,  92  Md. 
668.  -253 

Cumming  v.  Board  of  Education, 
175   U.    S.    538.  593 

Cummings  v.  National  Bank,  101 
U.    S.    153.  316,   319,    327,   604 

Cunningham  v.  Macon  &  Bruns- 
wick R.   R.   Co.,    109  U.   S.    446. 

724,   725 


Curry  v.  Spencer,  61  N.  H.  624.  570 
Curtis  V.  Whipple,  24  Wise.  350.  404 
Curtis   V.   Whitney,    13   Wall.    68.      80 

D 

Daggert  v.  Colgan,  92  Cal.  53.  407 
Dallinger  v.  Rapello,   14  Fed.   32, 

15  Fed.   434.  524 

Daniels  v.  State,  150  Ind.  348.  589 
Darnell  v.  Indiana,  226  U.  S.  390. 

167,   557 
Darnell    &    Son   v.    Memphis,    208 

U.   S.    113.  116,   141 

Dartmouth       College       Case,       4 

Wheaton,   518,   581.  352 

Davenport    Bank    v.     Davenport 

Board  of  Equalization,    125   U. 

S.    S3.  306 

Davidson  v.  New  Orleans,   96  U. 

S.    97.      334,    344,    349,    352,    354, 

355,    425,     426,    440,    536,    583, 

704,   706 
Davidson    v.    Wright,    16    D.    C. 

App.    371.  459 

Davis   V.    Elmira    Savings   Bank, 

161   U.   S.   276.  283 

Davis  V.  Va.,   263  U.  S.  697.  162 

Davis    V.    Weidbold,    139    U.     S. 

507.  26 

Deal   V.    Mississippi   County,    107 

Mo.   464.  406 

DeBarry  V.  Dunne,  Collector,    162, 

Fed.    961.  754 

Del.,  etc.,  R.  R.  Co.  v.  Pa.  198  U. 

S.    341,   206    Pa.   645.  526,  535 

Delaware  Railroad  Tax,  IS  Wall. 

206.  244,   257 

De  Lima  v.  Bidwell,  182  U.  S.  1.  651 
Denver  v.  Knowles,  17  Colo.  204,  435 
Desmare  v.   United  States,   93  U. 

S.    605.  521 

Detroit  v.  Parker,  181  U.  S.  399.  463 
Detroit,   G.   H.,   etc.,  R.   R.   Co.  v. 

Fuller,    205    Fed.    86.      96,   525,   711 
Detroit,  etc.,  R.  R.  Co.  v.  Powers, 

138     Fed.     264.  70 

Detroit    Union    Ry.    v.    Michigan, 

242    U.    S.    238.  66,     84 


TABLE   OF    CASES 


1051 


(References  are  to  pages.) 


De  Vignier  v.  New  Orleans,  16 
Fed.  11.  74 

Dewey  v.  Des  Moines,  173  U.  S. 
193.  424 

Diamond  Glue  Co.  v.  IT.  S.  Glue 
Co.,    1S7    U.    S.    611.  174 

Diamond  Match  Co.  v.  Ontona- 
gon,  ISS  U.   S.   82.  124 

Dize  V.  Lloyd,  36  Fed.   651.  203 

Dobbins  v.  Erie  County,  16  Pet. 
435.  661 

Dodge  V.  Brady,   240  U.  S.  122.     749 

Dodg-e  V.  Mission  Township,  46 
C.    C.   A.    661,    107   Fed.   827.  404 

Dodge  V.   Osborne,   43   App.   Dec.  749 

Dodge  V.  Woolsey,  18  How.  (U. 
S.)    331.  49,   738 

Dooley  v.  United  States,  182  U. 
S.     222.  650,   652,   658,   760 

Dooley  v.  United  States,  183  U. 
S.    151,    174.  7 

Douglas  County  v.  Common- 
wealth,   97   Va.    397.  370 

Dower  v.  Richards,  151  U.  S. 
658.  702 

Downes  v.  Bidwell,  182  U.  S.  214. 

7,   646,   694 

Downham  v.  Alexandria,  10 
Wall.   173.  141 

Dows   V.    Chicago,    11    Wall.    109. 

709,   744 

Doyle  V.  Insurance  Co.,  94  U.  S. 
535.  174 

Draper  v.  Hatfield,  124  Mass.  53.  521 

Dred  .Scott  Case,  20  How.  (U. 
S.)    1.  330 

Ducat  V.   Chicago,   10  Wall.    410.  167 

Duluth,  etc.,  R.  R.  Co.  v.  Minne- 
sota,   179   U.   S.    302.  68 

Duncan  v.  Missouri,  152  U.  S. 
382.  333 

Dundee  Co.  v.  Charlton,  32  Fed. 
192.  716 

Dundee  Mortgage  &  Trust  Co.  v. 
Parrish,    24    Fed.    197. 

583,   612,   618 

Dundee  Mortgage  Co.  v.  .School 
J>iHtrict  No.  1,  18  Fed.  389,  21 
Fed.    151  502 


Dutton  V.  Citizens'  National 
Bank,   53  Kan.  440.  293 

Dwight  V.  Mayor,  12  Allen 
(Mass.)    316.  528 

Dyar  v.  Farmington  Village,  70 
Me.    515.  422 

Dyer  v.   Osborne,   11   R.   L   321.     528 

E 

East    St.    Louis   v.   United    States 

ex  rel.  Zebley,  110  U.  S.  321.       734 
Eberly,  In  re,  98  Fed.    295.  589 

Edmundson  v.  Walker   (Tenn.) 

195   S.   W.    168.  915 

Egan  V.  Hart,   165  U.  S.   188.         702 
Eidman    v.    Martinez,    184    U.    S. 

578.  522,   542,   675 

Elder  V.  Wood,  208  U.  S.   226,  37 

Colo.    174.  26,   701 

Elliott    V.    Freeman,     220    U.    S. 

178.  640 

Elliott    National    Bank    v.    Gill, 

218   Fed.    933.  969 

Ellis  V.   Frazier    (Or.),   53  L.   R. 

A.    454.  553 

Emert  v.  Missouri,  156  U.  S.  296. 

154,   158 
Empire  Milling  &  Mining  Co.   v. 

Tombstone,    100    Fed.    910.  180 

Engelke   v.    Schlenker,    75    Texas 

559.  316 

English  V.  Richardson,   224  U.   S. 

680.  32 

Erie   v.    Russell,    148    Pa.    384.        438 
Erie  County  v.   City  of  Erie,   113 

Pa.  St.  360.  543 

Erie   R.    R.    Co.   v.    Pennsylvania. 

21    Wall.    492.  62,   219,   253 

Erie   R.    R.    Co.    v.    Pennsylvania, 

153    U.    S.    628.  498 

Erie  R.  R.   Co.   v.    Pennsylvania, 

158  U.  S.   437.  219 

Erie  R.   R.   Co.   v.   Purdy,   185   U. 

S.    148.  700 

Erskine  v.  Van  Arsdale,  15  Wall. 

75.  755 

Escanaba    Company    v.    Chicago, 

107    U.    S.    678.  4,    201.   215 


1052 


TABLE   OF    CASES 


(References  are  to  pages.) 


Essex     Public     Road     Board     v. 

Skinkle,    140    U.   S.    334.  80 

Evans   v.    Fall   River   Co.,    9    So. 

Dak.    130.  358,  378 

Evansville  Bank  v.   Britton,   105 

U.   S.    322.  308 

Ewing  v.  St.  Louis,  5  Wall.  418.  717 
Exchange    Bank    Tax    Cases,    21 

Fed.  99.  378 

Exchang-e  National  Bank  v.  Mil- 
ler, 19  Fed.  372.  297,  318 
Ex  parte  White,  228  Fed.  88.  523 
Express    Co.    v.    Allen,    38    Fed. 

712.  229 

Ewing  V.  Leavenworth,  226  U.  S. 

464.  227 

Eyre  v.  Jacob,  14  Grattan  (Va.), 

422.  570 


F 


Fagan  v.    Ohio   Humane   Society, 
6    Nisi    Prius    357.  359 

Fair,  Estate  of,  128  Cal.   607.         534 

Fairbank    v.    United    States,    181 
U.    S.    283.  128,   656,  674 

Fallbrook    Irrigation    District    v. 
Bradley,    164    U.    S.    112. 

349,    397,    427,    449,    456,    707 

Fargo  V.  Hirt,  193  U.  S.   491.         525 

Fargo    V.    Michigan,     121     U    S. 
230,    244.  247 

F.    &   M.    Sav.    Bk.   v.   Minn.    232 
U.    S.    516.  16 

Farrar  v.  St.  Louis,  80  Mo.  379.     438 

Farrell    v.    U.    S.,    167    Fed.    639. 

754,   761 

Farrell    v.    West    Chicago    Park 
Commissioners,    181    U.    S.    404. 

440,    446,    460,    463 

Farrington    v.    Tennessee,    95    U. 
S.    689.  94 

Fay  V.  Crosier,  217  U.  S.  455,  156 
Fed.    496.  379 

Fay  V.  Springfield,  94  Fed.   409.     459 

Fechheimer     v .    City    of    Louis- 
ville,   84    Ky.    306.  138 

Ferry  v.  Campbell,  110  Iowa  290.  359 


Ficklen  v.  Shelby  County  Taxing 
District,    145    U.    S.    1. 

144,    145,   147 

F.  &  D.  Co.  of  Md.  V.  Common- 
wealth of  Pa.,   240  U.   S.   319.        37 

Field  V.  Barber  A.  P.  Co.,  194 
U.    S.    618.  444 

Field  V.  Clark,  143  U.  S.  649, 
64L  632,   659 

Findlay  v.  McAllister,  113  U.  S. 
104.  734 

Fire  Department  of  New  York  v. 
Staunton,    159    N.    Y.    225.  588 

First  Congregational  Church  v. 
Board  of  Review,   254   111.   220.   812 

First  National  Bank  v.  Al- 
bright,   208   U.    S.    547.  286 

First  National  Bank  v.  Board  of 
Equalization,    92   Ark.    335.  780 

First  National  Bank  v.  Chapman, 
173  U.  S.  205.  303 

First  National  Bank  v.  Chehalis 
County,    6  Wash.   64.  290,   311 

First  National  Bank  v.  Concord, 
59   N.   H.   75.  298 

First  National  Bank  v.  Coving- 
ton,   129    Fed.    792.  66 

First  National  Bank  v.  Fancher, 
48  N.   Y.   524.  290 

First  National  Bank  v.  Lindsay, 
45   Fed.   Rep.    619.  318 

First  National  Bank  v.  Province, 
20    Montana    374.  287 

First  National  Bank  v.  Rich- 
mond, 42  Fed.  Rep.  877,  39 
Fed.    309.  290,   291 

First  National  Bank  v.  St.  Jo- 
seph,   46   Mich.    326.  842 

First  National  Bank  v.  San  Fran- 
cisco,   129    Cal.    96.  287 

First  National  Bank  v.  Stone,  88 
Fed.   409.  289 

First  National  Bank  v.  Turner, 
154   Ind.    456.  311 

First  National  Bank  of  Chicago, 
V.  Farwell,  7  Fed.  518.  318 

First  National  Bank  of  Hannibal, 
V.  Meredith,   44  Mo.   500.  290 


TABLE   OF    CASES 


1053 


(References  are  to  pages.) 


First   National    Bank    of    Omaha 

V.    Douglas    County,     3    Dillon 

330.  290 

First  National  Bank  of  Toledo  v. 

Lucas    County,    25    Fed.    749. 

318,   319 
First     National     Bank     of     Wil- 
mington   V.    Herbert,    44    Fed. 

158.  298 

First  National   Bank  of  Toungrs- 

town  V.  Hughes,   6  Fed.   737.        326 
Fleming  v.  Page,  9  How.   (U.  S.) 

603.  651 

Fletcher  v.  Peck,  6  Cranch  87.  46 
Flint    V.    Board    of    Aldermen    of 

Boston,    99   Mass.    141.  292 

Flint   V.    Stone    Tracey    Co.,    220 

U.    S.    107.  640 

Florida    Central    R    R.     Co.     v. 

Reynolds,    183  U.   S.    471.  560 

Fong  Tue  Ting  v.  United  States, 

149    U.    S.    721.  660 

Foote  V.  Stanley,  232  U.  S.  494.  132 
Forbes  v.  Gracey,  94  U.  S.  762.  27 
Ford  V.   Delta  &  Pine  Land  Co., 

164   U.    S.    662.  87. 

Foreign     Held     Bond     Case,     15 

Wall.    300.        72,    74,    482,    501,   903 
Forshaw    v.    Layman,    182    Fed. 

193.  69 

Forsythe   v.    Hammond,    68    Fed. 

774.  422 

Fort   Leavenworth   R.   R.    Co.   v. 

Lowe,    114   U.    S.    525.  24 

Fort    Scott    V.    Pelton,    39    Kan. 
764.  145 

Foster    v.    Com.    of    Pilotage,    22 

How.    (U.   S.)    245.  217 

Foster  v.  Nelson,  2  Pet.  314.  660 
Foster   v.    Prior,    189    U.    S.    325, 

66   Pac.   348.  678 

Fourteen  Diamond  Rings,  183  U. 

S.  177.  e54 

Francis  v.  U.  S.,  188  U.  S.  375.  672 
Fraser    v.     McConway,     82     Fed. 

257.  515,    584 

FraysfT    v.     Russell,     3     Hughes 
227.  749 


Frederickson  v.  Louisiana,  23 
How.    (U.  S.)    445.  41 

Freeland  v.  Hastings,  10  Allen 
(Mass.)    570.  407,   745 

French  v.  Barber  Asphalt  Pav- 
ing Co.,  158  Mo.  354,  181  U. 
S.    324.         419,    440,    460,    461,   462 

French  v.  State,  52  L.  R.  A. 
160   (Texas)  157,  158 

Frere  v.  Von  Schoeler,  47  La. 
Ann.   324.     .  201 

■  Fuller's  Estate,  In  re,  70  N.  T. 
Supp.    40.  362 

Furman   v.    Nichol,    8    Wall.    44.     53 


Q 

Gallup    v.     Schmidt,     183     U.     S. 

300.  372 

Galv.,  H.,  etc.,  Ry.  Co.  v.  Texas, 

210   U.    S.    217.  254 

Garland  v.  Gaines,  73  Conn.  662.   663 

Garrison    v.    City   of   New    York, 
21    Wall.    196.  82 

Gast  R.   Co.  V.  Schneider  G.  Co., 
240   U.   S.   54.  477 

Gatch    V.    Des    Moines,    63    Iowa 

718.  357 

Geekie   v.    Kirby    Carpenter    Co., 

106   U.    S. -379.  736 

Gellsthorpe  v.   Femell,    20   Mont. 

299.  570 

Gelpke  v.  Dubuque,  1  Wall.  17.  738 
Gon.    Oil   Co.  V.   Grain,    209  U.   S. 

211.  125 

Geneseo   v.    Geneseo    County,    55 

Kan.    358.  406 

Georgia  v.    Atkins,    1    Abbott   U. 

S.    22.  G62 

Georgia   Pkg.    Co.    v.    Macon,    60 

Fed.   774.  140 

Ga.  R.  R.  Co.  V.  Wright,  132  Fed. 

912.  68,     89 

Germania  Tru.st  Co.  v.  San  Fran- 
cisco, 128  Cal.  589.  534 
Gibbons  v.  District  of  Columbia, 

116   U.   S.    401.  C83 


1054 


TABLE    OP    CASES 


(References  are  to  pages.) 


Gibbons  v.  Ogden,  9  Wheaton  1. 

103,   212,   627 
Gibson       County      v.       Pullman 

Southern  Car  Co.,  42  Fed.  572. 

232 
Gillette  v.  City  of  Denver,  21  Fed. 

822.  441 

Gilman  v.    Sheboygant,    2   Black. 

(U.  S.)   510.  586 

Giozza  V.  Tiernan,  148  U.  S.  657.  589 
Givan  v.  Wright,  117  U.  S.  648.  46 
Glasgow  V.  Rowse,  43  Mo.  479.  553 
Gleason    v.    Waukesha    Co.,     103 

Wise.    225.  460 

Glidden  v.  Harrington,  1S9  U.  S. 

255.  388 

Gloucester  Ferry  Co.  v.  Pennsyl- 
vania, 114  U.  S.  196.  208 
Glue   Co.   V.    Commonwealth,   195 

Mass.    528.  837 

Glynn  v.  Beers,  186  N.  T.  449.       573 

Goddard,    In    re,      16    Pickering 
(Mass.)    504.  438 

Goldsbury  v.  Warwick,  112  Mass. 

384.  293 

Goodrich    v.    Detroit,    1S4    TJ.    S. 

432.  440,    453,    455,   457 

Goodsutter  v.  Lane,  139  Fed.  593.  510 
Gordon  v.  Appeals  Tax  Court,   3 

How.   (U.  S.)  133.  48,  83,  96 

Graham    v.    Folsom,    200    U.    S. 

248,    131    Fed.    496.  387,   734 

Grand     Canyon     R.     R.     Co.     v. 

Treat,    12    Ariz.    117.  63 

Grand    Lodge    v.    New    Orleans, 

166  U.  S.  143.  52,      84 

Gray  v.  Darlington,   15  Wall  63, 

1872.  954 

G.   N.^  R.    R.    Co.    v.    Occonogan 

Co.,  223  Fed.   19.  277,   740 

G.  W.  R.  R.  Co.  V.  Minn.,  216  U. 

S.    206.  94 

Greene  v.  L.   &  N.  R.   Co.,  U.   S. 

— 242    U.    S. —  (1917.)  704,   718 

Grether  v.    Wright,    23    C.    C.    A. 

498.    75    Fed.    742.  14,  719 

Gridley    v.    Bloomington,    88    111. 

554.  438 


Grigsby  C.    Co.   v.   Freeman,    lOS 

La.    435.  537 

Gromer  v.  Stand.  D.  Co.,   224  U. 

S.    362.  217 

Grundling  v.   Chicago,   177  U.   S. 

183.  516 

Gulbenkain    v.    U.    S.,    175    Fed. 

860.  751 

Gulf,  Colo.  &  Santa  Fe  R.  R.  Co. 

V.  Ellis,  165  U.  S.  154.  337,   566 

Gulf  &  Ship  Island  R.  R.   Co.   v. 

Hewes,    183   U.   S.   66.  64 

Grundling  v.   Chicago,   177  U.   S. 

183.  588 

Gunter  v.  At.  Coast  L.,  200  U.  S. 

273.  66,    716,   724 

Guy   V.     Baltimore,     100     U.    S. 

434.  .  215 


H 


Hadley  v.    Dague,    130   Cal.    207. 

460 
Haffin  V.   Mason,    15  Wall.    671.     742 

Hagar  v.  Reclamation  District, 
111  U.  S.  701. 

355,  362,  426,  440,  448,  449 

Hager  v.  Am.  Nat.  Bk.,  159  Fed. 
396.  295,   296 

Hager  v.  Swayne,  149  U.  S.  242.   763 

Hagner  v.  Hall,  10  App.  Div. 
(N.   Y.)    581.  380 

Hagood  V.  Southern,  117  U.  S. 
52.  725,  726 

Haight  V.  Railroad   Co.,    6  Wall. 

17.  662 

Hamilton  v.  Beggs,  171  Fed.  157.  509 

Hamilton  Company  v.  Massachu- 
setts,  6   Wall.    632.  19 

Hammett  v.  Philadelphia,  65  Pa. 
146.  438 

Hanford  v.  Davies,  163  U.  S. 
273.  695 

Hannewinkle  v.  Georgetown,  15 
Wall.    548.  709 

Hans  V.  Louisiana,  134  U.  S. 
1.  724 


TABLE   OF    CASES 


1055 


(References  are  to  pages.) 


Hardin    v.    Honeback.    137    U.    S. 

43.  742 

Harman  v.    City  of   Chicago,   147 

U.    S.    396.  201,   202 

Harrington  v.  Glidden,  179  Mass. 

486.  388 

Harrisburg    v.     McPherran,     200 

Pa.    343.  460 

Hartman    v.    Greenhow,    102    U. 

S.   672.  55 

Hawes    v.     Oakland,     104    U.     S. 

450.  713,    739 

Hawkens  v.  Magum,  78  Miss.  97.  586 
Hayes    v.    Commonwealth,    55    S. 

W.    425.  588 

Hayes  v.  Pacific  Mail  Steamship 

Co.,   17  How.    (U.  S.)    596.  195 

Hazzard    v.    O'Bannon,     36    Fed. 

220.  716 

Head    Money    Cases,    112    U.    S. 

595.  131,    599,   648 

Heine    v.    Levee    Commissioners, 

19  Wall.    655.  733 

Heman    v.    Ring,     85    Mo.     App. 

231.  711 

Heman  v.    Schulte,   1G6  Mo.    409. 

473,   711 
Henderson    v.    Mayor,    92    U.    S. 

269.  130 

Henderson  Bridge  Co.  v.  Hender- 
son,  173   U.   S.   592.  209 

Henderson  v.  Kentucky,  166  U. 
S.    150.  209,   288 

Hendrick  v.   Md.,   235   U.    S.   612.  517 

Hennick,    In   re,    5    Mackey,    589.  144 

Hepburn  v.  School  Directors,  23 
Wall.    480.  294,    300,   301 

Herold  v.  Kahn,  159  Fed.  608 ; 
147  Fed.  575.  644,   751 

Herold  v.  Mutual  Benefit  Life 
Ins.    Co.,    201   Fed.    918.  967 

Herrick  v.  Sargeant,  140  la.  -590.     22 

Hersey  v.  Supervisors,  16  Wis. 
185.  601 

Hershire  v.  First  National  Bank, 
35    Iowa,    272.  290 

Hertz  V.  Woodman,  218  U.  S. 
204.  644 


Heskin  v.  Soliah,  17  N.  D.  393.  424 
Heth    V.     Radford,     96    Va.     272. 

358,  448 
Hibernia   S.    &   L.    S.   v.    S.    Fran. 

200  U.  S.  310.  16 

Hill  V.  Railroad  Co.,  41  Fed.  610.  87 
Hills  V.   Exchange   Bank,    105    U. 

S.  319.                                             307,  711 

Hinson  v.   Lott,    8   Wall.    148.  159 

Hitchcock  V.   Morris,    21    App.   D. 
C.     565.  31 

Hodge  V.   Muscatine   Co.,    196   U. 

S.    276.  360 

Hoelfling     v.     San     Antonio,     85 

Texas,    228.  917 

Hoge  V.    Railroad    Co.,    99    U.    S. 

348.  86 

Holden  v.  Hardy,  169  U.  S.  3S9.  344 
Holmes    v.    Oregon    &    California 

Ry.    Co.,    5    Fed.   Rep.    523.  520 

Home  of  the  Friendless  v.  Rowse, 

8   Wall.   430.  50 

Home  Insurance  Co.  v.  Augusta, 

93    U.    S.    116.  83 

Home     Insurance     Co.     v.     New 

York,    92  N.   Y.   328  ;   119  U.   S. 

129.  19,   176 

Home     Insurance     Co.     v.     New 

York,  134  U.  S.  594.  20,  558 

Home  Insurance  v.   Swigert,   104 

111.    653.  170 

Home  Insurance  v.  Tennessee, 
161    U.    S.    198.  88 

Home  S.  Bk.  v.  Des  Moines,  205 
U.    S.    503.  18 

Hondayer's  Estate,  150  N.  T.  37.  540 
Honolulu    R.     T.     &    L,.     Co.     v. 
Wilder,    211   U.    S.    137.  37 

Hooper  v.    California,    155    U.    S. 

648.  150 

Hopkins  v.  Baker  Bros.  &  Co., 
78  Md.  363.  477,  513 

Plorn   v.    Green,    52   Miss.    452.  14 

Horn  Silver  Mining  Co.  v.  Now 
York.    143  U.   S.   30.'"..  171 

Hornor  v.  United  States,  113  U. 
S.   570.  692 


1056 


TABLE    OP    CASES 


(References  are  to  pages.) 


Houck    V.    L.    R.    D.    D.,    239    U. 

S.     254;     248    Mo.    373.  431 

Hough,   Ex  parte,  69   Fed.   330.        145 
Houston,  In  re,  47  Fed.   539.  157 

Huidekoper  v.    Hadley,    171    Fed. 

118;    177   Fed.    1.  78,    373,   623 

Humes  v.  Ft.  Smith,  93  Fed.  857.   589 
Humphrey    v.    Pegues,    16    Wall. 

244.  67,    88 

Hunnewell    v.    Cass    County,    22 

Wall.    464.  25 

Hunter   v.    Ballard,    74    Ark.    174. 

365,    475 
Hunter   v.    Pittsburgh,    207    U.    S. 

171.  79 

Huntington    v.    Mahan,    142    Ind. 

695.  149,156 

Huntington  v.  Palmer,  7  Sawyer, 

355.  715 

Huntington    v.    Worthen,    120    U. 

S.    97.  546,    6S8,   706 

Hurtada  v.   California,   110  IT.   S. 

516,    535.  393,    397 

Huse   V.    Glover,    119    U.    S.    543. 

201,   204,   211,    215 
Hutcheson    v.     Storrie,     92     Tex. 

685.  462 

Huus    V.    Porto    Rico    Steamship 

Co.,    182   U.    S.    392.  217 

Hylton  V.  United  States,  3  Dallas, 

171.  638 

Hynes  v.  Briggs,  41  Fed.  468.         151 


Idaho  Ry.  E.  L.  &  P.  Co.  v.  Monk. 

218   Fed.    682.  374 

Illinois    V.    Bacon,    243    111.    313.      125 

Illinois     Central     R.     R.     Co.     v. 

Adams.   180  U.  S.   2S.  694,730 

Illinois    Central     R.     R.      Co.    v. 

Decatur,  147  U.  S.  190.  97,    417 

Illinois  Central  R.  R.  Co.  v.  Miss. 

R.   R.   Com.,    229   Fed.    448.  621 

Illinois  Life  Ins.   Co.  v.  Newman, 

141   Fed.    449.  718 

Income  Tax  Cases,  157  U.  S.  429  ; 

158   U.    S.    601.  538,    747,   942 


Income  Tax  Cases,  (Wisconsin), 
148   Wis.    456.  942 

Ind.  V.  Darnell,  174  Ind.  143.     167,   557 

Ind.  Mfg.  Co.  V.  Koehne,  188  U. 
S.    681.  710 

Indiana  Railroad  Cases,  154  U. 
S.    426.  263,    265,    277,    280,   621 

Ind.  Ter.,  etc.,  O.  Co.  v.  St.  of 
Okla.,    240    U.    S.    522.  28 

Inman    Steamship    Co.    v.    Tinker, 

94    U.    S.    238.  212 

Insular   Cases,    182   U.    S.    1,    222, 

244.  657 

In  re  Crowell,  109  Fed.  659.  510 

Insurance  Company  v.  County 
of   Martin,    104    Minn.    179.  S44 

Insurance     Company     v.     Morse, 

20   Wall.    445.  173 

Int.  L.   &  S.   Co.  V.   St.   Clair  Co., 

109    Fed.    741.  207 

Iowa  V.  Wheelock,   95   Iowa,   577.  15  S 

Iowa    Ins.    Co.    v.    Lewis,    187    U. 

S.    335.  568 


Jackson    Lbr.    Co.    v.    McCrimon, 
164   Fed.   759.  364,   374 

James  v.   Hicks,    110   U.    S.    272.      763 

Jefferson  Branch  Bank  v.  Skelly, 
1   Black.    (U.   S.)    436.  49,   61 

Jefferson,   In  re,  35   Minn.   215.        490 

Jenkins  v.  Neff,  186  U.   S.   230.        305 

Jettson   V.     Univ.     of    the    South, 
208   U.    S.    5S2.  92 

Johns    Hopkins    Hospital,    In    re, 
56   Md.    17.  435 

Johnson  v.   De  Barry-Baya  Mer- 
chants'  Line,   37   Fla.   499.  199 


Johnson  v.   Duer,   115  Mo.   366. 


473 


Johnson  v.  W.   F.   Co.,   239   U.   S. 
234;    214   Fed.    180.        559,    620,   713 

Joseph  V.  Randolph,   71  Ala.   499.   515 

Juniata  Limestone  Co.  v.  Fagley, 
187  Pa.   St.   193.  58i 


TABLE    OF    CASES 


1057 


(References  are  to  pages.) 


K 


Kane  v.   New   Jersey,    242   U.    S. 

160.  517 

Kansas   City  v.    Bacon,    157   Mo. 

450.  418 

Kansas  City  v.  Building-  &  Loan 

Association,    145    Mo.    50,    53.        545 
Kansas    City  v.    Grush,    151    Mo. 

128.  587 

Kansas  City  v.  Whipple,  136  Mo. 

475.  5S8 

Kansas  City  v.    Ft.    S.,    &   C.   R. 
R.  Co.  V.  Bodkin,  240  U.  S.  227. 

190.   227 
Kansas  City,  M.  &  B.  R.  R.  Co. 
V.      Stiles,       242      U.       S.      111. 

190,  191 
Kansas    Indians,     The,     5    Wall. 

■^37.  28 

Keaney  v.   N.   T.,    222  U.    S.   525. 

541,  574 
Keeley  v.  Sanders,  99  U.  S.  441.  638 
Kehrer  v.   Stewart,   197  U.   S.    60. 

98,  146 
Keith  V.  Alabama,  97  Ala.  32.  lis 
Keith  V.   Clark,    97   U.   S.    454.  53 

Kelley  v.   Rhoads,   188  U.   S.   1.        123 
Kellog-g    V.     Winnebago     County, 

42   Wise.    97.  "     519 

Kelly   V.    Pittsburgh,    104    U.    S. 

78.  354,   399,    422 

Kelsey    v.    Chanslor,    183    N.    T. 

543.  98,   538 

Kentucky  v.  Ager  &  Lord  T.  Co., 

26   Ky.   L.   Rep.    585.  197 

Kentucky  v.   Bk.   of  Ky.,    29   Ky. 

L.    Rep.    643.  77 

Kentucky    v.    Louisville,    etc.,    F. 

Co.,   22  Ky.   L.  Rep.   446.  207 

Kentucky   v.    P.    L.    A.    Soc,    160 

Ky.    16.  175 

Kentucky    v.    P.    S.    L.    Soc,    155 

Ky.   197.  175 

Kentucky    v.    S.    P.    Co.,    134    Ky. 
417.  197 

Kentucky  v.   U.    R.    &   T.    Co.,    56 
Ky.   L.   Itep.  25.  525 


Kentuckj-     Railroad     Cases,     115 
U.    S.    331, 

260,    263,    264,    361,    362,    367,   561 
Kentucky  Un.  Co.  v.  Ky.,   219  U. 

S.    140.  380,    593.   701 

Keokuk    &    Hamilton    Bridge    Co. 

V.   Illinois,   175   U.   S.   626.  210 

Keokuk    &    Northwestern    R.    R. 

Co.  V.  Missouri,  152  U.  S.  301.  94 
Kerr  v.  South  Park  Commission- 
ers, 117  U.  S.  379.  440.  446 
Kidd  V.  Ala.,  188  U.  S.  730.  530,  537 
Kimmel,  In  re,  41  Fed.  775.  145 
Kimmel  v.  State,  104  Tenn.  184.  152 
King  V.  W.  Va.,  216  U.  S.  92.  379 
King   V.    Mullins,    171    U.    S.    404, 

348,    379 
King  V.   Portland,    184   U.    S.    61; 

33    Or.    402. 

440,    457,    468.    474,    475,    476 
Kingman  v.    Brocton.    153    Mass. 

255.  408 

Kings    County    Savings    Inst.    v. 

Blair.    116   U.   S.    206.  754 

Kinney  v.  Conant,   166  Fed.   720.   755 
Kinsley   v.    Cottrell.    196    Pa.    St. 

614.  588 

Kirtland  v.   Hotchkiss.    100   U.   S. 

491.  500.    501,    526,   576 

Kissinger  v.  Bean,  7  Biss.  60.         748 
Knowlton    v.    Moore,    178    U.    S.. 

41.  635,    636,    643,    648.    664.   665 

Knoxville  &    Ohio    R.    R.    Co.  v. 

Harris.    99    Tenn.    684.  228 


Lackawanna    v.    National    Bank, 
94    Pa.    221.  324 

Lacy  V.    Armour   P.    Co.,    134   N. 
C.    467.  147 

Lacy    V.     McCaffcrty,     215     Fed. 

a-'-S.  318 

Lafayette  Ins.  Co..  v.  French.  IS 

How.    (U,   S.)    451;    452.  166 

Lander    v.     Merc.     Nat.     Bk.     of 

Cleveland.       186      U.      S.       457. 

303,    310.    303,    37*' 


1058 


TABLE    OF    CASES 


(References  are  to  pages.) 


Lander  v.  M.  Nat.  Bk  of  Cleve- 
land, lis  Fed.  785  ;  109  Fed. 
21.  327,   718 

Lane  County  v.  Oregon,   7  Wall. 

75.  43 

Laurens    v.     Elmore,     55     S.     C. 

477.  149 

Layton    v.    Mo.,    187   U.    S.    356 ; 

160    Mo.    64.  700 

League  v.   Texas,   184  U.   S.   156.  381 
Leary    v.    Jersey    City,    189    Fed. 

89  ;    208    Fed.    854.  217,   375 

Leavenworth  v.  Ewing,   80  Kans. 

58.  227 

Lee  v.  Sturgis,  46  Ohio  153.  528 

Lehigh  Valley  R.  R.  Co.  v.  Penn- 
sylvania,  145   U.    S.    192.  252 
Lehigh  Water  Co.  v.  Easton,  121 

U.    S.    388,    392.  65 

Leigh    v.    Green,    193    U.    S.    79 ; 

62    Nebr.    344.  366 

Leisy  v.   Hardin,    135  U.   S.    100. 

109,    668,    672 
Leloup  V.  Mobile,    127  U.   S.   640. 

213,   222 
Lent    V.    Tilson,    140    U.    S.    316. 

365,  3S4,  440,  449  456 
Lesser  v.  Wagner,  120  Md.  671.  471 
Lewis  V.  Monson,  151  U.  S.  545.  736 
Lewis'  Estate,   In  re,    (Penn.)    52 

Alt.  Rep.  205.  540 

Lewiston  Water  &  Power  Co.   v. 

Asotin   Co.,    24   Wash,    37.    533,   715 
Lexington  v.   Security  T.   Co.,   27 

Ky.   L.    Rep.    591.  359 

License    Cases,    5    How.    (U.    S.) 

504,    575.  108 

License  Tax  Cases,   5  Wall,    462. 

513,   693 
Lightburne    v.     Taxing    District, 

4   Lea,   219.  203,   222 

Lindsay  v.  Shreveport  Bank,  156 

U.    S.    485.  712 

Linehan  Ry.  Trans.  Co.  v.  Pen- 
dergrass,  16  C.  C.  A.  585  ;  70 
Fed.   1.  693 

Linton   v.    Childs,    105    Ga.    567.      287 
Lionberger     v.     Rowse,     9     Wall. 

468.  298,   312 


Litchfield  v.    County  of  Webster, 

101   U.    S.    773.  369 

Little  v.  Bowers,   134  U.   S.   547.     710 
Little   Rock    &    Ft.    Smith    R.    R. 

Co.   v.   Worthen,    120   U.    S.    97.   706 
Liverpool  I.  Co.  v.  Bd.  of  Assrs., 

221    U.    S.    346.  493 

Liverpool       Insurance       Co.       v. 

Massachusetts,    10    Wall.    566.      167 
Loan    Association    v.    Topeka,    20 

Wall.    655.  551,   666 

Loan    &    Homestead    Association 

V.   Keith,    153   111.    609.  543 

Lockwood    V.    St.    Louis,    24    Mo. 

22.  417 

Loeb      V.      Columbia      Township 

Trustees,    179    U.    S.    472.      440, 

466,    692 

Loeb  V.    Trustees,    91   Fed.    37.       459. 
Lombard    v.     Park    Commission- 
ers,   181    U.    S.    38.  440,   446 

London  &  S.  F.  Bk.  v.  Block, 
136    Fed.    138  ;    117    Fed.    900. 

Londoner  v.  C.  &  C.  of  Denver, 
210    U.    S.    373. 

Long  Sault  D.  Co.  v.  Call,  242 
U.    S.    272. 

Longyear  v.  Toolan,  209  U.  S. 
414. 

Lotus,  The,  No.   2,   26  Fed.   637. 

Loughborough  v.  Blake,  5 
Wheaton,    317. 

Louisiana  v.  Mayor  of  New 
Orleans,    109    U.    S.    285. 

Louisiana  v.    Pilsbury,    105   IT.    S. 

278.  75,    42< 

I^uisiana  v.  New  Orleans,  102 
U.   S.   203.  76, 


497 


451 


69 


364 
196 


646 


85 


435 


77 


La.  Bd.  of  Assrs.  v.  M.  L.  I.  Co., 
116    La.    698. 

Louisiana    Co.    v.    New    Orleans, 
31   La.   Ann.    440. 

La.  Ex  rel.  Hubert  v.  La.,  215  U. 
S.    170.  77, 

La.   ex  rel.,  N.   T.   Guaranty  Co. 
V.   Steele,    134   U.   S.   230. 

Louisiana    Liquidation     Commis- 
sioners V.    Moreo,    106   La.    130.   567 


492 


543 


387 


726 


TABLE    OF    CASES 


1059 


(References  are  to  pages.) 


Louisville,    etc.,    F.    Co.    v.    Ky., 

ISS    U.    S.    385.  .  207 

L.   &  N.   R.   R.   Co.  V.  Bosworth, 

230  Fed.   191.  277,   621 

L.    &.    N.    R.    R.    Co.    V.    Coulter, 

131    Fed.    282.  556.    616,   620 

L.    &   N.    R.   R.    Co.   V.    Green,   U.    S. 

(1917).  616,    617,   720 

Louisville  &  Nashville  R.  R.   Co. 

V.  Palmes,  109  U.  S.  245.  60,  90 
L.  &  N.  R.  R.  Co.  V.  Wright,  110 

Fed.  1007;  201  Fed.  1023.  92,  530 
Louisville    Water    Co.    v.    Clark, 

143    U.    S.    1.  86 

Low  v.   Austin,   13  Wall.   29.  121 

Lowell  v.  Boston,  111  Mass.  454.  406 
Lowell  v.  County  Commission- 
ers, 152  Mass.  375.  602 
Lumberville  Bridge  Co.   v.   State 

Board    of    Assessors,    55    N.    J. 

L.   529.  210 

Luther  v.  Borden,  7  How.  1.  732 
Lynch  v.    Turrish,    236   Fed.    653, 

(1916).  954,   955 

Lyon     V.     Tonawanda,     98     Fed. 

361.  459 

:m 

Machine   Co.   v.    CJage,    100  U.    S. 

676.  154 

Mackay    v.    San    Francisco,    113 

Cal.    392.  502 

Macon    v.    First    National    Bank, 

59   Geo.    648.  323 

Madera  Irrigation  District,  In  re, 

92  Cal.   296.  42S 

Mager  v.  Grima,  8  How.    (U.  S.) 

490.  128 

^^agoun  V.  Ills.  Trust  &  Savings 

Bank,    170    U.    S.    283,    167    111. 

122.  570 

Maguire  v.  Board  of  Commission- 
ers, 71  Ala.  401.  543 
Maguire     v.     Commonwealth.     3 

Wall.    387.  667 

Mahoney's     Estate,     In    re,     133 

Cal.    180.  570 

Maine  v.  Grand  Trunk  R.  R.  Co., 

142  U.   S.   217.        250.    253,   636,   831 


Mallett  V.  North  Carolina,  181  U. 

S.    589.  698 

Manchester      v.      Massachusetts, 

139   U.   S.    240.  204 

Manchester     Insurance     Co.,     v. 

Herriott,    91    Fed.    711.  558 

Marbury    v.    Madison,    4    Cranch, 

110.  8 

Maricopa  &  Pheonix  R.  R.  Co.  v. 

Arizona,    156    U.    S.    347.  31 

Markham   v.    Manning,    9S   N.    C. 

132.  594 

Markoe    v.     Hartrauft,     16    Am. 

Law   Reg.    487.  291 

Marshall    Co.    v.    Cook,    119    Ta. 

384.  119,   590 

Marshalltown  v.  Blum,   58  Iowa, 

184.  140 

Martha  v.    Ottawa,    114   111.    59.     406 
Martin  v.  D.  of  C,  205  U.  S.  135  ; 

26    App.    D.    C.    140.  472 

Martin    v.    Hunter,    1    Wheaton, 

304,    326.  626 

Martin  v.  Rosedale,  130  Ind.  108.  145 
Marx  V.   Hanthorn,    30   Fed.    579, 

81,  382 
Marx   V.     Hanthorn,     148     U.    S. 

172.  382 

Marye  v.   Baltimore  &  Ohio  R.   R. 

Co.,    127    U.   S.    117.  236 

:Md.    V.    No.    R.    R.    Co.,    93    Md. 

737.  87 

Ma.ss.  v.  Baltic  M.  Co..  207  Mass. 

3S1;     212    Mass.    35.  188 

]Massachusetts     v.     Western     U. 

Tel.    Co.,    141    U.    S.    40.  268 

Matthews  v.  R.  R.  Co.,  58  Kans. 

447.  567 

Mattingly    v.     District     of    Colum- 
bia,   97    U.    S.    687.         440,    441,   683 
May    V.     New     Orleans,     178     U. 

S.    496.  118 

May,  In  re  82  Fed.  422,  432.  151 

Maynard  v.  Hill,   125   U.   S.   205.  397 

Mayor  v.   Hus.sey,    67   Md.    112.  499 
McBoan    v.    ChandU-r,     9     Hclak. 

(Tunn.)    349.  416,  436 


1060 


TABLE   OF    CASES 


(References  are  to  pages.) 


224 

640 
752 

438 


McCall    V.    California,    136    U.    S. 

104. 
McCoach    V.    Mlnniehill    &    S.    H. 

R.  R.   Co.,  228  U.  S.   295. 
McCoade  v.  Pratt,  236  U.  S.  59. 
McCormack   v.    Patchin,    53    Mo. 

33. 
McCready  v.   Virginia,    94   U.    S. 

391.  203,  204 

McCulloch       V.       Maryland,        4 

Wheaton,   316.  5,   284,   629,   686 

McCulloug-h    V.    Virginia,    90    Va. 

597;    172   U.   S.    102.  58 

McCutchen    v.     Rice     County,     7 

Fed.  558.  521 

McGahey  v.   Virginia,    133   U.    S. 

662. 
McGee  v.  Mathis,   4  Wall.   43. 
McHenry    v.     Downer,     116     Cal. 

20. 
McTver     v.     Robinson,     53     Ala. 

456. 
McKeen  v.  County  of  Northamp- 
ton,   49   Pa.   St.   519. 
McKnight    v.    Dudley,    148    Fed. 

204. 
McLaughlin  v.  St.  L.  &  S.  W.  Ry. 

Co.,   232  Fed.   579. 
McLeod    V.     Receveur,     71     Fed. 

455. 
McMahon  v.    Palmer,    102   N.   T. 

176. 
McMillen  v.    Anderson,    95   IT.    S. 

37.  354,   367 

McNeil,  Ex  parte,  13  Wall.  236.  217 
Mead  v.  Acton,  139  Mass.  341.  407 
IMechanicS     Bank    v.     Baker,     46 

Atl.    R    586;    65    N.    J.    L.    113, 

549.  290 

isiemphis    V.    Bank,    6    Baxter 

(Tenn.)    415.  323 

Memphis   v.    Darnell    &    Son,    116 

Tenn.    424.  116,   141 

Memphis    v.     Ensley,     6     Baxter 

(Tenn.),   553.  533 

Memphis  City  Bank  v.  Tennessee, 

161    U.    S.    186.  89 

Memphis     Gas     Co.     v.      Shelby 

County,    109    U.    S.    398.  48,   67 


58 
97 

307 

301 

528 

718 

718 

361 

303 


Memphis  &  L.  R.  Co.  v.  Dolan, 
14   Fed.   532.  222 

Memphis  R.  R.  Co.  v.  Commis- 
sioners,   112   U.    S.    609.  90 

Mercantile  National  Bank  v. 
Hubbard,  9S  Fed.  465;  45  C. 
C.  A.   66.  306,   362 

Mercantile  National  Bank  v. 
New  York,   121  U.   S.  156,     285, 

302,    304,    305,    306,   311 

Mercantile      National      Bank      v. 

Shields,   59   Fed.    952.  303 

Merchants  Bank  v.  Pennslyvania, 

167  U.  S.  461.  291,  325,  362,  568 
Merchants        &        Manufacturers 

Bank   v.    Pennsylvania,    167    U. 

S.   461.  298,   314 

Merck  v.  Treat,  174  Fed.  388.  762 
Meriwether    v.     Garrett,     102    U. 

S.    472.  77 

Merrill    v.    Humphrey,    24    Mich. 

170.  601 

Met.  L.  I.  Co.  V.  La.  Bd.  of  Assrs., 

205   U.   S.   395.  492 

Metropolitan  Railroad  v.  District 

of  Columbia,  132  U.  S.  1.  682,  685 
Meyer     v.     Muscatine,     1     Wall. 

384.  413 

Meyer   v.    Wells,    Fargo    Co.,    223 

U.  S.  297.  229,  255,  559,  715,  894 
Mich.  C.  R.  R.  Co.  v.  Powers.  201 

U.   S.    245.  391 

Michigan  Sugar  Co.  v.  Auditor- 
General,    124   Mich.    674.        405,   698 

Michigan   Sugar    Co.    v.    Dix,    185 

U.   S.    112.  698 

Mich.  Tax  Cases,  185  Fed.  634.  277 
Midland  G.   &  T.   Co.  v.  Douglas, 

217   Fed.    358.  509 

Middlesex    Bank    Co.    v.    Eaton, 

221    Fed.    86.  967 

Millard    v.    Roberts,     202    U.     S. 

429.  406 

Miller  v.  Blackstone,  171  N.  T. 
6S1.  541 

Miller  v.  Goodman,  40  S.  W. 
Rep.   718.  157 


TABLE    OP    CASES 


1061 


(References  are  to  pages.) 


Miller  v.  Merchants  National 
Bank,  3  National  Bank  Cases, 
711.  290 

Minneapolis  Brewing  Co.  v.  Mc- 
Gillivray,   104   Fed.   258.        159,   711 

Minneapolis  &  S.  R.  R.  Co.  V. 
Beckwith,   129  U.  S.  26.  337 

Minn.  v.  G.  W.  R.  R.  Co.,  106 
Minn.    303.  94 

Minn.  v.  U.  S.  Exp.  Co,  114  Minn 
346.  255 

Minot  V.  Winthrop,  162  Mass. 
113.  ^  570 

Mississippi  Mills  v.  Cook,  56 
Mass.    40.  543 

Missouri  v.  Welton,   55  Mo.   288. 

138,  140 

Missouri  Coal  &  Mining  Co.  v. 
Ladd,   160  Mo.   435.  181 

Mo.  Ex  rel.,  v.  Dockery,  191  U. 
S.   165.  702 

Mo.  Ex  rel..  Hill  v.  Tucker,  191 
U.   S.   165.  619 

Missouri,  Kansas  &  Texas  R.  R. 
Co.  V.  Elliott,  184  U.  S.  530.  698 

Missouri  Pacific  R.  R.  Co.  v.  Ne- 
braska,   164   U.   S.   403.  397,   412 

Mitchell  V.  Board  of  Commis- 
sioners,   91    U.    S.    206.  42 

Mitchell  V.  Clark,  110  U.  S.  643.     665 

Mitchell  V.  United  States,  21 
Wall.    350.  521 

Mobile  &  Ohio  R.  R.  Co.  v.  Ten- 
nessee,   153   U.   S.    486.      59,   70,   550 

Mob;le  v.   Dargan,   45   Ala.   310.     435 
Mobile  V.  Kimball,  102  U.  S.  691. 

421,    426,   440 

Mobile  Co.  v.  Ware.  146  Ala. 
163.  163 

Modesto  Irrigation  District  v. 
Tragea,   88   Cul.   334.  428 

Montana  C.  Missions  v.  Missoula 
Co.,    200    U.   S.    119.  28 

Montgomery  County  Com.  v.  Els- 
ton,    32    Ind.    27.  14 

Montlcello  Distilling  Co.  v.  Balti- 
more,   90    Md.    417.  358 

Moore  v.   Halllday,    4   Dillon,   52.  708 


Moore     v.      Maguire,      142      Fed. 

787.  483 

Moore   v.    Ruckgaver,    184   U.   S. 

593.  676 

Moran    v.    New    Orleans,    112    U. 

S.  69.  200,   202 

Morgan  v.  Beloit,  7  Wall.  613.  77 
Morgan     v.     Commonwealth,     98 

Va.    812.  203 

Morgan    v.    Louisiana,    93    U.    S. 

222.  90 

Morgan  v.  Parham,  16  Wall.  477.  196 
Morgan  v.   Town   Clerk,    7  Wall. 

610.  77 

Morgan  Steamship  Co.  v.  Board 

of  Health,   99   U.  S.   273.  212 

Morgan  Steamship  Co.  v.  Louis- 
iana, 118  U.  S.  455.  216 
Mormon  Church  v.  United  States, 

136   U.   S.    1.  677 

Morris   v.    Hitchcock,    194   U.    S. 

384.  31 

Morris     Canal     &     Bkg.     Co.     v. 

Baird,    239    U.    S.    126.  91 

Morrison     v.     Morey,     146     Mo. 

543.  416 

Mountain  Timber  Co.  v.  State  of 

Washington,  —  U.  S.  —  (1917) 

617 
Mountain  View  Mining  &  Milling 

Co.    V.    McFadden,     180    U.    S. 

533.  697 

Mudge    V.    McDougall,    222    Fed. 

562.  621,   718 

Mugler    V.    Kansas,     123     U.     S. 

623.  515 

Murdock  v.  Ward,  178  U.  S.  139.  664 
Murray   v.    Charleston,    96    U.    S. 

440.  65,    72,    74,    498,   499 

Murray,  Ex  parte,  93  Ala.  78.  144 
Murray  v.  Hobokon  Land  Co.,  18 

How.    (U.   S.)    272.  353,   686 

ATuscatine  Co.  v.  Hodge,   121   La. 

482.  360 

Mu.    L.    L    Co.    V.    McOrew.    188 

U.   S.    291  ;    131    Cal.    85.  700 

Meyers  v.  Baltimore  County  Com- 
missioners,   83    Md.    3S5.  12S 
Myles  S.   Co.  v.  Bd.  of  Com.,   239 

U.   S.    478  ;    34    La.    903.  476 


1062 


TABLE    OF    CASES 


(References  are  to  pages.) 


N 


Nathan   v.    Louisiana,    8    How. 

(U,  S.)    73.  128 

National  Bank  v.  Commonwealth, 

9  Wall.   353.  289,   290,   324 

National    Bank    v.    Kimball,    103 

U.   S.   732.  318,   714 

National  Bank  v.  New  Tork,   64 

N.   E.   756.  618 

National  Bank  v.  United  States, 

101   U.    S.    1.  666 

National    Bank    of   Baltimore    v. 

Baltimore,     92    Fed.     239  ;     100 

Fed.   24L  303,   322 

National     Bank    of    Camden    v. 

Pierce,  2  National  Bank  Cases, 

177.  292 

National    Bank   of   Chattanooga, 

V.    Mayor,    S    Heiskell    (Tenn.), 

814.  286 

National    Bank    of    Chemung    v. 

Elmira,    53   N.   Y.    49.  290 

Nat'l    Bank    of    Com.    v.    Allen, 

223   Fed.    472.  291 

National    Bank   of   Commerce   v. 

New  Bedford,  155  Mass.  313.  293 
National    Bank    of   Commerce   v. 

Seattle,    166  U.   S.   463,  311 

National     Bank     of     Garnett     v. 

Ayers,    160   U.    S.    660.  303 

National   Bank  of  Wellington  v. 

Chapman,    173   U.    S.    205.  309 

Natl.   B.   &.  L.   Assn.  v.   Oilman, 

128    Fed.    293.  390 

National   Dredging  Co.   v.    State, 

99    Ala.    462.  199 

National    State    Bank    v.    Young, 

25   Iowa,   311.  287 

Neal  V.  Deleware,  103  U.  S.  370.  339 
Neenan  v.  Smith,  50  Mo.  525.  425 
Nell  V.  Ohio,  3  How.  (U.  S.)  720.  17 
Neilson  v.  Garza,  2  Woods,  287.  132 
Nelson  Lumber  Co.  v.  McKinnon, 

61   Minn.   219.  367 

Nev.    Natl.    Bk.    v.    Dodge,     119 

Fed.    57.  321 

Newark  Banking  Co.  v.  Newark, 

121  U.  S.   163.  306 


Newbauer  v.  Am.  Seeding  Co., 
171   Fed.   273.  740 

Newby  v.  Brownlee,  23  Fed.  320.     23 

Newby  v.  Platte  County,  25  Mo. 
I.  c.   269.  416 

New  Hampshire  v.  Louisiana, 
108  U.  S.   76.  725 

New  Haven  v.  City  Bank,  31 
Conn.    106.  323 

N.  J.  V.  Anderson,  203  U.  S.  483  ; 
137   Fed.    858.  510 

New  Jersey  v.  Wilson,  7  Cranch, 
164.  46 

New   Jersey   v.    Yard,    95   U.    S. 

104.  81 

New   Orleans   v.    Citizens'    Bank, 

167  U.  S.  371.  96 

New  Orleans  v.  Eclipse  Towboat 
Co.,    33   La.   Ann.    647.  203 

New  Orleans  v.  New  Orleans 
Water  Co.,  142  U.  S.   79.  423 

New  Orleans  v.  Stempel,  175  U. 
S.   309.  487 

New  Orleans  &c.  Co.  v.  Louisiana, 
125    U.    S.    18.  65 

New  Orleans  v.  New  Orleans, 
143    U.    S.    192.  49,  83 

Newport  v.  Mudgett,  18  Wash. 
271.  311 

Newport  v.  Taylor,  16  B.  Mon- 
roe,   699.  203 

Newton  v.  Commissioners,  100 
U.  S.  548.  84 

New  York  v.  Barker,    179   U.    S. 

279.  316,    564,   604 

New  York  v.  Keeney,   194  N.  Y. 

281.  541,  574 

New  York  v.  Louisiana,    108   U. 

S.    76.  725 

New  York  v.  McClean,    57   App. 

Div.    601.  492 

New  York  v.  Miln,  11  Peters, 
102.  108 

New  York  v.  Roberts.  171  U. 
S.    664.  177,   178 

N.  Y.  Ex  rel.,  Cornell  Co.  v. 
Sohmer,   235   U.   S.   549.  202 


TABLE    OP    CASES 


1063 


(References  are  to  pages.) 


N.  T.  Ex  rel..  Hatch  v.  Rear- 
don,   204  U.   S.    152.  162 

N.  T.  Ex  rel.,  Interboro  T.  Co.  v. 
Sohmer,   237   U.   S.   226.  63 

N.  T.  Ex  rel.  Met.  St.  Ry.  Co.  v, 
St.  Bd.  of  T.  Com.,  199  U. 
S.    1.  83,   589 

N.  T.  Ex  rel.  Par.  Co.  v.  Knight, 
192  U.   S.    21.  227 

N.  T.  Ex  rel,  Schurz  v.  Cook, 
148   U.    S.    397  81 

N.  T.  Ex  rel,  v.  Miller,  202  U. 
S.   584.  245 

N.  T.  Ex  rel,  v.  Purdy,  231  U. 
S.   371.  308 

N.  T.  Ex  rel,  v.  State  Board  of 
Tax  Commissioners,  199  U.  S. 
392.  589 

N.  T.  Ex  rel,  v.  Wells,  208  U. 
S.  12.  121 

New  York  Guaranty  Co.  v.  Mem- 
phis Water  Co.,  107  U.  S. 
205,   214,  708 

New  York  Indians,  The,  5  Wall. 
761.  28 

New  York,  Lake  Erie  &  W.  R. 
R.  Co.  V.  Pennsylvania,  158  U. 
S.    431.  252 

New  York  Life  Ins.  Co.  v.  Crav- 
ens,  178   U.   S.   389.  150 

New  York  v.  Prest,   71  Fed.  15.     437 

New  York  &  New  England  R.  R. 
Co.  V.  Bristol,   51  U.  S.   556.  86 

Nicol    V.    Ames,    173    U.    S.    509. 

2,    644,    671,   686 

Nichols    V.    U.    S.,    7    Wall.    222. 

753,   759 

Nichols,  In  re,  48  Fed.  164, 

145,    151 

Nichols  V.  N.  H.  &  N.  Co.,  42 
Conn.    103.  323 

Nobel  State  Bank  v.  Haskell, 
219  U.   S.   104.  516 

Norfolk  &  Western  R.  R.  Co.  v. 
I'ennsylvania,     136    U.    S.    114.  225 

Norfolk  &  Western  R.  R.  Co.  v. 
SimmH,    191    U.    S.    441.  147 


North  Carolina  v.  Moore,  113  No. 

Car.    697.  587 

North  Dakota  v.  Nelson  County, 

1  No.  Dak.   88.  402 

North    Dakota    ex    rel    Flaherty 

V.  Hanson,  215  U.  S.  515.  37 

Northern    Pacific    R.    R.    Co.    v. 

Barnes,    2   No.   Dak.    310.  578 

Northern    Pacific    R.    R.    Co.    v. 

Clark,   153   U.   S.   252,   272.  714 

Northern    Pacific    R.    R.    Co.    v. 

Garland,    5    Mont.    126.  578 

Northern    Pacific    R.    R.    Co.    v. 

Myers,   172   U.   S.   589.  25 

Northern    Pacific    R.    R.    Co.    V. 

Traill  County,  115  U.  S.  600.  '  24 
Northern    Pacific    R.    R.    Co.    v. 

v.  Walker,  47  Fed.  681.  26,  578 
Northern    Pacific    R.    R.    Co.    v. 

Wright,    54    Fed.    67.  26 

N.    R.    R.    Co.   v.   Md.    187   U.    S. 

258.  87 

North  Missouri  R.  R.  Co.  v.  Ma- 

guire,    20   Wall.    86.  60 

Northwestern  Lumber  Co.  v.  Che- 

halis    County    (Wash.),    54    L. 

R.  A.   212.  199 

Norton  v.  Shelby  County,  118  U. 

S.   442.  740 

Norwood  V.  Baker,  172  U.  S.  269. 

439,     440,     446,     447,     450,     457, 

460,    461,    462,    463,    464,    465, 

466,  467,  468,  471,  474,  476,  715 
Nye   Jenks   &   Co.    v.   Washburn, 

125   Fed.    817.  710 


0 


O'Brien  v.  Rockefeller,   239  U.   S. 

127.  523,   718 

Opden   V.    City  of  St.    .Toseph.    90 

Mo.    522.  528 

Ogdon  City  v.  Armstrong,  168  U. 

S.   224.  693 

Opilvio    V.    Crawford    County,    7 

Fed.    745.  123 

Ohio  V.  Jones,   51   Ohio  492.  275 

Ohio  Life  Ins.  &  Trust  Co.  v.  Dc- 

liolt,    16    How.    (U.    S.)    41G.  49 


1064 


TABLE   OP    CASES 


(References  are  to  pages.) 


Ohio  St.  T.  Cases,  232  U.  S.  576  : 

203   Fed.    537.  255,   558,    SS9 

Olcott    V.    Supervisors,    16    Wall. 

678.  737 

Old.  Dom.  Co.  V.  W.  Va.,  198  U. 

S.  299.  198 

Olsen  V.  Smith,  195  U.  S.  332.  217 
O'Neil    V.    Vermont,,     144    U.    S. 

361.  333 

Ont.    L.    Co.   V.   Wilfong,    223    U. 

S.    543.  389 

'  Ont.  L.   Co.  V.  Tordy,   202  U.   S. 

152.  360 

Opinion    of    Justices,    53    Maine 

594.  291 

Opinion    of   Justices,    150    Mass. 

592.  409 

©pinion    of   Justices,    155    Mass. 
598.  410 

Opinion  of  Justices    (N.   H.),   79 
Atl.    Rep.    31.  867 

Orcutt's  Appeal,  97  Pa.  179.  540 

Oregon  &  California  R.  R.  Co.  v. 
Portland,    25    Or.    229.  470,    475 

Orient  I.  Co.  v.  Bd.  of  Assrs.,  221 
U.   S.    357.  493 

Orr  V.   Oilman,   183  U.   S.   278.  78 

Osbom    V.    Bank    of    the    United 

States,    9    Wheaton    738. 

12,   284,   727,   745 
Osborne  v.  Adams  County,  106  U. 

S.    191  ;    109   U.   S.    1.  396 

Osborne  v.  Florida,  164  U.  S.  650.  227 
Osborne  v.  Mobile,    16  Wall.    479. 

206,  220,  221,  222 
Oskamp  v.  Lewis,  103  Fed.  906.  367 
Ouachita  Packet  Co.  v.  Aiken,  121 

U.  S.   444.  215 

Overton    v.    Vicksburg,    70    Miss. 

558.  145 

Owensboro     National     Bank     v. 

Owensboro,    173    U.    S.    664. 

283,   285,   288 
Owensboro  v.  T.  &  T.  Co.,  230  U. 

S.    58.  516 

Oxley  Stave  Co.  v.  Butler  Coun- 
ty, 166  U.  S.  649.  698 


Pabst     Brewing     Co.      v.      Terre 

Haute,    98   Fed.   230.  159 

Pace  v.  Burgess,   92  U.  S.  272.       655 
Pacific  Cold  Storage  Co.  v.  Pierce 

Co..    85    Wash.    426.  935 

Pacific    Express    Co.    v.    Seibert, 

142   U.    S.    339.  226,   274 

Pacific  Ins.  Co.  v.  Soule,  7  Wall. 

433.  636 

Pacific  National  Bank  of  Tacoma 

v.  Pierce  County,  20  Wash.  675.  294 
Pacific    Postal    Tel.    Cable    Co.    v. 

Dalton,    119    Cal.    604.  601 

Pacific   Railroad   Co.   v.   Maguire, 

20    Wall.    36.  60 

Packet    Co.    v.    Catlettsburg,    105 

U.   S.    559.  213 

Packet  Co.   v.   Keokuk,    95   IT.   S. 

80.  213 

Packet   Co.   v.   St.   Louis,    100  U. 

S.    433.  213 

Paddell  v.   N.   Y.,    211  U.   S.    446, 

187  N.   Y.   552.  484 

Paine  v.  Germantown  T.  Co.,  136 
Fed.   52.  373,   375 

Palmer   v.    McMahon,    133    U.    S. 

660.  325,   358,   362,   368 

Palmer  v.  Way,  6  Colo.  106.  416,  435 
Paquete  Habana,    The,    175   U.    S. 

677.  693 

Parker  v.  Citizens'  Bank,  52  La. 

Ann.    1086.  57 

Parker  v.  Detroit,  103  Fed.  357.     459 
Parkersburg  v.  Brown,   106  U    S 
487.  396 

Parsons  v.  District  of  Columbia, 
170   U.   S.    45.  440,   443,    464,   465 

Passenger  Cases,  7  Howard  (U. 
S.)    283.  130 

Patterson  v.  Kentucky,  97  U.  S 
501.  38 

Patton   V.    Brady,    184   U.    S.    608, 
■    619.  636,   674,   748,   749 

Paul  V.  Detroit,  32  Mich.  108.  471 
Paul    V.    Virginia,    8    Wall.    183. 

150,  167,   453 


TABLE   OF    CASES 


1065 


(References  are  to  pages.) 


Paulsen  v.  Portland,  149  U.  S. 
30.  364,   416,    440,   441,   449 

Peacock  v.  Pratt,  121  Fed.  772, 
13  Hawaii  590.  680 

Peay  v.  Little  Rock,  32  Ark.   31.  436 

Peck  V.  Miami  County,  4  Dillon 
371.     '  29 

Peete  v.  Morgan,   19  Wall.   581.     212 

Pelton  V.  National  Bank,  101  TJ. 
S.    143.  315,   319 

Pembina  Mining  Co.  v.  Pennsyl- 
vania,   125   U.    S.    181.  170,   337 

Pennock    v.    Commissioners,    103 

U.  S.   44.  29 

Pennoyer    v.    McConnaughy,    140 

U.    S.    1.  726 

Pennoyer  v.  Neff,  95  U.  S.  714.  495 
Pennsylvania  v.   Pullman   Palace 

Car  Co.,  107  Pa.   156.  287 

Penn.  v.  Rearick,  26  Pa.  Sup.  Ct. 

384.  149 

Pensacola  Tel.  Co.  v.  Western 
Union  Tel.   Co.,   96  U.   S.   1.         223 

People  v.  American  Bell  Tel.  Co., 
117  N.   Y.   241.  182,   183 

People  V.  Assessors,  156  N.  T. 
517.  38 

People  V.  Bunker,  87  N.  W.  Rep. 

(Mich.)    90.  145 

People  V.  Barker,  148  N.  T.  304.  604 
People    V.    Campbell,    138    N.    T. 
543.  507 

People  V.  Coleman,  126  N.  Y.  433.  280 
People  V.  Gallagher,  93  N.  Y.  438.  593 

People    V.    Coleman.     119    N.    Y. 

137,    135   N.    Y.    231.  509,   533 

People   V.    Commissioners,    76   N. 

Y.    77.  72 

People  V.   Commissioners,   104  U. 

S.    466.  122 

People  V.  Compagnie  Gen.  Trans- 

Atlantique,    107    U.    S.    59.  130 

People  V.  Dolan,  36  N.  Y.  59.  307 
People  V.  Federal  Securities  Co., 

255   111.   561. 

People  V.  Fire  Association,  92  N. 
Y.   311.  170,   179 


People    V.    Harkness,     44    N.    Y. 

Supp.    46.  38 

People  V.  Home  Ins.  Co.,  29  Cal. 

533.  73 

People  V.  111.  Northern  R.  R.  Co., 

248  111.   539.  811 

People  V.   Keith,    153   111.   609.  544 

People  V.   Knight,   3   N.   Y.   Supp. 

745.  38 

People  V.  Mining  Co.,   105  N.  Y. 

76.  184 

People  V.  National  Bank,  123  Cal. 

53.  287 

People  V.  Roberts,  159  N.  Y.  70.  38 
People    V.    Salem,    20    Mich.    452. 

401.   404,   411 
People  V.  Smith,  123  Cal.  70.  742 

People  V.   Trust   Company,   96  N. 

Y.  387.  184 

People  V.  Trustees,  4S  N.  Y.  390.  490 
People  V.  Walling,  53  Mich.  264.  159 
People  V.  Weaver,  100  U.  S.  539. 

307,   315 
People's  National  Bank  v.  Marye, 

191    U.    S.    272,    107    Fed.    570. 

311,  324,  357,  711,  714 
People  ex  rel.  v.  Badlam,  57  Cal. 

594.  533 

People  ea?  rcl.  v.  Pitcher,   (Colo), 

156   Pac.   Rep.   812.  792 

People  ex  rel.  v.  Roberts,  152  N. 

Y.   59.  186 

People  V.  Ryan,  88  N.  Y.  142.  307 
People  V.  Tax  Commissioners.  69 

N.   Y.    91.  '       323,   324 

People  ex  rel.  Griffin  v.  Brooklyn, 

4  N.  Y.  419.  416 

People  ex  rel.   Hoyt  v.    Commis- 
sioners of  Taxes,  23  N.  Y.  224.     524 
People  ex  rel.  .Jefferson  v.  Smith, 

88  N.   Y.   576.  490 

People   ex  rel.   Mills  v.   Commis- 
sioners of  N.   Y.,  23  N.   Y.  242.   152 
People  ex  rel.  Southern  Hotel  Co., 

V.   Wemple.   131   N.   Y.   64.  184 

rogues   V.    Ray.    23    So.    Rep.    904 

(La.).  149 

Perry    &    Co.,    J.    W.    v.    Norfolk. 

220   U.  S.   473.  05,      08 


1066 


TABLE   OF    CASES 


(References  are  to  pages.) 


Pervear     v.     Commonwealth,     5 

Wall.   475.  667 

Petapsco    Guano    Co.     v.     North 

Car.    Bd.    of    Agriculture,     171 

U.  S.   345.  131 

Philadelphia  v.   Atlantic   &  Pac. 

Tel.    Co.,    42   C.    C.    A.    325,    102 

Fed.   254.  234 

Philadelphia    v.    Diehl,    5    Wall. 

720.  748,  7f9,   751 

Philadelphia  v.  Postal  Tel.  Cable 

Co.,    21   N.   Y.    Supp.    556.  234 

Philadelphia    v.    Western    Union 

Tel.    Co.,    40   Fed.    615,    82   Fed. 

797,   89  Fed.   454.  234 

Philadelphia  Fire   Ass'n  v.   New 

York,    119    U.    S.    110. 

169,    170,    173,    179,  558 
Philadelphia     Steamship     Co*,     v. 

Pennsylvania,    122  U.   S.    326.     246 
Ph.  &  H.  R.  Co.  V.  Lederer,   239 

Fed.    184.  750 

Philadelphia  &  Wilmington  R  R 

Co.   V.   Maryland,    10  How.    (U. 

S.)    376.  49 

Phillips  V.  Mobile,  208  U.  S.  471.  160 
Phillips  V.   Payne,   92  U.   S.   130.  732 
Phoenix  Insurance  Co.  v.  Tennes- 
see,  161  U.  S.   174.  67,     88 
Phoenix  Insurance  Co.  v.  Welch, 

29    Kan.    672.  170 

Picard  v.   Tennessee,   etc.,  R  R 

Co.,    130   U.   S.    637.  90 

Pickard     v.     Pullman     Southern 

Car  Co.,  117  U.  S.  34.  232,   236 

Piqua    Branch    Bank    v.    Knoop, 

16  How.    (U.  S.)    387.  49 

Pitts  V.   Clay,   27   Fed.    635.  24 

Pittsburgh  v.  Hunter,  217  Pa.  27.     79 
Pittsburgh  Co.  v.   Bates.,   156  TJ. 

S.    577.  113,    115,   672 

Pittsburgh,    etc.,    R    R    Co.    v. 

Backus,   154  U.   S.   421.  263,   274 

Pittsburgh    v.    Board    of    Public 

Works,  172  U.  S.  32.  210,   709 

Pittsburgh  v.   State,   49  Ohio  St. 

189.  553 

Planters'   Insurance   Co.   v.   Ten- 
nessee,  161  U.   S.   193.  89 


Plumley  v.  Massachusetts,  155  U. 

S.    461.  668 

Plummer  v.  Coler,  178  U.  S.  115.     40 
Pollard  V.  The  State,  65  Ala.  628.  301 
Pollock     V.     Farmers'     Loan     & 
Trust    Co.,    157    U.    S.    429,    158 
U.   S.    601.  638 

Port  Clinton   Borough  v.   Shafer, 

5   Pa.   Dist.   Ct.   583.  140 

Porter  v.   C.   C.   C.   &  St.   L.  Hy. 

Co.,    38   Ind.    App.    226.  452 

Porter    v.    Railroad    Co.,    76    111. 

561.  260 

Postal    Telegraph    Cable    Co.    v. 

Adams,  155  U.  S.  688.  230,   289 

Postal    Telegraph    Cable    Co.    v. 

Charleston,   153  U.  S.   692.     36,   226 
Postal    Telegraph    Cable    Co.    v.      • 

Richmond,    99   Va.    102.  229 

Postal   T.    Co.   V.    Taylor,    192   U. 

S.  66.  234,   235 

Powers  V.  Detroit,  etc.,  R.  R.  Co., 

201    U.    S.    543.  70 

Preston  v.  Calloway,  183  Fed.  19.  721 
Preston    v.     Finley     (C.    C),     72 

Fed.    850.  160 

Preston    v.    Roberts,    12    Bush. 

(Ky.)    57.  445 

Preston    v.    Sturgis    M.    Co.,    183 

Fed.    1.  721 

Prevost  V.  Grenaux,  19  How.  (U. 

S)   1.  41 

Price  V.  Hunter,  34  Fed.  355.         509 
Primm  v.  Fort,  23  Tex.  Civ.  App. 

605.  311 

Providence    Bank    v.    Billings,    4 

Peters   514.  47,   48 

Provident    Institution    v.    Jersey 

City,   113   U.   S.   506.  443 

Provident    Institution    v.    Massa- 
chusetts,   6   Wall.    611.  19 
Provident  Institution  for  Savings 

V.   Boston,   101  Mass.   575.  298 

Prov.   S.  L.   A.   S.   V.   Ky.,   239   U. 

S.    103.  175 

Prunell  v.  Page,   128  Fed.   496.       693 

Pryor  v.  Foster,   66  Pac.   340.  678 

Public  Service  Realty  Co.  v.  Her- 

old,    219    Fed.    301.  763 


TABLE   OF    CASES 


1067 


(References  are  to  pages.) 


Pullman    C.    Co.    v.    Adams,    189 

U.   S.   419.  233 

Pullman  C.   Co.  v.  Knott,    235   U. 

S.    23.  701 

Pullman  C.  Co.  v.  Traft,  186  Fed. 

126.  277 

Pullman's     Palace     Car     Co.     v. 

Hayward,   141  U.   S.   36.  240 

Pullman's     Palace     Car     Co.     v. 

Pennsylvania,   141  U.   S.   18.  237 

Pullman's     Palace     Car     Co.     v. 

Transportation    Co.,    171    U.    S. 

138.  261,   280 

Pullman's     Palace     Car     Co.     v. 

Twombley,    29    Fed.    658.  241 

Pullman    Southern     Car    Co.    v. 

Gaines,    3   Tenn.   Ch.    587.  232 

Pullman    Southern     Car    Co.    v. 

Nolan,    22   Fed.   276.  232 

Pyle  V.  Brenneman,  122  Fed.  786. 

497,  713 


Q 


Quincy,  City  of,  v.  Jackson,  113 
U.   S.   337.  478,   733 

Quong  Wing  v.  Kirkendall,  223 
U.   S.   59,   39   Mont.   64.  590 

R 

Racine  Iron  Co.  v.  McCommons, 
111  Ga.  536.  156 

Radebaugh  v.  Village  of  Plain 
City,   28  Weekly  Law  Bui.   107.   137 

Radiator  Co.  v.  Wayne  County, 
192   Mich.    449.  841 

Rahrer,  In  re,  140  U.  S.  545.  110 

Railroad  v.  Peniston,  18  Wall.  5.     33 

Railroad  v.  Richmond,  96  U.  S. 
529.  337 

Railroad  Co.  v.  Board  of  Equali- 
zation,  60  Cal.   35.  347 

Railroad  Co.  v.  Bristol,  151  U. 
S.    556.  8G 

Jiallroad  Co.  v.  Collector,  100  U. 
S.   595.  675 

Railroad  Co.  v.  Ellis,  165  U.  S. 
150,    577.  56G 


Railroad  Co.  v.  Gaines,  97  U.  S. 

697.  88 

Railroad    Co.    v.    Georgia,    98    U. 

S.    359.  94 

Railroad  Co.  v.  Hamblin,   102  U. 

S.    273.  90 

Railroad  Co.  v.  Jackson,  7  Wall. 

262.  498,  662,   675 

Railroad    Co.    v.    Loftin,    105    U. 

S.    258.  87 

Railroad  Co.  v.  McClure,  10  Wall. 

51L  738 

Railroad   Co.   v.   Maine,    96  U.    S. 

499.  86 

Railroad     Co.     v.     Maryland,     21 

Wall.   456.  235 

Railroad  Co.  v.  Matthews,  175 
U.    S.    96.  567 

Railroad  Co.  v.  Mississippi,  102 
U.    S.    135.  697 

R.    R.    Tax   Cases,    136    Fed.    233. 

375,   376 

Railroad  &  Telegraph  Com- 
panies V.  State  Board  of 
Equalizers  of  Tennessee,  85 
Fed.    302.  262 

Railway  Co.  v.  Ohio,  117  U.  S. 
123.  521 

Railway  Co.  v.  McShane,  22 
Wall.    444.  24 

Railway  Co.  v.  Prescott,  16  Wall. 

603.  22 

Ralls    County    v.    United    States, 

105   U.    S.    736.  76,   733 

Ralph  V.   Fargo,   7   N.   Dak.    640.   437 

Ramish  v.  Hartwell,  126  Cal.  443. 

3S2,   456 
Ramsey     County     v.     Robt.      P. 

Lewis    Co.     (Minn.),    53    L.    R. 

A.   421.  460 

Randcll  v.  City  of  Bridgeport, 
63   Conn.   321.  606 

Ra.ssmussen  v.  U.  S.,  197  U.  S. 
516.  6S0 

Rattcrman  v.  Western  Union,  127 
U.   S.    411.  248 

Raymond  v.  Chicago  U.  T.  Co., 
207    U.   S.    20.  613,   7U 


1068 


TABLE   OF    CASES 


(References  are  to  pages.) 


Reagan  v.  Farmers'  Loan  & 
Trust   Co.,    154   U.    S.    362.   726,   728 

Rearick  v.   Pa.,   203  U.  S.  5*07.       149 

Rector,  etc.,  v.  County  of  Phila- 
delphia,   24    How.    (U.    S.)    300. 

52,   84 

Red  "C"  Oil  Mfg.  Co.  v.  Bd.  of 
Agric,   222  U.   S.   393.  132 

Rees  V.  Watertown,  19  Wall.  107.  733 

Reinken  v.  Fuehring,  130  Tfi^. 
382.  437 

Reymann  Brewing  Co.  v.  Bris- 
ter,    179    U.   S.    445.  152 

Rhoads  v.  Kelley,  9  Wyo.   352.       123 

Rhodes   v.    Iowa.    170    U.    S.    412. 

110,   126 

Richards  v.  Raymond,  92  111.  612.   404 

Richards  v.  Town  of  Rock  Rap- 
ids,   31   Fed.    505.  312,   319 

Richardson  v.  English,  20  Okla. 
408.  32 

Ridpath  v.  Spokane  Co.,  23 
Wash.    426.  935 

Riley  v.  Western  Union  Tel.  Co., 
47  Ind.   511.  543 

Risley  v.   Utica,    179   Fed.    875.       730 

Ritterbusch  v.  A.  T.  &  S.  F.  R. 
R.    Co.,    198    Fed.    46.  714,   722 

Robbing  v.  Shelby  County  Tax- 
ing   District,    120    U.    S.    489. 

142,   144 

Roberts  v.    Lowe,    232    Fed.    604.  750 

Robertson  v.  Commonwealth  of 
Kentucky,  19  Ky.  Law  Rep. 
442.  203 

Robertson  v.  Sewell,  31  C.  C.  A. 
107,    87    Fed.    536.  22 

Robinson  v.  Longley,  18  Nev.  71.  125 
Rochester  v.  Rochester  R.  R.  Co., 
182  N.   Y.    99.  91 

Rochester  R.  R.  Co.  v.  Rochester, 
205    U.    S.    236.  91 

Rockefeller  v.  O'Brien,  224  Fed. 
541,    239    Fed.    127.  523,   718 

Rogers  v.  Co.  of  Hennepin,  240 
U.    S.    184.  514,   591,  731 

Rogers  v.  Kent  County  Judge, 
115   Mich.    441.  137 


Rose,    et   at.   v.    McKie,    145    Fed. 

584,  affirming  140  Fed.   145.  735 

Rosenblatt,     Ex    parte,    19    Nev. 

439.  145 

Rosenblatt    v.    Johnston,    104    U. 

S.    462.  287 

Rosenthal   v.    Walker,    111    U.    S. 

185.  962 

Royall  V.  Virginia,  116  U.  S.  572.     56 
Rozelle,   In  re,   57   Fed.    155.  144 

Ruffin  V.   Bank  of  Commerce,    69 

N.    C.    498.  14 

Rush  V.    Land   &  M.   Co.,    211   U. 

S.    25.  388 

Russell  V.  Croy,  164  Mo.   68. 

347,   581,   705 
Rutland    R.    R.    Co.    v.    Central 

Vermont   R.    R.    Co.,    159   U.    S. 

630.  699,   707 


St.    Albans   v.    Cent.    Co.,    57   Vt. 

68.  502 

St.     Clair    County    v.     Interstate 

Car     Transfer     Co.,     109     Fed. 

74L  207 

St.  Clair  Co.  v.  Int.  L.  &  C.  Co., 

192   U.   S.   454.  207 

St.    Louis   V.    Coal    Co.,    158    Mo. 

342.  202 

St.    Louis    V.    Consolidaled    Coal 

Co.,   113  Mo.   83.  588 

St.  Louis  V.  Ranken,  96  Mo.  497.  448 
St.  Louis  V.  Spiegel,   75  Mo.  145, 

90  Mo.   587.  5S8 

St.   Louis  V.  U.  Rys.   Co.,   210  U. 

S.    66.  83 

St.    Louis  V.   Wenneker,    145   Mo. 

230.  545 

St.   Louis  V.   Western  Union   Tel. 

Co.,   148  U.  S.   92.  233 

St.    Louis   V.   Wiggins   Ferry   Co., 

11   Wall.    423.  196 

St.    Louis   V.    Wiggins    Ferry   Co., 

40    Mo.    580.  196 

St.  Louis,  etc.,  R.  R.  Co.  v.  Berry, 
113   U.    S.    465.  94 


TABLE  OF   CASES 


1069 


(References  are  to  pages.) 


St.    L.    I.   M..    etc.,   R.    R.    Co.    v. 

Davis,    122   Fed.    639,    132    Fed. 

629.  245,   701 

St.  L.  &  S.  W.  R.  R.  Co.  V.  Ark. 

ex  rel.   235   U.   S.    350. 

188,   189,   562 
Salt    Co.    V.     East    Saginaw,     13 

Wall.    373.  84 

Salt   Lake   City  v.   Hollister,    118 

U.    S.    256,    262.  668 

Sanborn  v.  Rice  County,  9  Minn. 

273.  414 

Sands    v.     Edmunds,     116    U.     S. 

585.  56 

Sands    v.    Manistee    River    Impt. 

Co.,    123    U.    S.    288.      201,    205,   215 
Sanford    v.    Poe,    37    17.    S.    App. 

378,   69  Fed.   546.  275 

San  Francisco  v.   Bank,   92  Fed. 

273.  287 

San     Francisco     v.     Mackay,     21 

Fed.   602.  503,  504 

San  Francisco  National   Bank  v. 

Dodge,   197  U.  S.    70.  321,   327 

San   Joaquin   &   Kings   River   Co. 

V.   Stanislaus  Co.,   113   Fed.   930.   87 
San    Mateo    County    v.    So.    Pac. 

R.  R.   Co.,   13   Fed.   145,   118  U. 

S.   394.  339 

Santa   Clara  County  v.    So.   Pac. 

R.    R.    Co.,    118    U.    S.    394,    18 

Fed.    385.  337,    339,    355,    357 

S.    Fe    Co.    Commrs    v.    N.    Mex. 

ex  rel,  215  U.  S.  296,   69.   Pac. 

252.  734 

Saranac  Land  &  Timber  Co.  v. 
Comptroller  of  New  York,  177 
U.   S.    318.  385 

Sargeant  v.  Herrick,  221  U.  S. 
404.  22 

Sault   Ste.   Marie  v.   Int.    T.    Co., 

234    U.    S.    333.  207 

Savannah  v.  Savannah  R.  R.  Co., 

115  Ga.   137.  589 

Savannah  R.  R.  Co.  v.  Savannah, 

198    U.    S.    392.  84,  589^ 

Savings    Society    v.    Multmomah 

County,    1C9    U.    S.    421. 

72,   500,   581 


Sawyer  v.  Dooley,  21  Nev.  390.  367 
Sayre    Borough    v.    Phillips,    148 

Pa.    482.  137,   140 

Schell     v.     Cochran,     107     U.     S. 

625.  755 

Schaefer    v.    Werling,    188    U.    S. 

516.  457 

Schneider  G.   Co.  v.   Gast  R.   Co., 

259   Mo.    153.  477 

Schmidt  v.  Failey,  148  Ind.  150.  510 
Schollenb'erger,    v.    Pennsylvania, 

171  U.  S.   1.  116 

Schroder  v.   Overman    (Ohio),   47 

L.   R.   A.    156.  462 

Schwartz  v.   Hammer,   194  U.   S. 

441,   110  Fed.   256.  510 

Scobee  v.  Bean,  22  Ky.  Law  Rep. 

1076,  59  S.  W.  Rep.   860.  289 

Scotland    County    Court    v.    Hill, 

140   U.   S.    46.  734 

Scott    V.    Toledo,    36    Fed.    385. 

343,   357,      453 
Scottish   Union   Ins.    Co.   v.   Her- 

riott,    109   Iowa   606.  168 

Scottish    U.     &    M.     Ins.     Co.     v. 

Bolland,    196    U.    S.    611.      176,   509 
Scranton   v.    Levers,    9    Pa.    Dist. 

176.  460 

Seaboard    Air    Line    Ry.    v.    Ra- 
leigh,   242    U.    S.    15.  84 
Searight   v.    Stokes,    3   How.    (U. 

S.)    151.  17 

Sears  v.  Boston,   173  Mass.  71. 

437,   438,   460 

Sears    v.     Street    Commissioners, 
173  Mass.   350.  43S,    473 

Seattle    v.    Kelleher,     195    IT.     S. 
351.  471 

Second   National    Bank   of  Titus- 
ville  V.  Caldwell,   13  Fed.  429.      286 

Security    Mut.    Life    v.    Prewitt, 
200   U.   S.    446,    202    U.    S.    246.      359 

Security  T.  Co.  v.  Lexington,  203 
U.   S.   323.  369 

Sedgwick  V.  Bank,  104  U.  S.  111.   676 

Seeborger  v.  Castro,  153  U.  S.  3^.   763 


1070 


TABLE   OF    CASES 


Seibert  v.   Lewis,    122  U.    S.    284. 

76,  727 

Sellingrer  v.  Ky.,  213  U.  S.  200.  487 
Sentell   v.    Railroad    Co.,    166    U. 

S.   698.  692 

Seton  Hall  College  v.  Village  of 

S.  Orange,  242  U.  S.   (1917)     63,  93 
Seward  v.  City  of  Rising  Sun,  79 

Ind.    351.  528 

Sharpless  v.   Mayor  of  Philadel- 
phia,  21   Pa.   St.   147.  413,  545 
Shelby    County    v.    Union    Bank, 

161  U.  S.   149.  49,   60,  95,      96 

Sheley  v.   Detroit,    45   Mich.    431.  436 
Shelton  v.   Piatt,   139  U.   S.   591.     709 
Shepp  V.   Traction  Co.,    17   Mont- 
gomery Law  Rep.    52    (Penn.)    184 
Sheppard  v.   Johnson,   2  Humph- 
reys   (Tenn.)    285.  344 
Shields  v.  Ohio,  95  U.  S.   319.  87 
Shoemaker  v.   United  States,   147 
U.    S.    282.                         440,  445,   683 

Sholey  v.    Rew,    23   "Wall.    331. 

636,   643 

Shotwell  V.  Moore,  129  U.  S.  590. 

42,   369 

Shumate    v.    Heman,    181    U.    S. 

402.  463 

Siegfried    v.    Raymond,    190    111. 

424.  121 

Simmons    Hardware    Co.    v.    Ma- 

guire,    37    La.   Ann.    848.  145 

Simpson  v.  Hopkins,  82  Md.  478.  579 
Sims  V.  Norfolk  &  W.  R.  R.  Co., 

130  N.   C.   556.  157 

Sinclair  v.  State,  69  N.  C.  47.  137 
Singer  S.  M.   Co.  v.   Adams,   165 

Fed.    877.  181,   711 

Singer  S.  M.  Co.  v.  Benedict,  229 

U.   S.   481,   179  Fed.   628.  710 

Singer   Mfg.    Co.    v.    Wright,    97 

Ga.    114,    33    Fed.    121,    141    U. 

S.    696.  151,    588,   710 

Sinnott    v.    Com.    of    Mobile,    22 

How.    (U.  S.)    227.  217 

Sioux    City   R.    R.    Co.    v.    Sioux 

City,    138   U.    S.    98.  82 


(References  are  to  pages.) 

Slaughter  House  Cases,  16  "Wall. 


36.  331 

Smith  V.   County  Commissioners, 

117  Ala.   196.  553 

Smith   V.    Ind.    ex  rel,   191   U.    S. 

138,    158    Ind.    543.        596,   703,   815 

Smith  V.  Jackson  (Tenn.),  54 
S.  W.  Rep.   981.  150 

Smith  V.  Maryland,  18  How. 
(U.   S.)    268.  204 

Smith  v.  Reeves,  178  U.  S.  436.     725 

Smyth  V.  Ames,  169  U.  S.  466, 
516.  717 

Snyder  v.  Betman,  190  U.  S.  249.  664 

Snyder  v.   Marks,   109  U.   S.    189.  748 
Society    for    Savings    v.    Coite,    6 

Wall.    594.  19 

Soliah  V.  Heskin,  222  U.  S.  522.  424 

South  Bend  v.  Martin,  142  Ind. 
3L  151 

South  Carolina  v.  Gaillard,  101 
U.   S.    433.  54 

S.   C.  V.  U.   S.,   199  U.   S.    437.  663 

Southerland-Innes  Co.  v.  "Village 
of  Evart.  30  C.  C.  A.  305,  86 
Fed.   596.  412 

Southern  Cotton  Oil  Co.  v. 
Wemple,   44  Fed.   24.  184 

Southern  B.  &  L.  Ass'n  v.  Nor- 
man,   98   Ky.    294.  168 

Southern  Insurance  Co.  v.  Estes, 
106  Tenn.   472.  663 

Southern  Pacific  R.  R.  Co.  v. 
California,    118    U.    S.    109.  696 

Southern  Pacific  v.  Ky.,  222  U. 
S.   63.  197 

Southern  Pacific  Railroad  Tax 
Cases,  13  Fed.  722,  18  F.  R. 
385.  502 

So.  R.  R.  Co.  v.  Green,  216  U. 
S.    400,    160    Ala.    396. 

188,   191,   559 

Southern  Railway  Co.  v.  Ashe- 
ville,  69  Fed.  359.  711 

S.  W.  Oil  Co.  V.  Texas,  217  U.  S. 
114,   100   Texas  647.  589.   723 


TABLE   OF    CASES 


1071 


(References  are  to  pages.) 


Southwestern  Ry.  Co.  v.  Wright, 
116   U.    S.    231.  87 

Spain,  In  re,  47  Fed.   20S.        149,   151 

Speed  V.  Am.  S.  &  W.  Co.,  67  S. 
W.  806.  147,  700 

Speer  v.  Athens  (Geo.),  9  L.  R. 
A.    402.  455 

Spencer  v.  Merchant,  125  U.  S. 
345,    100   N.    Y.    5  87. 

437,    440,    442,    446,    449,   464 

Spies  V.  Illinois,  123  U.  S.  131.  334 
Spokane     V.     L.     &    "W.     Co.     v. 

Kootany  Co.,    199   Fed.   181.  483 

Spoon    V.     Frambach,     83    Minn. 

301.  663 

Sprague  v.  Fletcher,  69  Vt.  69.  923 
Spreckles    S.    R.    Co.    v.    McClain, 

109   Fed.   76.  646 

Spreckles  Sugar  R.  Co.  v.  Mc- 
Clain,  192  U.   S.    397,   113   Fed. 

244.  645,    646,    760,    761 

Spring  v.   W.   Co.   v.   C.   and  Co. 

of  S.  F.,  225  Fed.  728.  497,  511 
Springer    v.    United    States,    102 

U.   S.    586.  638 

Springfield      v.      First      National 

Bank,    87   Mo.    441.  290 

Standard    D.    Co.    v.    Gromer,    5 

P.   Rico  Fed.    142.  217 

Stanley  v.   Foote,   117   Md.    335.      132 
Stanley    v.     Supervisors     of    Al- 
bany,   121    U.    S.    535. 

307,    317,    318,    711,    717 
Stanley   v.    Supervisors,    15    Fed. 
483.  318 

Stapylton   v.    Thaggard,    91    Fed. 

93;  33  C.  C.  A.  353.  287 

State  V.   Agee,   83  Ala.   110.  144 

State  V.  Alston,  94  Tenn.  674.  570 
State  V.  Applegarth   (Md.),  28  1m 

R.  A.  812.  129 

State  V.  Auditor,  47  La.  Ann. 
1679.  547 

State    V.     Ben.sberg,     101     Wise. 

172.  586 

State   V.    Blxman,    162   Mo.    1. 

515,   744 


State  V.  Bracco,  103  N.  C.  349.  145 
State  V.    Butler,    3    Lea    (Tenn.), 

222.  38 

State  V.  Caldwell,  127  N.  C.  521.  156 
State  V.  Cheney,  45  W.  Va.  478.  379 
State  V.  Corson,  65  N.  J.  L.  502.  203 
State  V.  Dalrymple,  70  Md.  294.  834 
State  V.  District  Court,  41  Mont. 

357.  858 

State  V.  Engle,  34  N.  J.  L.  425.  123 
State  V.   Express  Co.,   114  Minn. 

346.  844 

State  V.  First  National  Bank,    4 

Nev.  348.  287 

State  V.  Fondulac,  42  Wise.  287.  453 
State   V.    Frappart,    31    La,   Ann. 

340.  202 

State  V.  French,  17  Mont.  54.  588 
State  V.  French,  109  N.  C.  722.  151 
State  V.  Furbush,  72  Me.  493.  140 
State    V.     Garbruski,     111     Iowa, 

496.  588 

State  V.  Gardner  (Ohio),  51  N.  E. 

136.  586 

State  V.  Gorham,  115  N.  C.  721.  156 
State  V.  Gorman,  40  Minn.  232.  569 
State  V.  Hamlin,   86  Me.    495. 

570,  636 
State  V.  Harrington,  68  Vt.  622.  154 
State     V.     Henderson,     160     Mo. 

190.  570 

State  V.  Hoyt.  71  Vt.  59.  585 

State  V.   Hubbard,    12   Ohio  Dec. 

87.  586 

State  V.  Leffingwell,  54  Mo.  458.  421 
State  V.   Lichtenstein,    44   W.   Va. 

99.  159 

State  V.  Loper,  46  N.  J.  L.  321.  203 
State  V.  McGinnis,  37  Ark.  362.  140 
State  V.   Mann.    76  Wise.    469.  569 

State  V.  Mayor,  63  N.  J.  L.  547.  14 
State    V.    Mcfk,    192    S.    W.    203. 

(Ark.)  C23,    779 

State    V.    Minn.    Tax    Com.,     117 

Minn.    192.  S44 

State  V.   Newark,    8   Vroom.    (N. 
J.)    415.  416 


1072 


TABLE    OF    CASES 


(References  are  to  pages.) 


State  V.  North,  27  Mo.  464.  139 

State    V.     O'Connor,     5    N.    Dak. 

629.  161 

State   V.    Osawkee    Township,    14 

Kan.   418.  402 

State  V.  Parsons,  124  Mo.  436.  118 
State    V.    Phil.    W.    B.    R.    Co.,    4 

Houston,    Del.,    158.  797 

State   V.    Rankin,    11    So.    Dak. 

144.  150 

State  V.  Reis,   3S  Minn.   371.  437 

State  V.  Richards,  32  W.  Va.  348.  154 

State  V.  Robt.  P.  Lewis  Co.,  72 
Minn.   87.  462 

State  V.  Ross,  23  N.  J.  L.,  3 
Zab.    517.  520 

State  V.  Smithson,  106  Mo.  149.  158 

State  V.  Snoddy,   128  Mo.  523.  157 

State  V.  Sponaugle,     45    W.     Va. 

415.  379 

State  V.  Stevenson,  109  N.  C.  730.  140 

State  V.  Stoll,  17  Wall.  425.  53 

State   V.    Wagner,    77    Minn.    483.  146 

State  V.  Wessell,   109  N.  C.   735.  157 

State  V.  Thomas,  26  N.  J.  L.  ISl. 

504,   53S 

State  V.  Travelers'  Ins.  Co.,  73 
Conn.   255.  503,  554 

State  V.   Weyerhauser,    68    Minn. 

353.  370 

State  V.   Weyerhauser,    72   Minn. 

519.  82 

State  V.  Williams,   68  Conn.   131.  423 
State  V.  Willingham,  9  Wyo.  290  ; 

156,  586 

State  V.  Wittlesey,  17  Wash.  447.  383 

State  V.  Zophy,   14  S.   Dak.   319.      159 

State  Board  of  Equalization  v. 
People,    191    111.    528.  613 

State  Board  of  Tax  Commission- 
ers v.   Holliday,   150   Ind.   216.     542 

State  ex  rel.  v.  Allen,  183.  Mo. 
283.  851 

State  ex  rel.  v.  Ashbrook,  154 
Mo.    375.  583,   586 


State  ex  rel.  v.  Bodcaw  Lumber 

Company,    194    S.    W.    R.    692. 

(Ark.).  534,   769,   780 

State  ex  rel.  v.  County  Court,  69 

Mo.    454.  524 

State    ex    rel.    v.    Insurance    Co., 

115   Ind.    257.  170 

State  ex  rel.   v.   Lesser,   237  Mo. 

310.  529,   544,   854 

State  ex  rel.  v.  Meek  (Ark.),  192 

S.  W.  Rep.   202.  778 

State  ex  rel.  v.  Railroad  Co.,  117 

Ark.    606.  780 

State  ex  rel.  v.  Railway,  195  Mo. 

228.  581 

State  ex  rel.  v.  Robinson,  35  Neb. 

401.  407 

State  ex  rel.  v.  Sargeant,  76  Mo. 

557.  390 

State    ex    rel.    v.    Schramm,    269 

Mo.    489.  374,   851 

State  ex  rel.  v.  Severance,  55  Mo. 

378.  260 

State    ex    rel.    v.     Stephens,    146 

Mo.    662.  241,  554 

State  ex  rel.  v.  Switzer,   143   Mo. 

317.  401,   403,  569 

State    ex   rel.   v.    Western   Union 

Telegraph    Co.,    165    Mo.    502. 

268,   605 

State   ex  rel.   v.   Wood,    155   Mo. 

425.  744 

State   ex  rel.    Goetzman  v.   Lord, 

161  N.  W.   516    (Minn.)  514 

State  ex  rel.  Hay  v.   Snyder,   139 

Mo.    549.  374 

State    ex    rel.    Hill    v.    Dockery, 

191   U.   S.    165.  702 

State  ex  rel  Richards  v.  Cincin- 
nati (Ohio),  27  L.  R.  A.  737.  400 
State  ex  rel.  Schwartz  v.  Ferris, 

53  Ohio  St.   314.  569 

State  ex  rel.  Taylor  v.  St.  Louis 

County,  47  Mo.  594.  490 

State  ex  rel.  Wolfe  v.  Parmenter, 
50  Wash.    164.  9S5 

State     Freight     Tax     Cases,     15 
Wall.    232.  240,   242 


TABLE   OP    CASES 


1073 


(References  are  to  pages.) 


State    of    New    York    v.    Barker, 

179   U.   S.   279.  604 

State  Railroad  Tax  Cases,   92  U. 

S.     575.  260,     264,     709.     714 

State      Tax      on      Foreign      Held 

Bonds,    15  Wall.   300.  498,   499 

State  Tax  on  Railway  Gross  Re- 
ceipts,   15    Wall.    284. 

242,    243,    246,    247,   252 
State    Tonnag-e     Tax    Cases,     12 

Wall.    204.  211 

Staunton    v.    Baltic    M.    Co.,    240 

U.  S.  163.  642,   714 

Steamship    Co.   v.   Pa.,    122  U.    S. 

326.  244 

Steamship    Co.   v.    Port  Wardens, 

6  Wall.  31.  211 

Stearns   v.   Minnesota,    179   U.    S. 

223.  68 

Stein  V.  Meyers,   253  111,  199.  818 

Stephens     v.     Railroad     Co.,     13 

Blatchford,    104.  509 

Stewart  v.  Barnes,  153  U.  S.  456.  752 
Stewart  v.   Kehrer,    117   Ga.    969. 

98,   146 
Stiles    V.    K.    C.    M.    &    B.    R.    R. 

Co.,    192    Ala.    687.  190,   191 

Stockard    v.    Morgan,    185    U.    S. 

27.  147 

Stockton,   Ex  parte,  33   Fed.   95.     145 
Stone  V.  Bank  of  Commerce,  174 

U.    S.    412.  61 

Stonebreaker  v.  Hunter,  215  Fed. 

67.  710 

Stoutenburgh  v.  Hennick,   129  U. 

S.    141.  684 

Stratford     v.     Montgomery,     110 

Ala.    619.  148 

Stratton   v.    Collins,    43   N.    J.   L. 

562.  543 

Stratton's    Ind.    v.    Howbert,    231 

U.   S.    299.  641 

Strauder    v.    West    Virginia,    100 

U.    S.    303.  332,  339 

Strauss  v.  Abrast  R.  R.  Co.,  200 

Fed.    327.  749 

Street   R.   R.   Co.   v.   Morrow,    87 
Tenn.    406.  502 


Streight    v.     Durham,     10     Okla. 

361.  362 

Strouse  v.  Galesburg,  89  111.  App. 

504.  589 

Stuart    V.    Jefferson    Police    Jury, 

116   U.   S.    135.  77 

Stuart  V.   Palmer,   74  N.   T.   183. 

357,  448,  453 
Stumpf  V.  Storz,  156  Mich.  228.  843 
Sturgis  V.   Carter,   114  U.   S.   511. 

370,   529 

Succession  of  Rixner,  48  La.  Ann. 

552.  41 

Sullivan  v.  Sheehan,  89  Fed.  247,  ISO 
Sumpter    Co.    v.    National    Bank 

of  Gainesville,   62  Ala.   464.  290 

Supervisors  v.   Davenport,    40  111. 

197.  490 

Supervisors    v.     Stanley,    105    U. 

S.    305.  307 

Susquehanna    Coal    Co.    v.    C.    of 

So.  Amboy,   184  Fed.  941.  124 

Sutton  V.  Hate,  96  Tenn,  710.  344 

Swan,  In  re,  150  U.  S.  637.  722 

Swann  v.    Mutual   Reserve   Fund 

Assn.,   100   Fed.   922.  180 

Swift,  In  re,  Estate  of,  137  N.  Y. 

77.  ^40 

Swofford  V.  Templeton,  185  U.  S. 

487.  706 

Swope  V.  Purdy,  1  Dillon,  350.  29 


T 


Taggart    v.    Claypool,     145    Ind. 

596.  400 

Talbott    V.     Silver    Bow    County, 

139  U.  S.  438.  295.  302,  303.   678 

Talbutt   V.    State.    39    Tex.    Crim. 

Rep.    64.  145 

Talladega   v.    Williams,    164    Ala. 

633.  35,   36 

Tamhlfi  v.  Pullman  Co.,  207  Fed. 

30.  376 

Tappan     V.     Merchants    National 

Bunk,    I'J   Wall.   490.  291,   503 

Tax  Com.  V.  Lowenstein,  128  Md. 

327.  833 


1074 


TABLE   OP    CASES 


(References  are  to  pages.) 


Taylor  v.  L.  &  N.  R.  R.  Co.,  31 
C.  C.  A.  537;  85  Fed.  302;  86 
Fed.    350.  609,    717,    718 

Taylor   v.    Palmer,    31    Cal.    240.      425 

Taylor   v.    Postal    Telegraph    Co., 

202   Pa.    583.  234,   235 

Taylor  v.  St.  Louis  County  Court, 

47   Mo.    594.  490 

Taylor     v.      Thomas,      22     Wall. 

479.  53 

Telegraph  Co.  v.  Texas,  105  IT.  S. 

460.  150 

Tennessee  v.   Scott,   9  Tenn.   254  ; 

460.  232 

Tennessee  v.   Sneed,   96  U.   S.   69. 

54,   690 
Tennessee    v.    Union    &    Planters 

Bank,    152   U.    S.    454.  696 

Tennessee   v.    Whitworth,    117   U. 

S.    129.  88.    93,    95,   96 

Texas  v.   G.  H..  etc.,  Ry.  Co.,  97 

S.  W.   71.  254 

Texas  v.  South-Western  Coal 
Co.,   100  Tex.   647.  589 

Texas  v.  White,  7  Wall.  I.  c.  721.  3 

The  Lotus  No.  2,  26  Fed.  637.  200 

•Thomas,  Ex  parte,  71  Cal.  204.  140 
Thomas   v.    Gay,    169    U.    S.    264. 

30,    561,  678 

Thomas  v.  U.  S.,   192  U.   S.   363.  645 
Thompson   v.    Allen   County,    115 

U.    S.    550.  733 

Thompson  v.  Ky.,   209  U.  S.  340.  486 
Thomson    v.    Pacific    Railroad,    9 
Wall.    579.  33 

Thorndike  v.  City  of  Boston,  1 
Metcalf,    242,    245.  519 

Thornton,  Ex  parte,  12  Fed.  5 38.  137 

Thyson  v.   State,   28  Md.   577.         570 

Tide   Water   Pipe   Co.    v.    Acces- 

sors,  57  N.  J.  L.  516,  192.  185,  254 
Tiernan    v.    Rinker,     102    U.    S. 

123.  159 

Tillson  V.  U.  S.,  100  U.  S.  343.         755 

Tomlinson  v.  Branch,  15  Wall. 
460.  93 


Tomlinson  v.  Jessup,  15  Wall. 
454.  86 

Tonawanda  v.  Lyon,  181  U.  S. 
3S9.  463,   465 

Toolan  v.  Longyear,  144  Mich. 
55.  364 

Township  of  Pine  Grove  v.  Tal- 
cott,  19  Wall.  666,  676.  413 

Transportation  Co.  v.  Parkers- 
burg,    107   U.    S.    691.  213 

Transportation  Co.  v.  Wheeling, 
99  U.  S.   273.  195,   198,   213 

Trapp   V.    Choat,    28    Okla.    517.  31 

Trask  v.  Maguire,  18  Wall.  391.        90 

Travelers'  Ins.  Co.  v.  Connecti- 
cut,   185    U.    S.    364.  503 

Traver  v.  Merrick  County,  14 
Neb.    327.  396 

Treat  v.  C.  of  Chicago,  125  Fed. 
644;   130  Fed.   443.  478 

Treat  v.  Can.  R.  R.  Co.,  222  U. 
S.    448.  63 

Tregea     v.     Medesto     Irrigation 

District,    164   U.    S.    179.  707 

Truscott  v.  Hurlbut  Co.,  19  C.  C. 

A.    374;    73    Fed.    60.  30 

Trustees   of  Cinncinati   &  So.   R. 

R.    Co.    V.    Guenther,    Trustee, 

19  Fed.   395.  612 

Tucker    v.    Ferguson,    22    Wall. 

527.  25,   84,  87 

Turner   v.    Maryland,    107    U.    S. 

38.  131 

Turner  v.   New  York,    168  U.    S. 

90.  385 

Turner  v.  Smith,  14  Wall.  553.  638 
Turner   v.    State,    41    Tex.    Crim. 

Rep.    545.  157 

Turpin  v.  Burgess,  177  U.  S.  504. 

126,  655 

Turpin  v.   Lemon,    187  U.   S.   52.  389 

Tuthill,  In  re,  163  N.  Y.   133.  430 

Tyerman,  In  re,  48  Fed.  167.  155 
Tyler,  In  re,  149  U.  S.  164. 

718,   728,  729 
Tyler  v.    Cass   County,   142  U.    S. 

288.  706 


TABLE   OP    CASES 


1075 


(References  are  to  pages.) 


U 


Udell  V.  Lefevre,  222  Fed.  471.  376 
Ulsh  V.  Perry  County.  7  Pa.  Dist. 

488.  17 

Union  R.  &  T.  Co.  v.  Ky.,  199  U.- 

S.    194.  525 

Union     and     Planters     Bank     v. 

Memphis,    49      C.      C.     A.    455  ; 

111  Fed.  561.  95,   731 

U.   &  P.   Bk.  V.  Memphis,    189   U. 

S.    71;    111    Fed.    561.  677 

U.  P.  R.  R.  Co.  V.  Bd.  of  Com.. 
217    Fed.    540.  710 

Union  Pacific  R.  R.  Co.  v.  Chey- 
enne, 113  U.  S.  516.  744 

U.  P.  R.  R.  Co.  V.  Dodge  Co. 
Corns.,    98   U.    S.    541.  751 

U.  P.  R.  R.  Co.  V.  Flint,  ISO  Fed. 
565.  479 

I^nion  Refrigerator  Transit  Co. 
V.    Lynch,    177    U.    S.    149.  241 

Union  Trust  Co.  v.  Wayne  Pro- 
bate Judge.    125   Mich.    487.  362 

Union  Trust  Co.  v.  Detroit,  170 
Mich.    692.  841 

United  States  v.  American  Bell 
Tel.    Co.,    29    Fed.    217.  182 

U.  S.  V.  Barber,   74  Fed.   483.         755 

U.  S.  V.  Board  of  Com.  of  Osage 
Co.,    193   Fed.    485.  30 

U.  S.  V.  Buntin,  10  Fed.   730.  594 

U.  S.  V.  Canyon  Co.,  232  Fed. 
985.  25 

U.  S.  V.  Chamberlain,  219  U.  S. 
250  ;    156   Fed.   181.  645 

U.  S.  V.  County  of  Macon,  99  U. 
S.  582.  468,   734 

U.  S.  V.  Emery-Bird,  etc..  Realty 
Co.,    237    U.    S.    28.  758 

U.  S.  V.  Erie  R.  R.  Co..  106  U. 
S.   327.  675 

U.  S.  V.  Finch.  201  Fed.  905.  760 

U.  S.  V.  Ft.  Scott,   99  U.  S.   152.      468 

U.  S.  V.  Frerlchs.  106  U.  S.   160.     750 

U.  S  V.  General  Inspection  & 
Loading   Co..    204    Fed.    657.  962 


955 

28 

676 

657 


U.  S.  V.  Gettysburg  Elec.  R.  R. 
Co.,  160  U.  S.  668.  406,  407.   411 

U.  S.  V.  Guggenheim  Exploration 
Co..  S.  D.  of  N.  Y.,  238  Fed. 
231,    1917. 

U.  S.  V.  Hemmer,  195  Fed.  790. 

U.  S.  Hunnewell,  13  Fed.  617. 

U.  S.  V.  Hvoslef,  et  al,  237  U.  S. 
1. 

U.  S.  V.  Jackson,  Federal  Cases 
No.    15,    458.  206 

U.  S.  V.  Johnson  County,  5  Dil- 
lon   207.  76 

U.    S.   V.   Jones.    236   U.    S.    106.        752 

U.  S.  V.  Kaufmann.  96  U.  S.  567.   759 

U.  S.  V.  Lee,  106  U.  S.  196.       688,   725 

U.  S.  V.  Lincoln  County,  5  Dil- 
lon.  184.  76 

U.  S.  V.  Louisiana,  123  U.  S.  32.     638 

L^.  S.  V.  Morrison,  Federal  Cases 
No.    15,    465.  206 

U.  S.  V.  Moses.  185  Fed.  90.  37 

U.    S.  V.   Pearson.   231   Fed.    270.  30 
U.    S.    V.    Perkins,    163   U.    S.    625. 

39.  664 
U.    S.    V.    Railroad    Co..    17    Wall. 

322.                                                661.  662 

r.  S.  V.  Realty  Co.,  163  U.  S. 
427. 

U.    S.   V.   Rice,    4  Wheat.    246. 
IT.    S.    V.    Rickert,    188   U.    S.    432. 
U.  S.  V.  So.  Qregon  Co..   196  Fed. 
423. 

l^  S.  V.  Thurston  Co..  Nebr.. 
143    Fed.    287;    140    Fed.    456. 

U.  S.  V.  Whitridge,  231  U.  S. 
144. 

I'nited     States     Express     Co.     v. 

Allen,    39    Fed.    714. 
United     States     Express     Co.     v. 

Ilemmingway,     39    Fed.    60. 
United     States     Express     Co.     v. 

Minnesota.  223  U.  S.  235.      255.   844 
U.    S.     Ex     rel,     v.    Capdevlelle, 

lis    Fed.    809.  478 

r.    S.    Ex  rel.,   Carlisle,    5    D.    C. 

Api).  138.  •as 


633 

650 
30 

26 


640 


206 


28 


1076  TABLE   OF    CASES 

(References  are  to  pages.) 

U.    S;    Ex    rel.,   V.    New    Orleans,  Virginia  Coal  Co.   v.   Thomas,   97 

98    U.    S.    381.  733           Va.    527.                                                 385 

U.   S.   Ex  rel.,  v.  Jimmerson,   222  Virginia    Coupon    Cases,    114    U. 

Fed.   489.                              78,    623,  779           S.    269.                          55,    56,    726,   727 

U.      S.      Ex     rel.,     Messelick     v.  Virginia     Coupon     Cases,      (later 

Saunders,    124   Fed.    125.        478,  735           series),    135   U  S.    662.                       58 

U.    S.    Glue    Co.    V.    Diamond    G.  Virginia  v.  Davis,  113  Va.  562.       162 


Co.,    103   Fed.    838.  174 


Voight  V.  Detroit,   184  U.   S.   115. 


U.     S.     Telegraph     Cable     Co.    v.  440,    452,   457 

Adams,   155  U.   S.   688.  848       .,.     .    .       _,  ^      mATi    a    q-jq' 

Virgmia,  Ex  parte,  100  U.  S.  339, 
U.    S.    Trust   Co.   V.   New  Mexico,  3^^  335 


183   U.   S.    535.  369 

niversity   v.     People,     99    U.    S. 

309.  52 

niversity   of   the    S.    v.    Jettson, 

155    Fed.    182.  720,   727 


Von  Baumbach  v.  Sargeant  Land 
University   v.     People,     99    U.    S.      ^^  ^^^   342  U.   S.    (1917).  967 

,.,   .         .,        ^   X,       r,  -r  ^^  Von  Hoffman  v.   Quincy,   4  Wall. 

University   of   the    S.    v.    Jettson,  „g    „, 


V 


w 


749.  366 

Vanderbilt,  In  re,  50  N.  Y.  App. 

Div.    246.  78 

Vandervelt  v.  Eidman,  196  U.  S. 

480.  644 


Wagner    v.     Lesser,      239     U.    S. 
Valle   V.    Ziegler,    84    Mo.    214.  524  207.  471 

Van  Allen  v.   Accessors,    3   Wall.  Wagner  v.    Meakin,    33    C.    C.    A. 

573.  295,   297  577;    92    Fed.    76.  180 

Van    Allen    v.     Commissioner,     4  Wagoner   v.     Evans,     170     U.    R. 

Wall.    244.  297  558.  301 

Van    Brocklin    v.    Tennessee,    117  Wagoner  v.   Loomis,  37   Ohio   St. 

U.   S.   151.                     16,   22,   638,   661  57^  g03 

Vanceburg  &  St.  L.  Turnpike  Co.  ^^.^^     ^      Dowley,  94      U.      S. 

V.    Maysville,     63     S.    W.    Rep.  r,-  291    326 

Walker    v.    Jacks,     31     C.    C.    A. 
462  ;    SS   Fed.    576.  490 

Walkley    v.    Muscatine,     6    Wall. 
481.  733 

Van  Slyke  v.   The  State,   23  Wis.  Walling   v.    Michigan,    116    U.    S 

655.  313  446.  136,    159 

Vaughan   Machine   Co.   v.    Light-  ™^   ^-  ^^"''^^'    ^^    ^^^-^^   ^^I^'^- 

house,    71   N.    Y.    S.    799.  ISO  ^^^• 

Veazie  Bank  v.   Fennell.   8   Wall.  ^alsh   v.  King,    74    Mich.    350.        601 

533.  666       Walston  v.     Nevin,      128     U.     S. 

Venable    v.    Richards,    105  'U.    S.  ^"^-  '*^^'    ^^^'   ^'^^ 

636.  748      Walters  v.   Railroad  Co.,   68  Fed. 

Vermont  &   Canada  R.   R.   Co.   v.  ^'^^"^  ^^^ 

Vermont    Cen.    R.    R.    Co.,    63  Walton  v.   Augusta,    104   Ga.    757.  148 

Vt.    1.  249       Warburton    v.    White,    176    U.    S. 

Vicksurg  v.  Tobin,  100  U.  S.   430.  213           484.  737 

Vicksburg   R.    R.    Co.    v.    Dennis,  Ward  v.   Flood,    48   Cal.    51.  592 

116   U.    S.    665.  88      ward  v.  Maryland,  12  Wall.   419. 

Vines  v.   State,   67  Ala.   73.  140                                                       135,   136,  139 


TABLE   OF    CASES 


1077 


(References  are  to  pages.) 


Ward  V.  State,  31  Md.  279.  136 
Ware   v.    Mobile   Co.,    209   U.    S. 

405.  163 

Waring   v.    The   Mayor,    8   Wall. 

110.  121 

Warner  v.  City  of  New  Orleans, 

31   C.   C.   A.   238 ;    87   Fed.    829.   466 
Washington  v.  Nashville,  1  Swan 

(Tenn.)     177.  416 

Washington  University  v.  Rowse, 

8  Wall.    439,   42   Mo.    326.  50 

Waters-Pierce   Oil   Co.   v.   Texas, 

177   U.   S.    28.  166,    174,   337 

Way  V.  N.  J.  S.  B.  Co.,  113  Fed. 

188.  213 

Webber   v.    Virginia,    103    U.    S. 

344.  38,   139 

Webster  v.  Bell,  15  C.  C.  A.  360; 

68   Fed.    183.  288 

Webster    v.    Fargo,    9    N.    Dak. 

208;    181    U.    S.    394. 

460,    463,   466 

Weismer  v.  Dougles,  64  N.  Y.  91.  406 
Welch  V.  Cook,  97  U.  S.  541.  84 
Wells    v.     Savannah,     181     U.    S. 

531.  87 

Wells    V.    Weston,    22    Mo.    384. 

393,    400,    422 

Wells  County  v.  Fahlor,  132  Ind. 

426.  453 

Wells  Fargo  &  Co.  v.   Crawford 

County,   63  Ark.   576.  506 

Welton    V.    Missouri,     91    U.     S. 

275.  138,   140 

Werling    v.     Schaefer,     156    Ind. 

704.  459 

W.  Va.  V.  Old  Dominion  Co.,  202 

Va.  576.  198 

W.  As.   Co.   of  Toronto  r.  Halli- 

day,   127  Fed.   830.  509 

W.    As.   of  Toronto  v.   Halliday, 

126   Fed.   257.  509 

Western  Union  Tel.  Co.  r.  Ala- 
bama, 132  U.  S.  472.  248 
W.  U.  T.  Co.  V.  Borough  of  Now 

Hope.   187  U.  S.   419.  233 

W.  U.  T.   Co.  V.  Howe,   180  Fed. 

444.  716 


W.  U.  T.  Co.  V.  City  of  Freemont, 

43  Neb.    499.  228 

W.  U.  T.  Co.  V.  City  of  Rich- 
mond, 224  U.  S.  160;  178  Fed. 
310.  36,   222,   235 

W.  U.  T.  Co.  V.  Indiana,  165  U. 

S.    304.  368 

W.   U.    T.    Co.   V.    Massachusetts, 

125   U.   S.   530.  230,    249,   268 

W.    U.    T.    Co.    V.    Poe,    64    Fed. 

9.  275 

W.    U.    T.    Co.    V.    Richmond,    26 

Grattan.    1.  222 

W.  U.   T.  Co.  V.   State,  55  Texas, 

314.  222 

W.  U.  T.   Co.  V.  Taggart,   163  U. 

S.  1.  268,   269,   275 

W.   U.   T.   Co.  V.   Kansas,    216   U. 

S.    1.  190 

W.   U.   T.   Co.  V.  Mo.,   190  U.   S. 

412.  36,   731 

W.    U.    T.    Co.   V.    Penn.,    195    U. 

S.    540.  36 

W.   U.    T.    Co.   V.    Texas,    105   U. 

S.    460.  36 

W.  U.  T.  Co.  V.  Trapp.  186  Fed. 

114.  36,    360,   621,   710,   717 

W.  U.  T.  Co.  V.  Wright,  185  Fed. 

250.  36,   277 

W.  I.  Co.  of  Toronto  v.  Halliday, 
122  Fed.  259;  110  Fed.  259; 
127  Fed.   830.  375 

Weston   V.    Charleston,    2    Peters 

Z.  c.  481.  13 

West    Winconsin    R.    R.    Co.    t. 

Supervisors,   93  U.  S.  595.  84 

Weyerhauser   v.    Minnesota,    176 

U.   S.   550.  371 

Wheeler   v.    Jackson,    137    U.    S. 

245.  81,   385 

Wheeler   v.    Wightman,    96    Kan. 

50.  820 

Wheless  v.  St.  Louis,  ISO  U.  S. 
379.  693 

Whitbeck  v.  Mercantile  Bank. 
127   U.   S.    193.  308,   310.   317 

White,   In  re,   43    Fed.    913.  145 

Whiting  v.  Fondulac  Rallrojid 
Co.,    25    WIh.    1G7.  at 


1078 


TABLE   OF    CASES 


(References  are  to  pages.) 


Whiting's   Estate,   In  re,   150   N. 

Y.     27.  540 

"Whitman  '  College    v.    Berryman, 

156    Fed.    112.  69 

"Whitney  v.   Robinson,    124   U.   S. 

190.  660 

"Wiggins    Ferry    Co.    v.    East    St. 

Louis,    107   U.    S.    365. 

83.   206,   232 

Wight  V.  Davidson,  181  U.  S.  371. 

440,    463,   465 

Wilcox  V.  Ellis,  14  Kansas,  588.  490 

Wilder   v.    Honolulu   R.    T.    &   L. 

Co.,  8  Hawaii  15.  37 

Wilfong  V.  Ont.  L.  Co.,  171  Fed. 

51.  389 

Wilkins  Co.  v.  Baltimore.  103 
Md.    293.  834 

Willard  v.  Presbury,  14  Wall. 
676.  440,   683 

Williams  v.  Eggleston,  170  U.  S. 
304.  423 

Williams  v.  Fears,  179  IJ.  S. 
270.  514 

Williams  v.  New  Jersey,  130  U. 
S.    189.  78 

Williams  v.  Reese,    2   Fed.    882.     587 

Williams  v.  Supervisors,  122  U. 
S.    154.  317,   711 

Williams  v.  Telladega,  226  U.  S. 
404.  35,  36 

Williams  v.  Weaver,  75  N.  Y. 
32;    100    U.    S.    547.  706,   741 

Willis   v.    Miller,    29   Fed.    238.         56 

Wilmington  R.  R.  Co.  v.  Alsbrook, 
146    U.    S.    301.  67,   87 

Wilmington  v.  Reid,  13  Wall. 
264.  67 

Wilson,  In  re,  (D.  C),  12  L.  R. 
A.    625.  156 

Wilson  V.   Gaines,   103  U.   S.   417.     90 

Wilson  Cyp.  Co.  v.  Cozo  Y 
Mascos,  202  Fed.  913.  22 

Winona  &  St.  Peter  Land  Co.  v. 
Minnesota,     159    U.    S.     526. 

370,   371 


Wisconsin    v.    Bullen,     143    Wis. 
512.  539 

Wisconsin   Central   R.    R.    Co.    v. 
Price  County,  133  U.  S.  496.  22 

Wisconsin    Central   R.   R.    Co.    v. 
Taylor  Co.,    52  Wis.    37.  543 

Wisconsin  &  M.  R.  Co.  v.  Powers, 
191   U.   S.   379.  70,   255 

Witherspoon  v.  Duncan,   4  Wall. 
210.  22 

Wolff  v.  New  Orleans,   103  U.   S. 
358.  75 

Wong  Yung  Quy,   In  re,   2   Fed. 
624.  130 

Wood    V.    Elder,    37    Colo.    174. 

26,   701 

Woodman  v.  Ely,  2  Fed.  839.         693 
Woodman    v.    Latimer,    2    Fed. 

842.  693 

Woodruff    V.     Parham,     8    Wall. 
123.  Ill,   658 

Woodruff   V.    Trapnall,    10    How. 
(U.   S.)    190.  53 

Woodward  v.   Ellsworth,   4   Colo. 
580.  287 

Woolfork    V.    Buckner,     GO    Ark. 
163,    167.  386 

Wright   V.   Blakesley,    101   U.    S. 
174.  752,   762 

Wright  V.  Central  of  Georgia  R. 
R.,    236   U.   S.    674.  92 

Wright  V.  Ga.  R.  R.  Co.,   216  U. 
S.    420.  68,    89 

Wright  V.  L.  &.  N.  R.  R.  Co.,  236 
U.  S.  687  ;  195  U.  S.  219.         92,   530 

Wright  V.  W.  U.  T.  Co.,  166  Fed. 
954.  36,   277 

Wrought     Iron     Range     Co.     v. 
Carver,   118  N.   C.   328.  154 

Wrought     Iron     Range     Co.     v. 
Johnson,    84    Ga.    754.  144 

Wurts    V.    Hoagland,    114    U.    S. 
606.  426,    440 

Wycomico    Co.     Comrs.    v.    Ban- 
croft, 203  U.  S.  102.  87,   720 


TABLE   OP    CASES 


1079 


(References  are  to  pages.) 


Yazoo,   etc.,   R.   R.   Co.   v.   Vicks- 

burg,    209   U.    S.    35S.  94 

Yazoo  &  Miss.   Valley  R.   R.    Co. 

V.  Adams,  180  U.  S.  41.  699 

Yazoo  V.  Adams,  181  U.  S.  580.  94 
Tick   Wo   V.    Hopkins,    118    U.    S. 

356.  336,   344,   586 

Yordy   v.    Ont.    L.    Co.,    44   Wash. 

239.  360 


York,   City   of,   v.    C.   B.    &   Q.    R. 
R.  Co.,  56  Neb.   572.  228 

Tost  V.  Dallas  Co.,  263  U.  S.  50.  387 

Yost    V.    Lake    Erie    Transporta- 
tion   Co.,     112     Fed.     746.  198 


Zonne   v.    Minneapolis    Syndicate, 
220   U.    S.    187.  640 


INDEX 


■(References  are  to  sections,  except  in  appendix  references  are  to  pages) 


ACT  of  March  3,  1917,  Appendix,  p.  1004. 
ACT  of  July  24,  1866,  In  re  Tel.  Cos.  Permissive  Only,  Sec.  34. 
acceptance  of  Tel.  Cos.  of  Act,  34. 

ACTION  to   recover   illegal  Federal   Taxes   may  be  brought   directly 
against  government,  654. 

ACTIONS  under  Tucker  Act  ex  contractu,  650. 

ACTUAL  NOTICE  AND  HEARING  held  sufficient  in  absence  of  stat- 
ute, 345. 

ADJUDICATION  of  impairment  of  contract,  71. 

ADMISSION  of  foreign  company  into   State  may   involve  a  contract 
right,  182. 

ADVERSE    CITIZENSHIP,    when    essential    to   Federal    jurisdiction, 
336,  648. 

AGENCY, 

of  State  exempt  from  Federal  taxation,  579. 

of  State  when  protection  under  Fourteenth  Amendment  328. 

U.  S.  exempt  from  State  taxation.     See  Taxing  Poweb. 

ALABAMA. 

State  system  of.  Appendix,  p.  772. 

ALASKA, 

Tax  system  of,  Sec.  597. 

ALLOWANCE    OF    INTEREST    AND    PENALTIES    IN    TAX    PRO- 
CEDURE,   628. 

AMENDMENTS   OF   1914     and    1916    IN   RE    JURISDICTION   OVER 
STATE  COURTS,  336. 


(1081) 


1082  INDEX. 

(References  are  to  sections;  except  in  appendix  references  are  to  pages) 

AMOUNT, 

necessary  jurisdiction  of  U.  S,  Court.     See  Jurisdiction  of  U.  S. 
Court. 

APPEAL, 

to  Commissioner  of  Internal  Revenue  essential,  652. 
to  Commissioner  from  an  adverse  decision  of  Collector,  652. 
to  Commissioner    of   Internal    Revenue   prerequisite,   to    right  of 
action,  650. 

APPORTIONMENT, 

basis  of,  any  special  assessments.     See  Special  Assessments,  Spe- 
cial Benefits. 

APPROPRIATION, 

See  Federal  Power  of.     See  Congress. 

ARBITRARY    SELECTION    OF    SITUS    OF    VESSEL    FOR    TAXA- 
TION, 204. 

AREA  AND  FRONTAGE  RULES  (in  special  assessments). 

apportionment  of  expenses  by,  valid,  Sees.  405,  406,  408,  409. 
assessment  on  each  lot  for  cost  of  improvement  in  front  valid,  430. 
effect  of  necessity  for  notice  and  hearing,  318. 
effect  of  Norwood  v.  Baker  as  to,  in  State  and  U.  S.  courts,  427,  428. 
exceptional    circumstances    may    render    invalid    in    special    cases, 

430,  434. 
legislative  discretion  to  fix  upon.     See  Legislative  Discretion 
Norwood  V.  Baker,  on,  426,  427,  428. 
sustained  in  Norwood  v.  Baker,  confined  to  special  facts,  428 

ARIZONA, 

State  tax  system  of.  Appendix,  p.  775. 

ARKANSAS, 

State  tax  system  of,  p.  778. 
ARRIVAL  (in  State), 

meaning  of,  in  Wilson  Bill,  124,  118. 

ASSESSMENT.    See  Valuation  for  Assessment. 
by  Board  of  R.  R.  Commissioners,  359. 

for  defraying  preliminary  expenses  of  drainage  district,  400. 
includes  the  right  to  reassess,  358. 
in  its  relation  to  tax  titles,  358. 
lawfully  levied  for  benefits  already  accrued,  431. 
must  be  required  by  law,  496. 

of  land  without  deduction  of  mortgage  not  violative  of  due  process 
of  law,  442. 


INDEX.  1083 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

ASSESSMENT— Continued. 

of  trustees  in  relation  to  due  process  of  law,  372 
when  incomplete  will  not  be  enjoined,  623. 
without  notice  or  opportunity  for  hearing,  643. 
discrimination    in,    through    railroads'    over-valuation,    is    fraudu- 
lent, 546. 
Incomplete  assessment  cannot  be  enjoined,  623. 
joint   and   unapportioned   assessment   of   taxable   and   non-taxable 

property  void,  362. 
local  assessors  causing  inequalities  in,  537. 
retroactive  of  property  not  assessed  valid,  356. 
State  may  fix  date  to  which  ownership  subject  to,  shall  relate,  356. 
under-assessment.     See  Reassessment, 

ASSESSORS.      See    Valuation    fob   Assessment    and    Personal   Lia- 
bility. 
assessment  by  Board  of  R.  R.  Commissioners,  359. 
assessment,  unequal  through  fraud  of,  may  be  vacated,  538. 
exercise  quasi  judicial  power,  343. 

inequalities  growing  out  of  action  of  local  assessors,  537. 
practice  of,  valuation  of,  313,  316. 
presumed  to  perform  official  duty,  540,  541. 
proof  of  fraud  of,  rarely  obtainable,  539. 

AVERAGE  IN  HABITUAL  USE, 

rule  in  taxation  of  rolling  stock.    See  Interstate  Cabbiebs. 
rule  of  involves  mileage  apportionment,  243. 

B 

BANK, 

credits  under  California  statute  held  not  localized  for  taxation,  455. 

party  in  interest  in  action  to  collect  taxes  levied  upon  share- 
holders, 323. 

capital  stock  vested  in  U.  S.  securities  exempt,  17. 

deduction  of  debts  of  unincorporated,  not  discrimination  against 
national  bank,  247. 

deposit  tax  not  discriminatory,  307. 

issue  of,  receivable  for  taxes.     See  Contract. 

national.     See  National  Bank. 

notes  of,  issued  in  seceding  States  not  ipso  facto  void,  54. 

of  U.  S.,  exempt  from  State  taxation,  6,  7,  8. 

of  U,  S.,  property  and  shares  within  State  subject  to  State  tax,  7. 

BANKRUPT    CORPORATION    PRIORITY    OF    CLAIM     OF     STATE 
TAXATION,  537, 


1084  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

BENEFITS  ALREADY  ACCRUED,  431. 
BOARD  OP  REVIEW, 

inadequacy   of,  to  remedy  unequal  assessments,   537. 

motives  of  members  of  boards  of  equalization  investigated,  550. 

purpose  of,  536. 

records  of  State  Board  of  Equalization  best  evidence,  549. 

remedy  against  excessive  valuation  must  be  sought  before  appeal, 
when,  624. 

BONDS, 

for  local  improvements,  437. 

of  District  of  Columbia  exempt  from  tax,  12. 

of  municipality.     See  Municipality. 

BOUNDARY  LINES,  441. 

BOUNTY, 

legislative  confers  no  contractual  rights,  89. 
not  a  public  purpose  for  State  taxation.     See  Public  Purpose. 
Supreme  Court  declines  to  pass  on  validity  of  Federal  bounty.    See 
Congress. 

BRANCH   LINE  CONSTRUCTED  BY  ANOTHER   COMPANY,  WHEN 
NOT  EXEMPT,  73n. 

BRIDGE, 

aid  to  company  building  is  public  purpose  in  taxation,  390,  391. 

interstate,  how  taxable  by  State,  215. 

intrastate  distinguished  from  interstate,  213. 

property  in  interstate  taxable,  213. 

State  power  to  establish  over  navigable  waters,  213. 

BUILDING  AND  LOAN  ASSOCIATIONS, 

funds  of,  not  "other  moneyed  capital,"  302,  303. 
BURDEN  OF  PROOF, 

in  tax  litigation,  645. 

BUSINESS  CORPORATION, 

stock  in,  not  "other  moneyed  capital,"  in  taxation  of  national 
banks,  299. 

c 

CAB  SERVICE, 

carried  on  by  interstate  railroad,  230. 

service  of  interstate  railroad  company  separable  from  other  trans- 
portation, 232. 


INDEX. 


1085 


(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

CALIFORNIA, 

discrimination  in  valuation  held  discriminative  of  national  banks 

in  California,  317. 
State  system  of,  Appendix,  p.  781. 

CANADIAN  CORPORATION  OPERATING  FERRY,  213. 

CANAL  COMPANY, 

aid  to  is  lawful  public  purpose,  390. 

CERTIORARI, 

not  adequate  remedy  to  bar  relief  in  Federal  courts,  624, 

not   adequate   remedy  where   facts   must  be  shown   de   hors   the 

record,  624. 
review  of  valuation  of  assessors  by,  346. 
what  hearing  is  sufficient  in  review  by,  346. 

CLASSIFICATION  IN  TAXATION, 

admits  of  allowing  appeal  to  only  one  class  of  taxpayers,  509. 

admits  of  allowing  assessors  two  chances  to  value  corporate  prop- 
erty, 509. 

admits  of  exemption  of  producers  in  license  taxation,  511. 

between  commission  merchants  and  produce  dealers  invalid,  528. 

between  gas  companies  and  other  manufacturing  companies,  528. 

between  manufacturing  and  quasi  public  corporations  and  other 
corporations  valid,  528. 

between  merchants  doing  business  in  different  parts  of  city  void, 
528. 

between  non-resident  insurance  associations  and  resident  insur- 
ance corporations  valid,  528. 

between  races  as  to  expenditure  of  school  funds,  when  ralid,  533. 

between  wholesale  and  retail  merchants  valid,  528. 

by  exemption  for  efficiency,  521. 

by  exemption  of  classes  valid,  520. 

for  police  legislation,  compared  with,  512. 

compelling  county  auditors  and  treasurers  to  assess  and  collect 
taxes,  640. 

difficulty  in,  513. 

discriminating  against  negroes  in  expenditure  of  school  funds 
void,  531,  533. 

discrimination  between  residents  and  non-residents  is  invalid,  527. 
See  DiscuiMiNATioN. 

distinguished  from  illegal  discrimination,  503,  504,  507,  520,  523. 
See  Discrimination'. 

equal  protection  of  laws  recognizes  right  of,  503,  504,  505. 

exempting  mortgages  of    quasi   public  corporation  is  not,  523. 


1086  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

CLASSIFICATION  IN  TAXATION— Continued, 
exempting  some  of  class  invalid,  516,  520,  528. 
inequality  of  burden  caused  by,  does  not  establish  invalidity  of 

tax,  514. 
in  imposition  of  penalties  upon  delinquents,  355. 
in    inheritance   taxation   by    discrimination    against   non-residents 

void,  515. 
in  inheritance  taxation  by  exemptions,  515,  516. 
in  inheritance  taxation  held  to  violate  State  constitutions,  515. 
in  license  taxation  according  to  residence  of  party  void,  528, 
in  license  taxation  by  amount  of  sales  valid,  518. 
in  license  of  occupation  taxation  discussed  by  Supreme  Court,  530. 
involves  power  to  assess  different  classes  by  different  methods,  508, 

454. 
must  not  rest  on  mere  ownership,  523. 
necessity  for,  in  levy  of  general  property  tax,  502. 
of  inheritances,  Supreme  Court  on,  517. 
of  inheritances  valid,  516,  517. 
of  foreign  corporations  valid,  510. 

of  merchants  according  to  number  of  clerks  employed,  525. 
of  peddlers  exempting  those  having  served  in  army  or  navy  Toid, 

528. 
of  polls  exempting  persons  who  voted  at  last  election  void,  528. 
of  property  by  amount  invalid,  519. 
plenary  power  of  legislature  to  make,  503,  504,  505. 
reasonable  basis  for,  essential,  512,  513,  514. 
required  to  be  reasonable  by  guaranty  of  due  process  of  law,  335. 
requirement  that  defendant  railroad  pay  plaintiff's  attorney's  fee, 

when  valid,  513. 
requirements  of  State  constitutions  as  to,  503. 
requiring  license  and  bond  from  liquor  dealers,  528. 
special  assessment  of  railroads  to  pay  railroad  commissioners  is 

valid,  509. 
special  method  of  assessing  railroad  property  sustained,  509. 
specification  of  corporate  securities  constitutes  valid,  496. 
specification  of  employers  of  foreign-born  males  is  not,  526. 
specification  of  railroads  constitutes  valid,  507,  520,  523. 
summary  of  requirements  of  equal  protection  of  laws  as  to,  534. 
to  provide  summary  process  for  enforcement  of  delinquent  tax,  353. 
valid  in  criminal  statute,  512. 
what  constitutes  reasonable  basis  for,  523,  534. 

-COAL  DUMPED  ON  DOCKS  FOR  TRANSSHIPMENT,  NOT  IN  TRAN- 
SIT AND  TAXABLE,  133. 


INDEX.  1087 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

COLLECTOR  OF  TAXES. 

reimbursing  collector  for   money  recovered   from  him  on   a  legal 

tax,  650n. 

suit  against  does  not  extend  to  successor,  650. 

COLORADO, 

State  system  of,  Appendix,  p.  791. 

COMMERCE,. 

among  the  States  a  practical  conception,  154. 

Congressional  consent  to  State  regulation  of,  107. 

construction  of  term.  111. 

extent  of  national  control  over,  111. 

imports  and  exports.     See  Imports  and  Exports. 

includes  navigation  or  navigable  rivers  within  States,  111. 

interstate.     See  Interstate  Commerce. 

national   control   over,   comprehensive   limitation   of   State   taxing 

power,  110,  112,  114. 
navigation  of  navigable  rivers  within  States,  111. 
necessity  for  national  control  over,  108. 
necessity  for  national  control  over,  Madison  on,  109. 
necessity  for  national  control  over,  Marshall,  C.  J.,  108. 
necessity  for  national  control  over,  Justice  Miller  on,  108. 
regulation  of  by  State  during  non-action  of  Congress,  115,  116. 
tax  on  importer  is  regulation  of,  114. 

COMMERCIAL  BROKERS, 

not  taxable  for  doing  business  exclusively  for  non-residents,  152, 

153. 
taxable  for  doing  general  commission  business,  154. 

COMMERCIAL  TRANSIT, 

property  in,  not  subject  to  State  tax,  131. 
what  constitutes,  131,  132. 
when  terminated,  135. 

COMPUTING  MILEAGE  OF  INTERSTATE  RAILROAD  FOR  PUR- 
POSES OF  ASSESSMENT  OP  ITS  FRANCHISE,  275. 

CONCLUSIVENESS  OF  CONSTRUCTION  OF  STATE  LAW  BY  STATE 
COURTS,  65. 

CONDITIONS, 

for  admission  of  foreign  corporations.     See  FoRFn«\  Corporations. 

CONFLICT  OF  STATE  AND  CONGRESSIONAL  REGULATION  OF 
COMMERCE,  111,  112. 


1088  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

CONGRESS, 

acts  of,  authorizing  State  taxation  of  national  banks,  281,  282. 

act  of,  enforcing  Fourteenth  Amendment,  332. 

consent  of  Congress  for  State  taxation  of  U.  S.  franchise,  32. 

effect  of  act  of,  relating  to  telegraph  company,  227,  235,  269. 

effect  of  coasting  license  granted  by.  111,  207. 

effect  of  license  to  build  interstate  bridge  granted  by,  215. 

judiciary,  when  concluded  by  decision  of,  638. 

power  of,  to  acquire  lands  in  State,  21. 

power  of,  to  regulate  commerce.     See  CoMMEaiCE. 

taxing  power  of.     See  Federal  Taxing  Poweb. 

validity  of  appropriation  by,  to  pay  bounty,  556,  557. 

validity  of  appropriation  by,  to  pay  moral  claims,  557. 

CONNECTICUT, 

State  tax  system  of,  Appendix,  p.  794. 

CONSOLIDATION, 

of  corporations  affecting  exemptions,  101. 
of  railroad  companies,  199. 

CONSTITUTION, 

Of  Unitb2)  States, 

Constitutional  Amendment  Sixteen,  561. 
constitutional  prohibition  against  tonnage  tax,  217. 
constitutional  prohibition   of  exemption  not  nullified  by  con- 
tract, 75. 
constitutionality  of  income  tax  of  1893  denied,  560. 
constitutionality  of  income  tax  of  1913  sustained,  563. 
effect  upon  Federal  power  of  taxation.    See  Congress. 
effect  upon  State  power  of  taxation.    See  State  Power  of. 
express  limitations  upon  Federal  taxing  power,  4. 
is  the  supreme  law  of  the  land,  5. 
express  limitations  upon  State  taxing  power,  2,  3,  107. 
taxing  power  of.     See  Federal  Taxing  Power. 

Of  State, 

classification,  503. 

in  relation  to  special  assessments,  395. 

operates  as  restraint  upon  power  of  State  legislature,  395. 

requirement  of  uniform  rate  as  to  power  of,  503. 

CONSTRUCTION  OF  STATE  LAW, 

decision  of  State  court  that  only  State  franchises  are  taxed,  con- 
clusive, 33. 

decision  of  State  court  that  State  tax  law  requires  hearing,  con- 
clusive, 347. 


INDEX. 


1089 


(References  are  to  sections,  except  in  appendix  references  are  to  pages) 
CONSTRUCTION  OF  STATE  LAW— Continued. 

independent  judgment  of  Supreme  Court  as  to   existence  of  con 

tract.     See  Contracts. 
of  legislative  power  to  exempt,  75. 
of  specific  legislation  as  effected  by  general  law,  657. 
of  State  courts  binds  U.  S.  Supreme  Court,  65,  66,  67,  425. 
of  telegraph  company  lines  on  post  roads  affecting  franchise,  34. 

CONTRACT, 

between  citizens  and  taxpayers  in  municipality  does  not  exist,  83. 

change  of  remedy  not  impairment  of  contract,  55,  81. 

contract  right  involved  in  admitting  foreign  corporations  to  State, 

182. 
contract  rights  exempting  corporations  from  taxation,  186. 
contractual  and  governmental  legislation  distinguished,  82. 
decision  of  State  court  on.  Supreme  Court  when  concluded  by,.  64, 

65,  66. 
decision  of  State  court  that  State  constitution  authorizes  only  re- 

pealable  exemption,  67. 
does  deduction  of  tax  from  interest  on  corporation  bonds  impair 

obligation  of,  78,  456. 
for  exemption  when  held  to  be  creating,  76. 
impairment  of  contract  determined  by  Supreme  Court,  70. 
impairment  of  contract,  how  may  be  occasioned,  68,  69,  8"!,  106. 
•       impaired  by  wrongful  judicial  construction,  70. 

impairment  of  obligation  "of  the  contract   in  exclusion   of  foreign 

corporation,  180. 
judgment  against  municipality  for  tort  of  mob  is  not,  91. 
judgment  on  exempted  bonds  not  taxable  by  State,  79. 
Justice  Miller  on  legislative,  87. 
legislative  grant  is,  43,  44,  72,  75. 
municipal  charter  not.     See  MtiNiciPALiTY. 

municipal  tax  on  municipal  bonds  held  by  non-residents  void,  79. 
nature  of  governmental,  82. 

not  impaired  by  retrospective  governmental  legislation,  86. 
obligation  of,  what  is,  71. 
of  exemption.     See  Exf;aiptiox. 
of  exemption,  what  constitutes,  71,  72. 
of  municipality  lacking  in  public  purpose  void,  389. 
of  State  to  receive  bank  notes,  etc.,  for  taxes,  52,  56. 
only  impaired  by  subsequent  law,  68. 
question  of,  when  properly  presented   to  iiulependi'nt  judgment  of 

Supreme  Court,  63. 
right  to  tax  as  remedy,  80. 
tax  receivable  coupons,  when  not  taxable,  56,  79. 


1090  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

CONTRACT— Continued. 

U.  S.  Supreme  Court  determines  existence  of,  61,  70. 

what  constitutes   adequate  remedy  to   compel   receipt   of  coupons, 

57,  59,  60. 
when  law  impairs  obligation  of,  71. 
when  Supreme  Court  leans  to  agreement  with  State  court  as  to,  66. 

COPYRIGHTS, 

taxable  by  State,  36. 

CORPORATE  FRANCHISE, 
defined,  18. 

exercise  of,  in  State  taxable  by  State,  277. 
grant  of,  compared  to  admission  of  foreign  corporation,  168. 
of  foreign  corporation  engaged  in  importing  business,  184. 
of  foreign  corporation  holding  U.  S.  bonds  valid,  183. 
of  interstate  carrier,  tax  on,  measured  by  gross  receipts,  251,  254. 
of  national  banks  not  taxable  by  State,  285. 
of  railroad  is  property,  73. 
,  tax  on,  distinguished  from  property  tax,  17. 

CORPORATION, 

capital  stock  does  not  include  surplus,  104. 

elements  of  taxable  value  in,  102. 

exemption  of  shares  does  not  extend  to  capital  stock,  103,  104. 

foreign.     See  Foreigx  Corporations. 

franchise  of.     See  Corporate  Fraxcihse. 

is  person  under  Fourteenth  Amendment,  167,  330. 

partial  distribution  of  surplus  earnings  of  corporation   outside  of 

State  not  assessable,  275. 
not  citizens  under  U.  S.  Constitution,  167, 
not  "subject"  under  U.  S.  Treaty,  172. 
shares  of.     See  Shares. 
valuation  of  capital  stock  by  adding  market  value  of  stocks  and 

bonds,  279. 
what  constitutes,  171. 
whether  on  property  and  shares  of,  is  double  taxation,  299. 

COTTON, 

when  bought  and  sold  for  future  delivery  held  not  to  be  interstate 
commerce,  166. 

COUPONS, 

license  to  sell  liquor  not  payable  in  tax  receivable,  59. 
tax  receivable,  not  taxable.    See  Contracts. 

COURT  OF  APPEALS, 

when  judgment  not  final,  656. 


INDEX.  1091 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

CREDITS, 

due  foreign  life  insurance  companies,  45G. 

held  not  taxable,  454. 

under  Louisiana  code  held  taxable,  453. 

CURTIS  ACT,  29. 

D 

DEBTS, 

of  United  States,  what  are.    See  United  States. 

DEDUCTION, 

of  mortgage  in  assessed  land,  442. 

DELAWARE, 

State  system  of,  Appendix,  p.  796. 

DEPOSITS, 

in  bank  taxable,  307. 

of  foreign  life  insurance  company  taxable  by  State,  464. 

DILEMMA, 

of  courts  in  remedying  discrimination  by  relative  undervaluation 
of  other  property.     See  Valuation. 
DIRECT  TAX, 

capitation   tax   is,   560. 

Congress  may  impose,  on  District  of  Columbia,  598. 
constitutional  limitation  on  power  of  Congress  to  levy,  559. 
definition  of,  in  Knowlten  v.  Moore,  564. 
direct  taxes  defined  by  Supreme  Court,  567. 
in  economic  and  constitutional  senses  distinguished,  565. 
inheritance  tax  is  not,  564. 
need  not  extend  to  territories,  568. 
summary  as  to  what  constitutes,  567. 
tax  on  franchise  granted  by  State,  not,  584,  585. 
tax  on  income  from  land  was,  562. 
tax  on  income  from  personal  property,  560. 

tax  on  real  or  personal  property  "solely  because  of  general  owner- 
ship" is,  564. 
tax  on  sales  made  by  exchange  or  boards  of  trade  is  not,  590. 

DISCONTINUANCE  OF  BUSINESS. 

by  foreign  life  insurance  company,  181. 

discretionary  and  mandatory  requirements  distinguished,  373. 

DISCRIMINATION  IN  TAXATION. 

against   national   bank,   difference   of  tax-rate   may   not   constitute, 
309,  514. 


1092  INDEX. 

(References  are  .to  sections,  except  in  appendix  references  are  to  pages) 

DISCRIMINATION    IN    TAXATION— Continued. 

against  national  bank,  differential  taxation  of  personalty  may  not 

be,  318. 
against  national  bank,   inequality   in  valuation   must  be  habitual 

and  intentional,  314. 
against  foreign  products  and  non-residents  forbidden,  143. 
against  holders  of  national  bank  stock,  303,  304. 
against  national  bank,  charter  exemption  of  State  banks,  295. 
against  national  bank,  assessing  shares  above  par  and   money  at 
interest  at  par.     See  Other  Moneyed  Capital,  317. 
against  national  bank,  deduction  for  U.  S.  securities  from   other 

personalty,  305. 
against    national    bank,    deduction    of    debts    from    other    moneyed 

capital  is,  303. 
against  national  bank,  deduction  of  debts  of  unincorporaed  banks 

is  not,  305. 
against  national  bank,  double  taxation  may  not  be,  320. 
against  national  bank,  exemption  must  be  of  other  moneyed  capital 

to  constitute,  298. 
against  national  bank,  formal  resolution  of  assessors  not  necessary 

to  constitute,  316. 
against  national  bank,  making  bank  pay  tax  for  shareholders  is 

not,  286. 
against  national  bank,  mere  error  of  judgment  is  not,  315. 
against  national  bank,  must  be  substantial,  308. 
against  national  bank,  ordinary  State  exemptions  are  not,  295. 
against  national  bank,  partial  exemption  of  "other  moneyed  capi- 
tal" may  not  be,  297. 
against    national    bank,    relative    over-valuation    of    national    bank 

shares  is,  312. 
against  national  bank,  rules  of  Supreme  Court  as  to,  313. 
against  national   bank,   statute   authorizing   discriminating   deduc- 
tion of  debts  not  void,  304. 
against  national  bank,  through  assessor's   failure  to  assess  other 

moneyed  capital,  306. 
against  national  bank,  through  difference  in  valuation,  312. 
against  national  bank,  through  taxation  of  State  banks  on  capital, 

292. 
against  national  bank,  where  bank  is  not  assessed  higher  than  true 

value,  313. 
against  national  bank,  when  failure  to  allow  deduction  for  debts 

303. 

against   national    bank,    when   allegations    of   exemptions    require 
answer,  296. 


INDEX.  1093 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

DISCRIMINATION    IN    TAXATION— Continued. 

against  national  bank,  where  only  taxables  are  realty,  live  Btoclc 
and  bank,  shares,  288. 

against  non-residents  condemned  in  State  courts,  144. 

against  non-residents  held  illegal  by  Supreme  Court,  143. 

against  products  of  another  State  void,  145,  146. 

between  classes,  when  illegal.     See  Classification. 

between  foreign  and  domestic  corporations,  505. 

deduction  for  corporate  realty  from  assessment  of  resident  stock- 
holders only  not,  460. 

denial  to  railroad  alone  of  right  to  deduct  for  mortgages  on  realty 
is,  524. 

difference  in  taxation  not  necessarily  discriminative,  309, 

discriminating  tax  on  foreign  interstate  carriers,  196. 

discrimination  in  valuation  of  statute,  317. 

forbidden  by  Fourteenth  Amendment,  332,  334. 

general  principle  determining  invalid  classification,  523. 

in  conditions  for  admission  of  foreign  corporations.     See  Fobeioit 

COBPORATIOXS. 

in  favor  of  foreign  products  invalid,  527. 

in  peddler's  licenses  void,  150. 

in  violation  of  State  constitution,  549. 

in  wharfage  charge,  221. 

must  be  more  than  incidental  disadvantage,  157. 

of  interstate  importation  void,  121,  123. 

proof  of,  552. 

proof  of,  by  cross-examination  of  members  of  Board  of  Equaliza- 
tion, 550. 

systematic  discrimination  by  under-valuation  of  other  property  il- 
legal, 551. 

what  constitutes,  146,  157. 

DISTRAINT, 

consistent  with   due  process  of  law,   354. 

for  enforcement  of  tax  on  national  banks,  285,  286,  321. 

DISTRESS  WARRANT, 

for  collection  of  tax.    See  Due  Pbocess  of  Law. 

DISTRICT  OF  COLUMBIA. 

plenary  taxing  power  of  Federal  government  over.     See  Federal 

TAXI.Vfl   PowEit. 
system  of  taxation  in.    Sec.  598. 

DISTRICT  COURTS, 

concurrfnt  jurisdiftion  with  Court  of  Claims  in  action  against  IT. 
S.  to  recover  illegal  taxes,  654. 


1094  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

DIVIDEND, 

definition  of  corporate,  77. 

DOING  BUSINESS, 

business  domicile  essential  to  constitute,  194. 

incorporation  is  decided  by  State  court,  65. 

holding  stock  in  domestic  company  is  not,  190,  191. 

maintaining  paraphernalia  of  pipe-line  is,  192. 

maintaining  sales  agency  and  office  is,  192. 

making  single  contract  is  not,  188. 

mere  ownership  of  property  in  State  is  not,  189. 

sending  goods  into  State,  or  sale,  is  not,  156. 

State  tax  for  privilege  of.     See  Foreign  Corporations. 

conditions  for,  187. 

transaction  of  interstate  commerce  is  not,  188. 

whether  holding  interests  in  limited  partnership,  191,  193. 

DOMICILE, 

business,  essential  to  constitute  "doing  business"  in  State,  192,  194. 

burden  of  proof  is  on  person  claiming  to  have  changed,  477,  478. 

business  and  habitancy  in  State  laws,  synonymous  with,  475,  479. 

definition  by  Shaw,  C.  J.,  475. 

definition  by  Justice  Story,  475. 

due  process  of  law  requires  that  personal  taxation  shall  be  only 

at,  480. 
fact  in  attempt  must  unite  to  create,  479,  480. 
of  owner  or  actual  situs,  204. 
motive  in  change,  immaterial,  478. 
person  can  have  only  one,  480. 

personalty  in  other  jurisdictions  generally  not  taxed  at,  482. 
personalty  located  elsewhere  in  same  State,  taxable  at  owners,  486. 
right  to  change,  477. 
term  residence  employed  in  sense  of,  479. 

DOUBLE  TAXATION, 

as  controlled  by  Federal   Constitution,  569. 
,       at  actual  situs,  475. 

by  assessments  on  same  property  of  different  persons,  488. 

by  competing  State  authorities,  489. 

by  inheritances,  492,  493. 

by  levying  general  taxation  and  special  assessments  on,  493. 

by  State  of  same  property  to  same  person,  490,  501. 

by  State  and  Federal  government,  493. 

can  only  be  avoided  by  interstate  comity,  490. 

driving  sheep  through  different  States  not  subject  to  taxation  in 
each  State,  131. 


I^^)EX.  1095 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

DOUBLE    TAXATION— Continued. 

of  corporations,  what  constitute,  461,  484. 

of  national  banks,  when  not  discrimination,  319,  320. 

presumption  that  legislature  does  not  intend,  463,  487. 

same  property,  501. 

through  taxation  of  property  at  domicile  of  owner,  and  at  actual 

situs,   475. 
when  does  not  violate  requirement  of  due  process  of  law,  488. 

DRAINAGE  DISTRICT, 

assessment  for  defraying  preliminary  expenses  of,  400. 

DRUMMER, 

delivery  of  goods  sold  by,  exempt  from  State  tax,  154. 

from  other  States  not  subject  to  license  tax,  148,  149,  150,  151,  152. 

what  constitutes,  159,  160. 

DUE  PROCESS  OF  LAW, 

as  related  to  notice  of  assessment,  345. 
as  related  to  right  of  redemption,  371. 
defined  by  Story,  339. 
defined  by  Webster,  339. 

distress  warrant  issued  by  U.  S.  Treasury  against  defaulting  col- 
lector is,  340. 
does  not  require  judicial  hearing,  340,  364. 
does  not  require  retrial,  346. 
does  not  require  review  by  certiorari,  346. 
in  assessment  of  trustees,  372. 
in  inheritance  tax,  492. 
in  Michigan  R.  R.  taxation,  375. 
in  taxation,  essentials  only  considered,  368. 
is  the  law  of  the  land,  339. 

Justice  Miller  on  meaning  of,  in  tax  procedure,  340. 
no  want  of  due  process  of  law  when  sale  is  subject  to  redemp- 
tion, 371. 
required  in  tax  procedure,  335. 
requires  notice  and  hearing  in  special  assessments.     See  Special 

ASSKS.SMKXT.S. 

requires  notice  and  hearing  in  taxation,  when.  See  Notice  and 
Heaiung. 

requires  public  purpose  for  taxation,  376. 

requires  that  compensation  be  made  for  condemned  private  prop- 
erty, 338. 

scope  of  guaranty  of,  333. 

summary  procedure  for  collection  of  tax  consistent  with,  340,  353. 
364.  417. 


1096  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

DUE   PROCESS    OP   LAW— Continued. 

to  be  construed  in  light  of  common  law,  340. 
under  Fifth  and  Fourteenth  Amendments,  327,  334,  338,  394. 
when  legislative  regulation  of  charges  is  denial  of,  335. 
when  not  denied,  by  erroneous  decision  of  State  court,  328. 

DUTY, 

jurisdiction    in    United    States    District   Court   over   suits    arising 

under  war  power,  571. 
levy  of  custom,  consistent  with  requirement  of  uniformity,  570. 
meaning  of,  in  U.  S.  Constitution,  559. 
of  boards  of  eualization,  357. 

on  imports  from  and  exports  to  ceded  islands,  572. 
position  of  territory  acquired  by  conquest  as  to  imposition  of.     See 

Territory. 
reciprocity  powers  as  to  levy  of  custom,  conferred  on  President  of 

United  States  valid,  577. 
remedial  law  for  recovery  of  illegally  paid,  659. 
under  act  imposing,  602. 


under  Foraker  Act,  573. 


E 


EARNINGS, 

capitalization  of,  distinguished  from  measuring  excise  by,  257. 

eminent  domain  and  special  assessments,  432. 

tax  on  gross.    See  Interstate  Carriers. 

tax  on  gross,  distinguished  from  tax  on  freight,  245,  248. 

tax  on  net.    See  Interstate  Carriers. 

ENJOINING  FEDERAL  TAXES  NOT  ALLOWED,  649. 

EQUAL  PROTECTION  OP  THE  LAWS, 

does  not  prohibit  valuation  of  railroad  property  by  unit  rule,  508. 
See  Unit  Rule. 

does  not  require  iron  rule  of  equal  taxation,  504. 

extends  Federal  protection  over  existing  rights,  501. 

■guaranteed  to  persons  in  jurisdiction  only,  331. 

guaranty  of,  directed  against  arbitrary  discrimination  in  taxation, 
501. 

in  regard  to  street  railroads,  529, 

In  regard  to  tax  procedure,  532. 

in  regulation  of  charges,  335. 

meaning  and  scope  of  guaranty  of,  333,  500. 

permits  adjustment  -of  tax  system  to  subjects  taxed,  502. 

requirements  of,  inherent  in  taxation,  501. 


INDEX.  1097 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

EQUAL    PROTECTION    OF    THE    LAWS— Continued. 

requirements  of,  as  to  legislative  classification,  503.     See  Classifi- 

CATIOX. 

requires  apportionment  of  tax  according  to  uniform  standard,  501, 

503,  510. 
requires  equality  of  valuation,  535,  548. 

requires  that  classification  for  taxation  be  reasonable,  313,  335. 
right   of  appeal   from   decision   of  reviewing  board   not   essential 

to,  509. 
secures  equal  benefit  of  laws,  532. 
taxation  of  employers  of  foreign-born  males  is  denial  of,  526. 

EQUALIZATION, 

of  all  assessments  by  State  Board  of  Equalization,  357. 
State  Board  of  Equalization  an  instrumentality  for  raising  public 
revenue,  547. 

EQUITY, 

equitable  relief  barred  by  collusion,  629. 
jurisdiction  of,  in  special  assessments,  438. 
no  jurisdiction  to  levy  a  tax,  639. 

only  intervenes  where  there  is  an  obvious  violation  of  law,  547. 
procedure  in,  625. 

right  to  proceed  in  under  rules  in  Federal  court,  323. 
right  to  proceed  in,  when  such   remedy  is  given  by  State  stat- 
ute, 323. 

ESTATES  OF  DECEDENT, 

inheritance  of,  subject  to  double  taxation,  493. 

judgment  against  non-resident  executor  for  back  taxes  on,  356. 

personalty  of,  inherited  by  non-resident,  subject  to  State  tax,  446, 

452. 
personality  of,  who  was  non-resident,  subject  to  State  tax,  493. 
estate  or  inheritance  tax  of  U.  S.,  Appendix,  p.  983. 

ESTOPPEL, 

of  municipality  by  refusing  to  hear  objections  to  public  improve- 
ments, 426n. 
of  taxpayer  by  his  return  of  assessment,  361. 

EVIDENCE, 

examination  of  members  of  State  Board  of  Equalization  In  regard 

to  value  in   taxation,  550. 
records  of  State  Board  of  E>]uaIizatioD,  551. 

EXCEPTIONAL  CIRCUMSTANCES, 

requires  deduction  under  unit  rule.     Sec  Unit  Rui.k. 


1098  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

EXCISE  TAX, 

as  an  exercise  of  police  power  sustained,  473. 

defined,  251,  559. 

inheritance  tax  is,   564. 

levied  on  interstate  carriers.     See  Interstate  Carrieks. 

Federal  may  be  increased,  592. 

meaning  of,  in  constitutional  grant  in  taxing  power  to  Congress, 

559. 
stamp  tax  is,  559. 

tax  levied  by  Congress  on  manufactured  tobacco  is,  559. 
tax  on  sales  made  at  commercial  exchanges  is,  559. 
miscellaneous  Federal  taxes,  Appendix,  p.  991. 

EXEMPTION  FROM  STATE  TAXATION, 

agreement  with  municipality,  88. 

as  affected  by  consolidation  of  corporations,   101. 

clause  of  bank  charter  containing  exemption  covenant  discussed,  72. 

contract  of,  charter  provision  in  lieu  of  all  taxes,  sustained,  44. 

contract  of,  conditional  exemptions,  69-74,  93,  94. 

contract  of,  consideration  essential,  50-90. 

contract  of,  consideration  need  not  be  mentioned  in  grant,  46. 

contract  of,  consideration  presumed,  46. 

contract  of,  enforced  as  to  property  acquired  after  constitutional 
repeal  of  power  to  exempt,  92. 

contract  of,  extends  to  property  of  eleemosynary  corporation  held 
for  revenue,  51. 

contract  of,  judgment    on    exempted    bond,    exempted,    80. 

contract  of,  not  implied,   44,  88,  93. 

contract  of,  possibility  of  abuse  of  exemption  does  not  affect  valid- 
ity of,  50. 

contract  of,  power  of  State  to  make,  44,  46. 

contract  of,  strictly   construed    against    grantee,    93. 

contract  of,  validity   established,   43 

contract  of,  what  constitutes,   72. 

contract  of,  with  One  constituent  of  consolidated  corporation,  47- 
101. 

dependent  upon  relations  to  government,  13. 

extending  to  State's  assumption  of  business  of,  27,  28. 

from  taxation  by  act  of  Indian  nation,  29. 

from  taxation  involving  power  of  abuse,  56. 

grant  of,  is  contract,  43. 

implication  of,  from  payments  for  franchise,  46n. 

not  assignable,  98. 

application  of  to  Territories,  13. 

of  certain  telephone  companies  valid,  522. 


INDEX.  1099 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

EXEMPTION  FROM  STATE  TAXATION— Continued. 

of  Indian  Reservation.     See  Indian  Resekvations. 

of  interstate  passengers.     See  Interstate  Commerce. 

of  Jesuit  Society  owning  cattle  denied,  27. 

of  imported  original  packages,  125-127. 

of  property  of  U.  S.     See  Lands. 

of  St.  Louis  R.  R.  Co.  resulting  from  provisions  of  liquor  law,  580. 

power  of  legislature  to  make  contract  of  exemption,  75. 

specific   exemptions  and  general  legislation  distinguished,   76. 

what  property  exempt  in  hands  of  lessee  or  assignee,  99. 

when  an  exemption  is  an  arbitrary  classification,  520. 

when  applicable  to  licensee  or  assignee,  99. 

when  certain  exemptions  give  vested  right,  33. 

when  directly  interfering  with  interstate  commerce,  146. 

when  discriminatory,  146. 

when  not  extended  to  party  not  entitled  to  rely  thereon,  100. 

when  not  revived  by  subsequent  statute,  101. 

of  U.  S.  agencies.    See  State,  Taxing  Power  of. 

EXEMPTION  FROM  TAXATION, 

constituting  discrimination  against  national  banks.    See  Discbimt- 

NATION, 

constitutional  provision  forbidding,  limited  to  affirmative  exemp- 
tions, 496. 

constitutional  provisions  forbidding,  violated  by  indirect  exemp- 
tions, 498. 

contract  of,  one  subject  of  corporate  taxation.     See  Corporations. 

does  not  extend  to  new  ,stock  issued  after  repeal,  92. 

does  not  extend  to  special  assessments,  105. 

for  purposes  of  classification.     See  Classification. 

governmental,  repealable,  76. 

incident  to  selection  of  subjects  for  taxation,  521. 

is  personal  immunity,  97. 

Jesuit  Society  owning  cattle,  26n, 

lost  by  change  of  corporate  business,  95. 

lost  by  repeal  before  incorporation,  96. 

money  held  by  U.  S.  in  trust,  when  exempt,  27. 

object  of  exemption  must  be  beneficial   to  community,  50. 

obligation  to  government  in  relation  to  exemptions.  13. 

of  native  products  held  not  substantial  discrimination,  157. 

of  non-interest  bearing  bonds,  valid,   521. 

orders  for  purchase  or  sale  on  future  delivery  not  exempt  from 
taxation,  166. 

personal  property  given  by  U.  S.  to  Indians,  when  exempt,  27. 


1100  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

EXEMPTION  FROM  TAXATION— Continued. 

power  to  exempt  by  legislature  strictly  construed,  75. 
power  of  legislature  to  make  exemption  contract,  75,  76. 
power  reserved  to  alter,  amend  or  repeal,  92. 
varying  policies  of  State  as  to,  521. 
when  exemption  ceases,  26. 

EXPORTS, 

duty  on,  what  constitutes,  112. 

inheritance  tax  on  aliens,  not  tax  on,  136, 

in  relation  to  State  taxing  power,  138. 

intent  to  export  insufBcient  to  exempt,  130. 

license  tax  on  foreign  exchange  broker,  not  tax  on,  137. 

tax  on,  forbidden,  574. 

tax  on  foreign  B/L  is  tax  on,  575. 

tax  on  tobacco  intended  for  exportation  valid,  574. 

term  restricted  to  purchase  in  foreign  commerce,  119. 

EXPRESS  COMPANIES, 

valuation  of.     Under  Unit  Rule,  See  Unit  Rule. 
property  of,  considered  is  unity  in  use,  for  purpose  of  valuation, 
268-276. 

F 

FEDERAL  CORPORATIONS, 

federal  franchises  and  State  franchises  distinguished,  18,  34. 

surety  company  as  Federal   instrument,   35. 

Federal  franchise  not  given  to  telegraph  companies  by  Act  of  July 
24,  1866,  34. 

franchise  national  defined,  32. 

franchise  when  granted  by  U.  S.  not  taxable  by  State,  32. 
FEDERAL  COURTS, 

jurisdiction  of  Court  of  Appeals,  605. 

reluctant  to  adjudge  State  statutes  until  considered  by  State  tribu- 
nal, 375. 
FEDERAL  ESTATE  TAX,  Appendix,  p.  983. 
FEDERAL  MUNITIONS  TAX  of  1916,  Appendix,  p.  990. 
FEDERAL  PROCEDURE, 

Federal  taxes  cannot  be  enjoined,  649. 

fraud  as  warranting  injunction,  619. 

habeas   corpus    cannot   be   used   to    perform   function    of   writ   of 
error  or  appeal,  627. 

habeas  corpus    permissible    to  release    State's  prisoner    only   in 
urgent  cases,  627. 


INDEX.  1101 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

FEDERAL,  PROCEDURE— Continued. 

habeas  corpus    will  issue  when    party  confined    for  non-payment 

of  illegal  tax,  627. 
in  actions  to  recover  illegal  taxes  summarized,  660. 
judiciary  act  of  1789,  336. 

Judiciary  code,  amendment  of  permitting  review  by  certiorari,  614. 
party    admitting    to    correctness    of   his    own    tax    cannot    invoke 
Federal  Procedure,  608. 
FEDERAL  QUESTION, 

as  to  right  of  removal  to  U.  S.  Circuit  Court    See  Jukisdiction  of 

U.  S.  C.  C. 
decision  against  for  error  in  assessment  does  not  raise  Federal 

question,  607. 
determination  of  which  residence  is  the  domicile  does  not  raise,  480. 
denial  to  railroad  alone  of  right  to  deduct  for  mortgage  on  realty 

raises,  332. 
doubtful  whether  misdescription  in  tax  procedure  involves,  425. 
first  raised  in  petition  for  rehearing,  606. 
illustrative  cases  of  what  is  not,  614. 
inequality  of  valuation  as,  548. 
is  claim  of  right  or  exemption  under  U.  S.  Constitution  and  laws, 

601-607. 
method   followed  by   State  auditor  in  reassessing  personalty  not, 

356. 
not  presented  by   decision   of  State  tax  tribunal  on   question   of 
fact,  425. 
FEDERAL  POWER, 

over  District  of  Columbia,  598. 
over  territories.     See  Terkitort. 

two  modes  of  procedure  to  resist  taxation  in  Federal  Court,  601. 
Court  on.     See  Supi{eme  Coxnix. 
FEDERAL  REPORTS, 

value  of  the  right  involved  as  affecting  jurisdiction,  603. 
FEDERAL  TAXING  POWER, 

as  to  uniformity  required  in  indirect  taxation  levied  under.     See 

U.VD'OKMITY. 

bonds  required  by  law  to  be  given  to  State  exempt  from,  579. 

coextensive  with    territory  of  U.   S.,   568. 

Constitutional   limitations  on   purpose  of,  addressed   to  discretion 

of  Congress,  554-558. 
difficult  for  courts  to  review  exercise  of,  554-558. 
diminution  of  salaries  by  exercise  of,  588. 

(liHtinguished  from  State  (axitiK  power  under  U.  S.  ConBtituMon,  2. 
exports  not  Bubject  to.    See  Exi'outh. 


1102  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

FEDERAL  TAXING  POWER— Continued, 
express  limitations  upon,  559. 
extends  to  property  of  non-resident  aliens,  593. 
extends  to  property  of  residents  invested  abroad,  594. 
extends  to  selection  of  means  for  attainment  of  express  objects, 

555. 
extends  to  tax  on  sales  made  on  boards  of  trade,  590. 
for  what  purposes  may  be  exercised,  554. 
franchise  granted  by  State  subject  to,  585. 
^  granted  by  U.  S.  Constitution,  553. 
imports  from  one  State  to  another  not  subject  to,  517. 
in  relation  to  State  authority,  580. 

justifies  tax  on  bank  for  paying  out  municipal  notes,  585. 
license  imposed  under,  gives  no  rights  against  State  police  power, 

586. 
may  be  exercised  in  what  forms  of  taxation,  559.    See  Tax. 
not  subordinate  to  treaty  power,  578. 
over  agencies  of  municipality.     See  Municipaijty. 
over  foreign  and  other  interstate  commerce  compared,  591. 
over  inheritances.     See  Inheritance  Tax. 
over  interstate  commerce.     See  Interstate  Commerce. 
relation  of,  to  State  taxing  power.    See  State  Taxing  Power. 
remedial  law  and  Federal  Taxation,  648. 
salary  of  State  judicial  oflBcers  exempt  from,  579. 
State  agencies  and  instrumentalities  exempt  from,  579. 
to  be  exercised  with  direct  reference  to  existing  trade  conditions, 

590. 
to  levy  direct  tax.     See  Direct  Tax. 
to  levy  duties.     See  Duty. 

to  pay  debts  of  U.  S.  557-559.    See  United  States. 
to  provide  for  "general  welfare  of  the  United  States,"  555.     See 

United  States. 
use  of,  to  tax  out  of  existence,  554. 

FEDERAL  AND  STATE  TAXATION  DISTINGUISHED,  648. 

FEDERAL  SYSTEM  OF  INTERNAL  TAXATION,  Appendix,  p.  947. ' 

FERRIES, 

intrastate  distinguished  from  interstate,  213. 
license-tax  on  interstate,  sustained,  213. 
situs  of,  for  taxation,  214. 
operated  by  foreign  corporation,  213. 
power  of  State  to  establish  and  license,  213. 
property  employed  in,  taxable,  213. 
taxation  of,  213. 


INDEX.  1103 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

FIFTH   AMENDMENT, 

Taxing  power  of  Congress  not  limited  to  Fifth  Amendment,  563. 

FLORIDA, 

State  tax  system,  Appendix,  p.  800.  ^ 

FOREIGN  CORPORATION, 

admission  of,  analogous  to  grant  of  corporate  franchise,  178. 

credits  due  foreign  life  insurance  companies,  449-464. 

discrimination  favoring  State  manufactures  in  tax  on,  186. 

discrimination   taxing  of  foreign  corporation,  169. 

does  business  in  State  only  through  comity  thereof,  168-463. 

"does  business"  in  State,  when.     See  Doing  Business. 

entitled  to  equal  protection  of  laws,  178-179. 

foreign  interstate  carriers  and  equal  protection  of  the  laws,  506. 

Fourteenth  Amendment  does  not  prohibit  State  from  excluding, 
330. 

furnishing  channels  of  interstate  commerce,  not  subject  to  condi- 
tions for  admission,  196. 

impairment  of  obligation  of  the  contract  in  exclusion  of  foreign 
corporation,  180. 

in  service  of  U.  S.  not  subject  to  conditions  for  admission,  195. 

license  tax  on  foreign  insurance  companies  for  doing  business,  170. 

limitations  of  State  power  as  to  admission  of,  why  ineffectual,  179. 

not  admitted  into  State  by  force  of  U.  S.  treaty,  172. 

operating  ferry,  213. 

plenary  discretion  of  State  as  to  conditions  for  admission  of,  175- 
176. 

power  to  discriminate  limited  to  conditions  for  admission  of,  178. 

rights  of,   interstate  commerce,   196. 

State  can  change  conditions  for  admission  of,  173. 

State  charges  for  consolidation,  200. 

State  may   discriminate   in  conditions   for  admission  of,   177. 

subject  to  local  tax  on  premiums,  450. 

tax  on  capital  of,  employed  in  State,  185. 

tax  on  corporate  franchise  of.     See  Cofu'oratr  Franchise. 

taxed  more  than  domestic  corporations,  177. 

unconstitutional  condition  for  admission  of,  179. 

when  doing  business  within  the  State,  194. 

FOURTEENTH  AMENDMENT,  324. 

all  property-rights  protected  by  guarantees  in,  327. 
"any    person"    and    "any    person    within    the   jurisdiction"    distin- 
guished, 331. 
application  to  condemnation  proceedings,  338. 
applied  to  taxation,  332. 


1104  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 
FOURTEENTH  AMENDMENT— Continued. 

applies  to  all  instrumentalities  of  State,  328,  337. 

applies  to  State,  not  individual,  action,  328. 

corporations  are  persons  under,  330. 

does  not  prohibit  State  from  excluding  foreign  corporations,  330. 

"due  process  of  law"  distinguished  from  "equal  protection  of  the 

laws",  335. 
effect  of,  upon  State  power  to  exempt  from  taxation,  333. 
forbids  discrimination  in  taxation,  332,  333,  336. 
forfeiture  of  lands  for  taxes  consistent  with,  364. 
enforced  by  Act  of  Congress,  332. 
enforced  in  State  courts,  336. 

guarantees  due  process  of  law.     See  Due  Process  of  Law. 
guarantee  equal  protection  of  the  laws.     See  Equal  Protection  of 

THE  Laws. 
guaranties  of,  protect  all  persons  in  jurisdiction,  329,  333. 
importance  of  guaranties  in,  327,  333. 
immediate  purpose  of,  324,  325,  333. 
infringement     of     fundamental     rights     granted     by     Fourteenth 

Amendment,  368. 
in  relation  to  power  of  State  to  compel  township  to  levy  tax,  396. 
protects  against  agencies   of  State,   328. 
protects  privileges  and  immunities  of  citizens  of  U.  S.,  not  State, 

325,  326. 
requires  substantial  compliance  with  guaranties,  337. 
requires  that  property  tax  be  levied  by  common  ratio  to  value,  333. 
restraint  upon  State  power,  324. 
restricted  to  protection  of  enfranchised  race,  325. 
scope  of  guaranties  in,  not  at  once  recognized,  324,  325,  326. 
the  child  of  Reconstruction,  324. 
what  are  privileges  and  immunities  protected  by,  326. 

FRANCHISE, 

corporate.     See  Corporation  Franchise. 

definition  of,  31,  32. 

distinguished  from  "rights,  privileges  and  immunities",  94, 

U.  S.  franchise  not  taxable,  31,  32. 

franchises,  contracts,  privileges  and  good  will  of  railroad  company, 

275. 
corporate  franchise  tax,  505. 

from  municipality  not  conferred  by  implication,  88. 
granted  by  city  on  condition,  not  a  contract,  88. 
granted  by  State  subject  to  State  tax,  505. 
granted  by  State,  taxable  by  State,  31. 


INDEX.  1105 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

FRANCHISE— Continued. 

granted  by  Territorial  government  construed,  35. 

of  cab  service  of  interstate  railroad,  230. 

of  national  bank  not  subject  to  State  tax,  285. 

of  railroad,  is  property.     See  Railroads. 

tax  as  represented  by  specified  percentage  of  the  outstanding  capital 

stock,  508. 

FRONTAGE  RULE, 

in  special  assessments.     See  Area  axd  Proxtage  Rules. 

FULL  VALUE, 

enforced  by  creditors  of  counties  and  municipalities,  552. 
of  assessments  enforced  by  creditors  as  contract  right, 'SI. 

G 

GEORGIA, 

State  tax  system  of,  appendix,  p.  803. 

GENERAL  WELFARE, 

of  the  United  States,  what  is.     See  United  States. 

GOOD  WILL, 

of  organized  and  established  industries  a  thing  of  value,  274. 
of  railroad  companies,  275. 

GRAIN, 

taxed  by  State  moving  in  interstate  commerce,  131. 
GRANT, 

legislative,  when  contract,   43,   72,  89. 

of  privilege,  when   a  taxable  property,  472. 

GROSS  RECEIPTS, 

gross  receipts  and  ad  valorem  tax  discussed,  251. 

gross  earnings  from  carriage  of  passengers  or  freight  coming  from 

points   within   State,   254. 
gross   earnings   tax   excluding   all    interstate   earnings    from    com- 
putation sustained,  254. 
gross  earnings  tax  in  addition   to  property  tax,  254. 
earnings  tax  in  lieu  of  taxes  on  property,  254. 
when  occupation  or  privilege  tax,  26. 

H 

HABEAS  CORPUS, 

cannot  be  used  to  perform  function  of  writ  of  error  or  appeal,  627. 
Federal  Court   will   release  party   confined   for  non-payment  of  Il- 
legal tax  by,  627. 


1106  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

HABEAS  CORPUS— Continued. 

permissible  to  release  State's  prisoner  only  in  urgent  cases,  627. 
will  issue  when  party  confined  for  non-payment  of  illegal  tax,  627. 
Hamilton   on  expediency  in   Constitutional   repugnancy,   in   State 
and  Federal  taxation,  3. 

HARBORS, 

lands  under,  taxed,  223. 
HAWAII, 

tax  system  of,  p.  597. 
HEARING, 

and  notice  when  required.     See  Notice  and  Heabing. 

as  to  erroneous,  as  well  as  illegal,  assessments  necessary,  343. 

essential  where  court  relief  denied,  419. 

excluded  by  legislative  apportionment  in  special  assessments,  418. 

in  review  by  certiorari,  when  sufficient.    See  Certiorari. 

in  suit  to  collect  tax,  when  sufficient,  352. 

in  suit  to  enjoin  collection  of  tax  held  suflScient,  352. 

legislative  discretion  as  to  tribunal  before  which,  may  be  had,  341, 
346. 

need  not  be  secured  before  assessment  or  collection  of  tax,  352. 

not  essential   if  party   only   contingently  liable,  420. 

one  suflicient,  satisfies  requirement  of  due  process  of  law,  346. 

opportunity   for,  at   any  stage  of  proceedings  suflScient,   352,   356, 
424. 

when  required  before  including  property  in  benefited  district,  418, 
421. 

HOME  PORT, 

of  vessels.     See  Situs  fob  Taxation, 

I 

INDIAN   RESERVATIONS, 

Cattle,  on  non-Indian  on  Indian  reservation,  taxable,  28. 
classification  of  Indian  reservation  in  Territorial  taxation,  596. 
exempt  from  State  taxation,  27. 
exemption  inconsistent  with  Treaty,  26. 
exemptions  and  alienations,  29. 

power  of  legislature  to  make  an  exemption  contract,  75,  76. 
right  of  way  of  railroad  to  Indian  reservation,  taxable,  28. 
stock  of  Indian  trader  taxable,  27. 


INDEX.  1107 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

INDIANS, 

lands  of,  26,  27. 

nation  and  property  exempt  from  taxation,  28. 

special  rule  as  to  exemption,  29. 

when  in  inalienable  exemption,  29. 

when  not  taxable  for  limited  time,  29. 

INEQUALITIES  GROWING  OUT  OF  ACTION  OF  LOCAL  ACCES- 
SORS,  537. 

INHERITANCE  TAX, 

bequests  to  U.  S.  subject  to,  38. 

construction  of  U.  S.  inheritance  tax,  564. 

classification  in  levy  of.    See  Classification. 

final  incidence  of,  519,  520. 

distinguished  from  property  tax,  519. 

duplication  of  inheritance  tax  discussed  by  Supreme  Court,  494. 

equal  protection  of  the  laws  in  re  inheritance  tax  discussed  by 
Supreme  Court,  517. 

Federal,  does  not  infringe  State  power  to  regulate  inheritance,  584. 

Federal  securities  subject  to  Federal,  583. 

Federal   succession   tax   on  bequest   of  municipality,   581. 

incidence  of,  38. 

in  relation  to  due  process  of  law,  492. 

Federal  tax  is  consistent  with  requirement  of  geographical  uni- 
formity, 569. 

is  not  "direct"  tax,  564. 

law  imposing,  not  contract,  82. 

may  be  imposed  on  succession  to  property  in  other  jurisdictions, 
493,  495. 

not  rendered  illegal  by  U.  S.  treaty,  40. 

on  aliens  not  tax  on  imports,  136. 

progressive  feature  of  U.  S.  tax  sustained,  589. 

requires  notice  and  hearing  as  to  valuation  of  estate,  344. 

State  securities  subject  to  Federal,  582. 

U.  S.  securities  subject  to  State,  39. 

IDAHO, 

State  system  of.  Appendix,  p.  806. 

ILLINOIS, 

State  system  of.  Appendix,  p.  809. 

IMPAIRMENT  OF  CONTRACT, 

adjudication   of  impairment   of  fontract,   71. 
Impairment  of  contract  dcterniincfd   by   Supt.   C't.,   70. 
impairment  of  contract,  how  may  be  occasioned.  70,  81,  103. 


1108  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

IMPAIRMENT  OF  CONTRACT— Continued. 

impairment  of  the  obligation  of  private  contract,  106. 

impairment  of  obligation   of    a   contract    in   exclusion    of   foreign 
corporation,  180. 
IMPLICATIONS, 

not  resorted  to  for  conferring  a  grant  to  municipality  to  contract, 
88. 
IMPORTS, 

are  subjects  of  foreign,  not  interstate,  commerce,  109,  110. 

defined,  112. 

duty  on.     See  Duty. 

meaning  of  import,  112. 

in  minute  original  packages  for  consumption,  126. 

in  relation  to  State  taxing  power,  127. 

right  to  import  includes  right  to  sell,  112. 

tax  on  importer  is  tax  on,  102. 
INCOME  TAX,  559,  560,  561. 

amendment  of  1913,  561. 

certain  prior  laws  held  unconstitutional,  560. 

of  1913  sustained,  563. 
INCOME  TAX  OF  1916  AS  AMENDED  1917,  Appendix,  p.  953. 

summary  of  Income  Tax,  Appendix,  p.  949. 
INDEPENDENT  JUDGMENT, 

of  Supreme  Court  as  to  existence  of  a  contract.     See  Contract. 

on  questions  of  general  jurisprudence,  643. 
INDIANA, 

State  system  of,  Appendix,  p.  813. 
INDIAN  LANDS, 

ores  on  Indian  lands,  26. 

output  of  Indian  lands,  26. 
INJUNCTION, 

by  stockholder  to  restrain  corporation  from  paying  illegal  tax,  620, 
645. 

demanded  often  by  public  policy,  618,  620,  649. 

extends  to  whole  of  illegal  assessment,  547. 

irregularities  in  assessments  not  sufficient  to  warrant  injunction, 
358. 

is  proper  remedy  for  invalid  tax,  649. 

only  proper  remedy   for  seizure  of  property  under   illegal  license 
taxation,  618. 

only  proper  remedy  to  enforce  objections  to  making  of  public  im- 
provements, 618. 


INDEX.  1109 

(References  are  to  sections^  except  in  appendix  references  are  to  pages) 

INJUNCTION— Continued. 

only  proper  remedy  to  prevent  multiplicity  of  suits  against  same 
defendant,  618. 

only  proper  remedy  where  prompt  claim  for  deduction  of  debts  is 
essential,  618. 

out  of  Federal  courts,  bill  for,  not  dismissed  after  insufficient  tender 
in  good  faith,  622. 

out  of  Federal  courts,  granted  where  State  procedure  is  not  open 
to  plaintiff,  624. 

under  Federal  statute,  616,  639. 

under  Federal  statute  does  not  issue  to  enjoin  tax  paid  under  pro- 
test, 616. 

under  Federal  statute,  does  not  lie  to  restrain  collection  of  Fed- 
eral taxes,  649. 

out  of  Federal  courts,  granted  against  excessive  tax  only  in  pay- 
ment of  amount  due,  622. 

out  of  Federal  courts,  issues  to  restrain  collection  of  Federal  tax 
adjudged  invalid,  649n. 

out  of  Federal  courts,  issues  to  restrain  execution  of  unconstitu- 
tional State  statute,  632,  637. 

out  of  Federal  courts,  issues  to  restrain  illegal  administration  of 
valid  statute,  632,  637. 

out  of  Federal  courts,  issues  to  restrain  State  officers  from  seiz- 
ing property  in  hands  of  court's  receiver  for  State  taxes,  633. 

out  of  Federal  courts,  plaintiff  must  show  in  bill  what  part  of  tax 
is  illegal,  622. 

out  of  Federal  courts,  requisites  of  valid  tender,  622. 

out  of  Federal  courts,  State  statutory  remedy  does  not  oust  juris- 
diction to  issue,  625. 

out  of  Federal  courts,  State  statutory  remedy  may  be  adequate  at 
law,  625. 

out  of  Federal  courts,  tender  not  required  where  whole  tax  is  com- 
plained of,  622. 

out  of  Federal  courts,  when  application  to  State  tribunals  must 
precede  bill  for,  624. 

out  of  Federal  courts,  where  State  provides  for  injunction  against 
illegal  tax,  625,  649. 

out  of  Federal  courts,  will  not  lie  to  compel  levy  of  tax  to  pay 
municipal  bonds,  639. 

remedy  by,  in  case  of  national  banks,  323. 

restraining  collections  of  tax  on  stockholders  of  national  bank,  321. 

restrains  only   excess  over  uniform  assessment,   625. 

restrains  whole  of  fraudulent  assessment,  625. 

superiority  of,  a.s  remedy  over  lu-tion  at  law,  649. 


1110  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

INJUNCTION— Continued. 

to  restrain  collection  of  special  assessment,  misdescription  as 
ground  for,  424. 

under  Federal  statute,  616. 

under  Federal  statute,  court  recognizes  existence  of  adequate  legal 
remedy  sua  sponte,  617. 

under  Federal  statute,  issues  against  State  courts  only  in  bank- 
ruptcy cases,  616. 

under  Federal  statute  not  granted  on  ground  of  constitutionality 
merely,  616. 

under  Federal  statute  only  issues  when  party  shows  lack  of  ade- 
quate legal  remedy,  617. 

when  issues  to  restrain  discrimination  by  relative  overvaluation, 
550,  551. 

will  not  lie  when  assessment  incomplete,  623. 

INSPECTION  LAWS, 

authorizing  excessive  charge,  140. 

Oyster  Inspection  Act  construed  by  Court,  138. 

power  to  fix  fees  covering  inspection,  140. 

power  of  State  to  enact,  138,  211. 

quarantine  and  pilotage  charges  sustained,  222. 

relation  of  inspection  to  possible  expenses,  140. 

scope  of,  138. 

when  valid,  140. 

INSURANCE, 

company,  classification  between  foreign  and  resident,  valid,  528. 
company,  stock  of  is  not  "other  money  capital",  300. 
company  withdrawing  from  State  not  liable  for  privilege  tax,  181. 
not  interstate  commerce,  147,  170,  196. 

premiums  due  foreign  life  insurance  companies  subject  to  local 
taxation,  450. 

INTANGIBLE  PROPERTY, 

intangible   elements   of    value   entering    into   worth    of  corporate 

stock,  317. 
subject  to  taxation,  274,  275. 

INTERSTATE  CARRIERS, 

carriers  and  equal  protection  of  the  laws,  506. 

excise  tax  on  State's  proportion  of  gross  earnings  valid,  250,  251, 

252. 
gross  receipts,  not  subject,  but  measure  of  tax  on,  255. 
license  tax  on.    See  License  Tax. 
revocation  of  right  to  do  business,  196. 


INDEX.  1111 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

INTERSTATE  CARRIERS— Continued. 

situs  of  products  moving  interstate  commerce,  133. 

State  tax  on  gross  receipts  of  interstate  properties  void,  248,  249. 

State  tax  on  Interstate   freight  void,   244. 

State  tax  on  interstate  telegraph  message  void,  235. 

State  tax  on  net  earnings   of,   sustained,   247,   257. 

State  tax  on  property  of,  within  State  valid,  258. 

State  tax  on  railway  gross  receipts  valid,  245. 

State  tax  on  refrigerator  cars  by  rule  of  average  in  habitual  use, 
242. 

State  tax  on  rolling  stock  by  rule  of  average  in  habitual  use,  240, 
241. 

taxable  by  rule  of  mileage  apportionment.  See  Mileage  Apportion- 
ment. 

taxation  of,  by  unit  rule.     See  Unit  Rule. 

tolls  received  by  railroad  for  use  of  railroad  in  State  taxable  by 
State,  252. 

INTERSTATE  COMMERCE, 
bridges  in.    See  Bridges. 

business  for  non-residents  only  exempt,  when,  155. 
Congress  may  levy  indirect  taxes  on  facilities  of,  591. 
Congress  not  restrained  by  U.  S.  Constitution  from  interfering  with, 

591. 
distribution   of  goods  from  out  of  State  consigned   to  fill   orders 

exempt,  155. 
foreign  corporation  is.     See  Foreign  Corporation. 
furnishing    channels    for,    distinguished    from    making    interstate 

sales,  184. 
future  delivery  sales  not  interstate  commerce,  166. 
grain  taxed  by  State,  moving  in  interstate  commerce,  131. 
illustrating   distinction   between    interstate   and    intrastate    traffic, 

188n. 
insurance  is  not  interstate  commerce,  147,  160,  183. 
interstate  earnings  excluded  from  computation  of  gross  earnings 

tax,  254. 
interstate  passengers  exempt  from  State  tax,  20. 
license  tax  on  commercial  brokers.     See  Commercial  Brokers. 
license  tax  on  peddlers,  not  regulation  of.     See  Peddler. 
not  interfered   with   by  tax   applied   to   local   business   of   foreign 

packing  house,  152. 
not  taxable  by  States  oven  without  discrimination,  148. 
original  package  in.     See  Originai,  Package. 
police  power  of  State  in  relation  to.     Sec  Poi.k  k  P(»\vi:k. 


1112  INDEX. 

(References  are  to  sections,  except  in  appendix  reTerences  are  to  pages) 

INTERSTATE  COMMERCE— Continued. 

power  of  Congress  to  regulate,  distinct  from  Federal  taxing  power, 
591. 

power  to  regulate  interstate  commerce,  where  existent,  121. 

property  in  commercial  transit  through  States  exeempt  from  tax, 
131. 

regulation  of,  during  non-action  of  Congress,  115,  116. 

regulation  of,  through  discriminating  taxation.  See  Discrimina- 
tion. 

sale  of  goods  already  in  State  is  not,  148,  152. 

shipments  of,  whether  subject  to  Federal  tax,  591. 

State  inspection  laws  in  relation  to,  140. 

State  taxing  power  over,  national  banks  dependent  on  permission 
of  Congress,  264. 

tax  on  property  employed  in,  when  would  be  direct  tax,  591. 

tax  on  shipments  of,  consistent  with  freedom  of.  123,  124. 

tax  on  shipments  of,  must  be  without  discrimination,  122,  123. 

taxation  of  drummers  from  other  States.     See  Drummebs. 

vessels  in.     See  Vessels. 

what  constitutes,  147,  148,  152,  160. 

IOWA, 

State  "tax  system  of,  Appendix,  p.  815. 
INTOXICATING  LIQUORS,  35. 
liquor  selling  by  State,  580. 


JUDGMENT  AGAINST  COLLECTOR  CARRIES  INTEREST  AND 

COSTS,  653. 
of  Circuit  Court  of  Appeals,  when  not  final,  656. 
of  Circuit    Court  of    Appeals,  when    not  reviewable    by  Supreme 

Court,  605. 

JURISDICTION, 
defined,  634. 

objections  to,  distinguished   from  defenses  to  merit,   634. 
of  Court  of  Equity,  438. 

of  Federal  Courts  as  affected  by  value  of  right  involved,  603. 
of  U.  S.  District  Court,  under  Tucker  Act,  654. 
where  depends  upon  party,  it  is  party  to  record,  632. 

JURISDICTION  OF  COURT  OF  CLAIMS  VESTED  IN  U.  S.  DISTRICT 
COURT  IN  RE  CLAIMS  NOT  EXCEEDING  $10,000,  654. 


INDEX.  1113 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

JURISDICTION  OF  STATE, 

credits  subject  to,  must  be  evidenced  in  tangible  form,  451. 
credits  subject  to,  must  be  localized  for  permanent  use,  451. 
debts  owed  by  residents  to  non-residents  not  within,  451. 

extends  to  all  movables  and  immovables  in  confines,  443. 

extends  to  money  and  securities  in  its  confines  of  non-resident  own- 
ers, 446,  447,  448. 

extends  to  mortgages  of  residence  on  extra-State  realty,  446. 

extends  to  personalty  in  hands  of  resident  agents,  446,  447. 

immaterial  as  to,  whether  obligation  was  executed  by  resident  or 
non-resident,  448. 

municipal  tax  on  municipal  bonds  of  non-residents  is  beyond,  79. 

not  affected  by  maxim  mobilia  sequntur  personam,  443,  446,  447. 

personal  judgment  on  special  tax  bill,  against  non-resident  is  be- 
yond, 397. 

plenary  power  of  State  over  subjects  within,  439. 

presence  of  resident  agent  not  essential  to,  448. 

securities  regarded  in  taxation  as  tangible  chattels  for  purposes  of, 
447. 

State  taxing  power  limited  to,  by  general  principles  of  constitu- 
tional law,  440. 

State  taxing  power  restricted  by  due  process  to,  439-440. 

subjects  of,  enumerated,  439. 

tax  on  corporate  franchise  of  foreign  corporation  may  be  tax  on 
property  beyond,  178-463. 

tax  on  judgment  held  by  non-resident  on   exempted  bonds  is  be- 
yond, 79. 

taxation  of  foreign-held  securities  is  beyond,  78-ft56. 

when  property  is  within,  395-482-493. 

JUKISDICTION  OF  U.  S.  COURT, 

assessments  cannot  be  lumped  to  reach  amount  essential  to,  603. 
concurrent  with  State  courts,  when,  612-643. 
defenses  of  merit  distinguished   from  objections  to,   634. 
depending  on  adverse  citizenship,  advantage  of  pleading  Federal 

claim,  604. 
does  not  extend  to  corporate  stock  of  non-resident   in  absence  of 

statute,  461. 
enforcement  of  tax  against  non-resident  owners  of  property  with 

in,  452. 
essential  to  on  removal,  that  Circuit  Court  might  have  exercised 

original  jurisdiction,  605. 

essential   to  on   removal   that  Federal   claim   appear  by   plaintiff's 
petition,  605. 


1114  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

JURISDICTION  OP  U.  S.  COURT— Continued. 

essential  to,  that  excess  of  tax  complained  of  should  reach  juris- 
dictional amount,  602. 
extends  to  all  suits  arising  under  act  imposing  tax  on  imports  and 

tonnage,  602. 
extends  to  construction  of  State  constitution  and  statutes,  612. 
extends  to  partnership  business  localized  therein,  469. 
extends  to  property  therein  in  hands  of  receivers,  trustees,  etc., 

465. 
extends  to  stock  of  domestic  corporation  held  by  non-jresidents,  460. 
extends  to  taxation  of  bonds  of  resident  secured  by  mortgage  on 

foreign  realty,  483. 
extends  to  taxation  of  extra-territorial  personality  of  resident,  475. 
extends  to  taxation  of  resident  stockholders   in   foreign   corpora- 
tion, 484. 
extends  to  taxation  of  State  securities  of  other  states,  485. 
for  taxation  over  property  in  bonded  warehouses,  444. 
in  enforcing  collection  of  State  tax,  370. 
in  taxation  of  persons,  475. 

in  taxation  of  persons  depends  upon  domicile.    See  Domicile,  475. 
jurisdiction  of  U.  S.  Courts,  370. 
local  agents  to  control  salesmen  when  constituting  business  within 

State,  188. 
mortgage-interest  wherever  held  in  realty  within,  subject  to  State 

taxation,  458^459. 
non-resident  stockholder  in  corporation  within,  not  subject  to  tax 

in  absence  of  statute,  461. 
not  necessary  to,  to  allege  how  State  would  parcel  out  illegal  taxes 

602. 
other  questions  may  be  determined,  601. 
proceeds  on  ground  of  adverse  citizenship  or  Federal  claim,  601. 

See  Federal  Questiox. 
suggestion  by  plaintiff  that  defendant  will  set  up  Federal  claim, 

insufficient  for,  605. 
what  amount  in  controversy  is  necessary  to,  602. 
when  necessary  to,  Federal  question  must  be  distinctly  pleaded. 
604. 

when  plaintiff  pleads  Federal   claim  insufficiently  for  remedy  of 

defendant,  604. 
over  business  for  taxation,  469-474. 
over  property  for  taxation  summarized,  468. 
over  State  Courts  under  amendment  of  1914,  336-601. 
over  state  lands,  441. 
personalty  elsewhere  within,  taxable  at  owner's  domicile,  486. 


INDEX.  1115 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

JURISDICTION  OF  U.  S.  COURT— Continued. 

question  of  plaintiff's  authority  to  maintain  bill  distinguished 
from  question  of,  634. 

requirement  that  corporation  deduct  tax  from  interest  on  bonds 
within,  valid,  456. 

requirement  that  railroad  at  ofl5ce  beyond,  deduct  tax  from  in- 
terest paid  residents  void,  457. 

to  enjoin  collection  of  tax.     See  Injtjnctiox.  • 

unit  and  mileage  rule  in  relation  to,  268-269-462,  See  Unit  and 
Mileage  Rule. 

E 

KANSAS, 

State  tax  system  of,  Appendix,  p.  818. 
KENTUCKY, 

State  tax  system  of.  Appendix,  p.  821. 

L 

LANDS, 

deeded  for  U.  S.  for  limited  use  not  exempt  as  Federal  agency,  35. 

forfeiture  of,  for  taxes  consistent  with  due  process  of  law,  364. 

held  in  trust  by  U.  S.,  27. 

line  between  boundaries  ef  States,  441. 

not  surveyed  by  U.  S.,  24. 

of  U.  S.  exempt  from  State  taxation,  21. 

of  U.  S.,  limitation  of  exemption  in  grant,  22. 

of  U.  S.,  ores  from  taxable,  25. 

ot  U.  S.,  title  of  grantee  of  U.  S.,  essential  for  State  taxation,  21, 

24. 
of  U.  S.,  when  exemption  ceases,  21,  22,  23,  24. 
of  U.  S.,  when  State  holds  as  trustee,  23. 
taxation  of  lands,  under  harbors,  223. 

LAW, 

constitutionality  of,  is  for  judicial  not  executive  determination,  498. 
contract  only  impaired  by,  68. 

equivalency  in,  distinguished   from  equivalency   in   fact,   268. 
general,  Supreme  Court  exercises  independent  judgment  on  ques- 
tions of,  643. 
governmental   distinguished    from   contractual,   82,   83,   84,   85. 
Imposing  tax  may  describe  subjects  in  general  terms,  497. 
Includes  municipal  ordinance,   when,  69. 


1116  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

LAW — Continued. 

limiting     time     for     enforcing    vested     rights.       See     Limitation 

Statute. 
local  distinguished  from  general  law,  644. 
local,  Federal  courts  follow  State  courts  on  questions  of,  644. 
local,  what  is,  643,  644. 

local,  when   administered   in  Federal   courts,  643. 
of  the  situs  in  same  State  personalty  subject  to  taxation  under,  486. 
remedies   appropriate    to    construction    and   to     determination   of 

validity  of,  distinguished,  649. 
Supreme  Court  not  concluded  by  title  as  to  purpose  of,  163. 
unconstitutional  statute  is  no,  631,  648. 
void  in  part,  whether  void  in  toto,  164,  429,  497,  556. 
what  determines  whether  object  of  is  public  purpose,  382. 
when  impairs  obligation  of  contract,  71-78. 
when  practical  construction  of,  is  to  be  relied  on,  575. 

LEASES, 

lessees  and  assignees   exemptions  construed,   99. 
oil  and  gas  leases,  26. 

rights  enjoyed  under  leases  and  leases  themselves  separable,  26. 
LEGAL  TENDER  NOTES,  11. 

State  may  require  taxes  to  be  paid  in  coin,   42. 
subjected  to  State  taxation,  11. 

LEGISLATIVE   DISCRETION, 

as  to  notice  and  hearing.    See  Hbiaring  and  Notice. 

as  to  purposes  for  which  Congress  may  appropriate  public  money. 
555,  558. 

constitutional  provision  requiring  affirmative  legislative  action  is 
addressed  to,  496.     See  Law. 

general  limitations  upon,  declared  in  Loan  Assn.  v.  Topeka,  377. 

how  limited  by  requirement  of  public  purpose,  377,  378. 

in  assessment  and  reassessment,  356. 

in  special  assessments,  conclusive  as  to  basis  for  apportioning  ex- 
pense, 402,  406,  409,  410. 

in  special  assessments,  conclusive  as  to  boundaries  of  taxing  dis- 
trict, 395,  406. 

in  special  assessments  conclusive  as  to  need  for  improvement,  395, 
410. 

in  special  assessments,  conclusive  as  to  proportion  of  cost  to  be 
borne  by  public,  395,  398,  410. 

in  special  assessments,  conclusive  on  question  of  benefit,  398. 

in  special  assessments,  how  limited,  407-426-433-434. 


INDEX.  1117 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

LEGISLATIVE  DISCRETION— Continued. 

in  special  assessments,  in  what  particulars  may  be  delegated,  399. 

in  special  assessments,  limited  to  jurisdiction,  397. 

in  special  assessments.  Supreme  Court,  reluctant  to  disturb  exer- 
cise of,  408. 

in  special  assessments,  must  be  exercised  in  accord  with,  due  proc- 
ess, 396. 

in  special  assessments,  presumption  that  exercise  of,  as  to  basis 
of  apportionment,  was  based  on  calculation  of  special  benefits 
See  Special  BE>'EFrr.s. 

in  special  assessments,  summary  of,  433. 

in  special  assessments.  Supreme  Court  on,  895. 

in  special  assessments,  to  apportion  expense  on  ad  valorem  basis, 
398,  399. 

in  special  assessments,  to  form  taxing  district  of  municipalities, 
396. 

in  special  assessments,  when  subject  to  judicial  review,  396. 

levy  of  tax  is  matter  for,  431. 

limitation  of  purposes  for  which  Congress  may  levy  taxes  ad- 
dressed to,  554. 

requirement  that  public  purpose  apply  to  whole  district  taxed  ad- 
dressed to,  391. 

selection  of  subjects  of  taxation  is  matter  for,  496. 

to  exempt  from  taxation,  520. 

to  provide  classification.     See  Classification. 

to  revoke  tax,  how  limited,  80. 

LEVEE  DISTRICT, 

non-resident  owners  of  land,  in  levee  districts,  351. 
LICENSE  TAX, 

applied  to  interstate  commerce,  225,  226. 

classification  for  levy  of.     See  Classification, 

decision  of  State  court  limiting  to  local  business  conclusive,  231. 

distinguished  from  property  tax,  519. 

not  exceeding  property  tax  on  interstate  carrier  invalid.  234. 

Federal,  on  municipality  engaging  in  liquor  business  valid,  587. 

final  Incidence  of,  518. 

Imposed  on  foreign  corporations.     See  Foreigx  Corporations. 

Imposed  under  police  power.     See  Pouce  Power. 

Invalid,  when  amount  is  determined  by  length  of  railroad  beyond 
State,  232. 

limitations  on  power  of  State  to  levy,  474. 

merchants  license  tax  discussed,  123. 

must  clearly  appear  to  be  on  local  business  of  carrier  only,  232. 


1118  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

LICENSE  TAX— Continued. 

must  not  be  condition  for  transacting  interstate  business,  233. 
not  affected  by  exemption  from  taxation,  72. 
not  exceeding  tax  on  property  in  use  valid,  234. 
notice  and  hearing  not  necessary  to  valid  levy  of,  341. 
occupation  or  license  taxation  discussed  by  Supreme  Court,  530. 
of  foreign  life  Ins.  Cos.,  449,  450,  464. 
on  agent  of  interstate  railroad  invalid,  228. 
of  business  of  buying  and  selling  for  exportation  valid,  138. 
on  drummers  from  another  State  not  subject  to.     See  Dbummeb. 
on  emigrant  agent  sustained,  471. 
on  ferry  sustained,  214. 
on  foreign-exchange  broker,  137. 
on  importer,  also  regulation  of  commerce,  114. 
on  importer  is  tax  on  imports,  112. 

on  interstate  carrier  for  maintenance  of  office  invalid,  228. 
on  interstate  carrier  for  transacting  local  business  valid,  230. 
on  interstate  carrier  invalid  as  regulation  of  commerce,  227. 
'    on  interstate  carrier  invalid  though  imposed  under  police  power, 
229. 
on  interstate  carrier  without  discrimination  sustained,  226. 
on  interstate  operation  of  sleeping  cars  invalid,  236. 
on  national  bank  void,  285. 
on  peddlers.     See  Peddlebs. 

on  rolling  stock  an  interference  with  commerce,  239. 
on  vessels  for  navigating  public  waters.     See  Vessel. 
payment  of  Federal,  obtains  no  immunity  from  State  police  power, 
586. 

plenary  power  of  State  to  levy,  472,  473. 

relation  to  ad  valorem  tax,  225. 

rental  for  occupation  of  streets  by  telegraph  poles  not,  237. 

upon  motor  vehicles  sustained  for  road  purposes,  473. 

when  commercial  brokers  are  subject  to.    See  Commercial  Beokees. 

LIMITATION  STATUTES, 

barring  suit  to  set  aside  tax  sale  void  on  its  face,  invalid,  369. 

cannot  bar  assertion  of  jurisdictional  defect  in  tax  proceedings,  364. 

limited  time  exemption  construed  by  Court,  29. 

of  actions  against  the  U.  S.  of  the  Tucker  Act,  657. 

power  of  State  to  enact,  as  to  tax  titles,  369. 

protecting  tax  title,  what  constitutes  valid,  369. 

relation  to  vested  rights,  86. 


INDEX. 


(References  are  to  sections,  except  in  appendix  references  are  to  pages) 


1119 


LOCAL  LAW, 

of  Iowa  as  to  reassessments  enforced,  416. 

as   determining   rights   of   reassessment   when   former   assessment 

irregular,  416. 
local  statutes  governing  jurisdiction  of  U.  S.  courts,  370. 

LOUISIANA, 

State  tax  system  of,  Appendix,  p.  826. 

M 

MAINE, 

State  tax  system  of.  Appendix,  p.  830. 

MANDAMUS, 

lies  to  compel  performance  of  ministerial  act  by  State  official,  640. 

lies  to  compel  levy  of  tax  to  pay  municipal  bonds,  640. 

must  be  based  on  statute  authorizing  tax  to  pay  municipal  bonds, 

639,  641. 
when  ineffectual,  is  not  therefore  inadequate  remedy  at  law,  639. 
right  to,  not  impaired  because  property  is  pledged  for  payment  of 

municipal  bonds,  640. 
does  not  lie  where  municipal  taxing  power  was  limited  by  statute 

when  bonds  were  issued,  640. 
power  of  Federal  court  to  issue,  642. 
to  compel  county  authorities  to  levy  assessments,  370. 
to  compel  Boards  of  Equalization  to  act,  357. 
mandatory  and  discretionary  statutory  requirements  distinguished, 

373. 

MANUFACTURING  CORPORATION, 

stock  of,  not  "Other  moneyed  capital",  299. 
specification,  on  classification  of  taxation,  528. 

MARKET  VALUE, 

as  indicating  value  of  corporate  capital  stock,  260,  272,  546. 

stock  market  quotation  as  evidence  of  value,  279. 

market  value  of  bonds,  stocks  and  gross  earnings  evidence  of  value 

of  railroad  property,  275. 
market  value  of  stock  defined,  317. 

MARYI.ANT), 

State  tax  system  of.  Appendix,  p.  832. 
oyster  inspection  cases,  140. 

MASSACHUSETTS, 

State  tax  system  of,  Appendix,  p.  835. 


1120  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

MEMBERSHIP, 

in  an  incorporated  Chamber  of  Commerce  taxable,  470. 

MICHIGAN, 

State  tax  system  of.  Appendix,  839. 

MILEAGE  APPORTIONMENT, 

enforcement  of  mileage  apportionment,  275. 

rule  of,  used  in  calculation  of  average  in  habitual  use,  240. 

rule  of,  in  taxation  of  interstate  commerce,  243,  246. 

in  connection  with  unit  rule.     See  Unit  Rule. 

as  basis  of  fixing  value,  246. 

MINING  CLAIMS, 

mining  corporation,  stock  of,  not  other  moneyed  capital,  299,  300, 

301. 
ores  on  Indian  lands,  26. 
patented  or  unpatented,  25. 
when  taxable,  25. 

MINNESOTA, 

State  tax  system  of,  Appendix,  p.  843. 

MISSOURI, 

State  tax  system  of,  Appendix,  p.  850. 

MISSISSIPPI, 

State  tax  system  of,  Appendix,  p.  846. 

MONTANA, 

State  tax  system  of,  Appendix,  p.  855. 

MORTGAGE, 

equal  protection  of  laws  in  taxation  of,  332,  524. 

holder  of  mortgage  bonds  of  R.  R.  Company  has  interest  in   its 

property  to  maintain  tax  litigation,  625. 
Of  non-resident  in  State  jurisdiction  subject  State  taxation,  446. 
on  realty  within  State  held  by  non-resident  subject  to  taxation,  458, 

459. 
on  foreign  realty,  bonds  secured  by,  taxable  at  holder's  domicile, 

483. 

MOTOR  VEHICLES, 

license  tax  on  for  road  purposes,  sustained,  473. 

MUNICIPALITY, 

authority  of,  to  issue  bonds  includes  power  to  tax  for  payment,  80, 

640. 
bank  may  be  subjected  to  Federal  tax  for  paying  out  notes  of,  585. 


INDEX.  '       1121 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

MUNICIPALITY— Continued. 

basis  of  apportionment   for   special   assessments   may  be  fixed   in 

charter  of,  403. 
basis  of  apportionment   made   on   theory   of  equal   distribution   of 

benefits,  403. 
bonds  of,  as  "other  moneyed  capital,"  302. 
bonds  of,  exempt  from  Federal  taxation,  579. 
bonds  of,  valid  though  assessment  to  pay  them  is  void,  429. 
bonds  of,   when  judgment  on   can  be  collected,   assessment  being 

void,  429. 
bonds  of,  when  valid  for  want  of  public  purpose,  378. 
charter  not  contract,  83,  84. 

difficulties  attending  special  assessments  in,  401. 
engaging  in  liquor  business  subject  to  Federal  license  tax,  587. 
estoppel  of  municipality  by  refusing  to  hear  objections  to  public 

improvement,  426n. 
is  merely  state  agency,  598. 

may  impose  tax  on  annexed  farming  lands,  381,  396. 
merits  and  evils  of  fixing  basis  of  apportionment  in  charter  of, 

403,  418. 
municipal  and  State  revenue  separation  of  sources  of,  538. 
municipal  bonds  for  local  improvements,  437. 
municipal  ordinance  taxing  privilege  to  act  as  government  agents 

invalid,  35. 
ordinances   for   improvement   not   invalid   by   restricting   work   of 

resident  citizens,  411. 
ordinance  of,  may  impair  contract,  69. 
ordinances  granting  right  to  maintain  polls,  a  grant  of  property 

subject  to  taxation,  472. 
privilege  of  act  as  government's  agent,  invalid,  35. 
property  of,  governmental  and  proprietary,  84. 
proper  remedy  to  enforce  payment  of  bonds  of.     See  Mandamus, 

640,  641. 
relation  of  State  to,  and  to  individuals  distinguished,  85. 
revenue  of,  from  railroad  bonds  exempt  from,  579. 
special  municipal  tax  as  constituting  Impairment  of  franchise  con- 
tract, 88. 
what  is  public  purpose  in  taxation  by.     See  Public  Purpose  ix 
Taxatio-n. 

N 

NATIONAL  BANK, 

Act  of  Congress  concerning  place  of  asseBsment  of,  282,  287. 
Acts  of  Congress  authorizing  States  to  tax,  281,  282. 


1122  INDEX. 

(References  are  tft  sections,  except  in  appendix  references  are  to  pages) 

NATIONAL  BANK— Continued. 

deduction  for  value  of  realty  in  other  States  not  required,  289,  319, 

320. 
discrimination  against.     See  Discrimination. 

double  taxation  of,  through  taxation  of  realty  in  other  States,  320. 
immaterial  that  bank  holds  stock  of  foreign  corporations,  288. 
immaterial  that  capital  of  is  invested  in  exempt  property,  288,  291. 
may  sue  to  enjoin  tax  unlawfully  assessed  upon  shareholders,  303. 
realty  of,  exempted  by  State  laws,  319. 
shares  in  are  "moneyed  capital,"  293. 
shares  in,  distinguished  from  money  at  interest,  288. 
shares  in,  owned  by  national  bank  included  in  valuation  of  shares, 

288. 
shares  in,  taxable  like  other  similar  personalty,  288. 
shares  of  non-residents  taxable  only  at  location  of  bank,  287. 
State  bank  changing  into,  taxable  by  State,  288. 
State  may  determine  manner  of  taxing  shares  in,  288. 
State  may  determine  where  shares  of  residents  are  taxable,  287. 
State  may  employ  usual  methods  in  enforcing  tax  on,  321,  354. 
State  may  enforce  payment  by,  for  shareholders,  by  distraint,  286, 

321. 
State  may  require  to  pay  tax  in  soliclo  for  shareholders,  286. 
State  tax  on  franchise  of,  void,  285. 

State  tax  on,  must  conform  to  permissive  legislation,  283. 
State  tax  on  personalty  of,  invalid,  284. 
State  tax  on  president  of,  invalid,  284. 
State  tax  on  realty  of,  authorized  by  Act  of  Congress,  284. 
State  taxation  of,  method  allowed  by  Acts  of  Congress  exclusive, 

284. 
stock  as  taxed  under  New  York  system  not  discriminatory,  300. 
tax  on,  as  agent  of  stockholders  distinguished  from  tax  on  bank 

as  such,  286. 
taxation  of  stock  in  real  property,  300. 
taxed  by  State  and  no  allowance  made  for  deduction  of  U.  S.  bonds 

held  by  bank,  291. 
territories  have  same  taxing  power  over  as  States,  290. 
valuation  of  shares  in,  288. 
visitorial  power  of  State  over,  322. 
when  new  shares  in,  become  taxable  by  State,  288. 

NEBRASKA, 

State  tax  system  of.  Appendix,  p.  859. 

NEVADA, 

State  tax  system  of,  Appendix,  p.  863. 


INDEX.  1123 

(References  are  to  sections,  excipt  in  appendix  references  are  to  pages) 

NEJW  HAMPSHIRE, 

State  tax  system  of,  Appendix,  866. 

NEW  JERSEY, 

State  tax  system  of.  Appendix,  p.  869. 

NEW  MEXICO, 

State  tax  system  cf.  Appendix,  p.  872. 

NEW  YORK, 

State  tax  system  of.  Appendix,  p.  875. 

NON-RESIDENT, 

a  trustee  does  not  subject  trust  estate  to  taxation,  465. 
resident  and  non-fesident  shareholders.  National  Bank,  310. 

NORTH  CAROLINA, 

State  tax  system.  Appendix,  p.  880. 

NORTH  DAKOTA, 

State  tax  system  of,  p.  883. 

NOTES, 

issued  by  State  in  aid  of  secession  void,  54. 
of  U.  S.    See  Legal  Tender  Notes. 

NOTICE, 

and  hearing  when  required.    See  Notice  and  Hearing. 

as  to  certificate  of  tax  sale.     See  Tax  Certificate. 

by  publication,  essentials  of,  351, 

legislative  discretion  as  to  kind  of,  343. 

legislative  discretion  as  to  mode  of  giving,  343. 

of  assessment  and  equalization  not  necessary  when  date  fixed  by 
statute,  348. 

of  fixed  public  sessions  of  revision  boards  need  not  be  personal, 
341,  348,  350. 

of  special  assessment  may  be  by  publication,  350. 

of  special  assessment  must  be  specific,  350,  417. 

special,  of  adjourned  meeting  of  revision  board  not  required,  348. 

to  parties  liable  to  be  assessed  for  street  opening,  422. 

to   taxpayer  that   his   land   is   in   district  benefited  by   public   im- 
provement, 409,  418,  421. 
NOTICE  AND  HEARING.    See  also  Hearing  and  Notice. 

actual  notice  and  hearing  held  sufficient  in  absence  of  statute,  345. 

assessments  for  general  and  special  taxation  distinguished  an  to, 
350. 

decision  of  State  court  that  State  law  requires,  conclusive,  347. 

essential  in  reassessments,  363. 


1124  INDEX. 

(References  are  to  sections,  exiept  in  appendix  references  are  to  pages) 

NOTICE  AND  HEARINd — Continued. 

in  relation  to  due  process  of  law,  345. 

must  be  afforded  before  tax  becomes  effectual,  343. 

not  required  in  levy  of  poll  taxes,  341. 

not  required  in  levy  of  specific  taxes,  341. 

not  required  in  license  taxation,  341. 

not  required  when  valuation  is  fixed  by  taxpayer,  342. 

of  time  and  place  of  first  meeting  of  Board  of  Equalization,  357.' 

provision  for,  may  be  implied,  349. 

required  in  determining  value  of  estate  for  inheritance  taxation, 
344. 

required  when  special  assessment  is  apportioned  according  to  bene- 
fits, 334. 

required  when  taxes  levied  according  to  value,  343. 

required  where  valuation  for  special  assessments  is  according  to 
special  benefits,  417,  418. 

requirements  as  to,  in  general  taxation  applicable  to  special  assess- 
ments, 417. 

special  necessity  for,  in  special  assessments,  417. 

unnecessary  in  special  assessments  under  frontage  and  area  rules, 
418. 

what  constitutes,  in  special  assessments,  424,  430. 

what  constitutes  sufficient,  341,  348,  363,  367,  368,  430. 

0 

OCCUPATION  OF  PRIVILEGE  TAX,  26. 
of  importer,  a  tax  on  importation,  122. 

OHIO, 

State  tax  system  of,  Appendix,  p.  887. 

OIL, 

moving  in  interstate  commerce,  its  situs  for  taxation,  133. 
oil  and  gas  leases,  26. 

OKLAHOMA, 

State  tax  system  of,  Appendix,  p.  891. 

OREGON, 

State  tax  system  of.  Appendix,  p.  897. 

ORIGINAL  PACKAGE, 
defined,  127. 

exempt  from  all  forms  of  taxation,  129. 
rule  as  to,  113. 
rule  as  to,  does  not  prohibit  tax  on  interstate  importations,  123. 


INDL  1125 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

ORIGINAL  PACKAGE— Continued. 

rule  as  to,  limits  police  power  of  State,  116,  161. 

sale  of  imported  or  foreign  goods  in  original  package,  128. 

State  cannot  prohibit  sale  of  importation  in,  124,  161. 

tax  exemption  of,  discussed,  112. 

taxed  in  warehouse,  123. 

theory  of  exemption  of,  from  State  police  power,  126. 

what  is,  125,  126. 

when  exemption  of,  cease,  124,  128. 

"OTHER  MONEYED  CAPITAL". 

Act  requires  equality  between  tax  on  national  bank  shares  and, 

294. 
competing  with  shares  in  national  banks.    See  National  Banks. 
deposits  in  savings  banks  are  not,  299. 

is  capital  competing  with  business  of  national  bank,  299,  304. 
meaning  of,  299. 

means  other  taxable  moneyed  capital,  293. 
money  at  interest  is,  283. 

moneys  belonging  to  charitable  institutions  are  not,  299. 
municipal  bonds  are,  302 

stock  of  building  and  loan  associations  is  not,  302. 
stock  of  business  companies  is  not,  300. 
stock  of  insurance  companies  is  not,  300. 
stock  of  manufacturing  corporations  is  not,  299. 
stock  of  mining  corporations  is  not,  298,  299,  300. 
stock  of  railroad  corporations  it  not,  299,  300. 
stock  of  trust  companies  Is,  301. 

P 
PARR, 

establishment  of,  is  public  use,  415. 
PARTNERSHIP, 

jurisdiction  of  State  over,  469. 

whether  holding  stock  in  limited,  is  doing  business  in  State,  191. 
193. 

PATENTS, 

corporation  holding  patent  rights,  how  taxable,  36. 

how  taxable  by  States,  36. 

ownership  and  lease  of,  in  State,  is  not  doing  business  therein,  189. 


1126  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

PAYMENTS, 

of  Federal  taxes  under  protest,  651, 

of  tax  under  duress,  198. 

of  tax  under  threat  of  forfeiture  not  voluntary,  198. 

what  is  payment  under  protest,  651. 

PEDDLER, 

definition  of,  159. 

distinguished  from  drummer,  160. 

license  tax  on,  valid,  158,  528. 

peddling,  In  relation  to  interstate  commerce,  158. 

PENNSYLVANIA, 

State  tax  system  of.  Appendix,  p,  900. 

PERSONAL  JUDGMENT, 

on  special  tax  bill  against  non-resident  without  service,  void,  397. 
against  resident,  397. 

PERSONAL  LIABILITY  OF  TAX  OFFICIAL, 

decision  against,  for  error  in  assessment  does  not  raise  Federal 

question,  614. 
distinguished  from  liability  of  State,  631. 
does  not  attach  for  erroneous  exercise  of  discretion,  646. 
does  not  attach  to  Tax  Collector  for  collecting  bills  fair  on  face, 

648. 
for  failure  to  perform  ministerial  duty,  631,  648. 
to  injunction  out  of  Federal  Court.     See  Injunction. 

PHILIPPINE  ISLANDS, 
tax  system  in,  597. 

PILOTAGE, 

State  regulation  of  sustained,  222. 

POLICE  POWER  OF  STATE, 

compared  with  taxing  power  as  to  public  interest  justifying  exer- 
cise, 384, 

classification  under,  compared  with  classification  for  taxation,  512, 
528. 

distinguished  from  taxing  power  over  original  packages,  124. 

Federal  license  gives  no  rights  against  lawful  exercise  of,  586. 

license  under,  in  relation  to  interstate  commerce,  161. 

limited  by  original  package  rule,  116. 

meaning  of  "arrival"  in  State,  118,  124. 

must  not  interfere  with  interstate  commerce,  161,  162. 

over  alien  passengers,  139. 

over  shipments  of  liquors,  117. 


INDEX. 


1127 


(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

POLICE  POWER  OF  STATE— Continued, 
over  vessels  in  harbor  or  transit,  210. 
special  excise  taxes  in  the  exercise  of  the  police  power  sustained, 

472. 
tax  on  interstate  carrier  imposed  under,  invalid,  229. 

POLL  TAX, 

exempting  from,  those  voting  at  previous  elections  held  illegal,  528. 
notice  and  hearing  not  necessary  to  valid  levy  of,  341. 
of  residence  of  citizens,  480n. 

PORTO  RICO, 

system  of  taxation  in,  p.  597. 

POSSESSION, 

is  vendible,  inheritable  and  taxable,  25. 
right  of,  taxable,  25. 

PRESUMPTION, 

arising  from  tax  deeds.     See  Tax  Deeds. 

that  legislature  considered  special  benefits  in  special  assessment* 
See  Special  Benefits. 

PRIVILEGE, 

distinguished  from  immunity,  94. 
meaning  of  in  claim  tax  exemption,  72,  94. 

privilege  tax  for  conducting  corporate  business  in  State,  in  addi- 
tion to  ad  valorem  tax  on  property,  254. 
privilege  tax  on  foreign  corporations,  169. 
tax.     See  Licexse  Tax. 
when  collectible  from  insurance  companies,  after  leaving  State,  181. 

PROCEDURE. 

See  Federal  Pbocedube,  648-660. 

against  collector  and  U.  S.  regulating,  652,  654. 

how  process  served  on  government  to  recover  illegal  tax,  655. 

in  action  to  recover  illegal  Federal  taxes,  summarized,  660. 

in  equity,  626. 

in  Income  taxes  waived,  620,  649. 

procedure  under  Tucker  Act,  655. 

in  taxation  as  related  to  equal  protection  of  the  laws,  532. 

taxation   procedure  in   State  Board   of  Equalization,   360. 

writ  of  error,  party  entitled  to,  618. 

writ  of  error  to  State  court  must  be  based  on  personal  interest,  611. 

writs  of  rertiornri  issued  to  review  findings  of  State  courts,  Pi36- 

601. 
written  application  to  Commissioner  of  Internal  Revenue  to  refund 

sum  not  equivalent  to  an  appeal,  562. 


1128  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

^PROPERTY, 

incapable  of  benefits  not  lawfully  assessed  therefor,  436. 
only  property  required  by  law  to  be  assessed  is  taxable,  496. 
out  of  the  jurisdiction  of  the  State,  188. 

subject  to  taxation  and  subjected  to  taxation,  distinguished,  468, 
496. 

PROTEST, 

impossible  date  of  hearing  protest,  345. 

payment  under  and  suit  to  recover  taxes.    See  Remedy  fok  Invalid 
TaxatiOxN,  635,  651. 

PUBLIC  PURPOSE, 
In  Taxation, 
aid  to  railroads,  is,  337,  390. 
aid  of  custom  grist  mill  is,  378. 
as  to  contract  of  municipality  lacking,  void,  389. 
as  to  erection  of  memorials  to  soldiers,  386. 
as  to  furnishing  fuel  to  inhabitants  of  municipality,  388. 
as  to  illumination  of  streets  of  municipality,   387. 
as  to  inspiration  of  patriotism,  386,  391. 
as  to  maintenance  of  G.  A.  R.  post,  386. 
as  to  payment  of  bounties  to  soldiers  for  enlistment,  386. 
as  to  payment  of  substitutes  for  conscripts,  386. 
as  to  payment  of  testimonials  to  soldiers  after  war,  386. 
as  to  promotion  of  World's  Fair,  386. 
benefits  accruing  from  construction  of  a  drain  and  power  to  make 

assessment  therefor,  396,  399n. 
considerations  affecting  question  whether  object  of  statute  is,  377, 

382. 
distinguished    from   public    welfare   justifying    exercise    of   police 

power,  384. 
encouragement  of  manufactures  is  not,  377,  378,  389. 
erection  of  public  sorghum  mills  is  not,  384. 
in  founding  scholarships  to  aid  students  at  State  University,  383. 
inherent  in  tax,  aside  from  Fourteenth  Amendment,  376,  377,  378. 
irrigation  of  arid  lands  is,  380,  383. 
Justice  Miller,  in  Loan  Assn.  v.  Topeka,  on,  377. 
legislative  decision  as  to,  subject  to  judicial  review,  382. 
legislative   discretion    as   to    district   affected   by,    391,   554.     See 

LEGiSLATmc  Discretion. 
maintenance  of  what  schools  is,  383. 
meaning  of,  382, 

must  appeal  to  all  people  in  taxing  jurisdiction,  386,  391,  396. 
pertaining  to  part  cannot  be  levied  on  whole  State,  391. 


INDEX.  1129 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

PUBLIC  PURPOSE— Continued. 

pertaining  to  State  cannot  be  levied  on  part  of  State,  391. 

primarily  legislative  question,  376. 

public  and  judicial  opinion  as  to  what  is,  382,  383. 

public  park  is,  415. 

required  by  definition  of  tax,  376. 

required  by  due  process  of  law,  335. 

requirement  of,  applies  to  all  forms  of  taxation,  general  and  special, 

391,  396. 
special  peculiar  benefits  accruing  for  public  improvements,  392. 
tax  for  other  than,  is  invasion  of  private  rights,  377. 
taxation  for  public  purpose,  376. 

whether  aid  of  custom  steam  grist  mill  is,  378,  384. 
whether  aid  to  destitute  farmers  is,  383. 

Ix  EirixEXT  Domain, 

distinguished   from   public   purpose  in  taxation,  388. 
elimination  of  grade  crossing  at  Union  Station  lawful  public  pur- 
pose, 385. 
erection  of  elevator  for  private  persons  is  not,  388. 
establishment  of  park  is  public  purpose,  415. 
preservation  and  marking  battlefield  at  Gettysburg  is,  388. 

Q 

QUARANTINE, 

regulations,  power  of  State  to  enact,  222. 
regulations,  when  valid,  217-222. 

QUASI  PUBLIC  CORPORATION, 

specifications  of,  in  classification  for  taxation,  523,  528. 

B 

RAILROAD, 

aid  to  is  public  purpose  for  taxation,  377,  390. 

assessment  of  property  by  railroad  commissions,  359. 

bonus  reserved  in  charter  of,  not  regulation  of  commerce,  238. 

classification  of  property  of,  for  taxation.     See  Classification-. 

consolidated  railroad  companies  taxed  as  domestic  corporation,  199. 

franchises  granted  by  U.  S.  exempt.    See  Fuanciiise. 

franchise  of,  Is  property,  73. 

franchises,  what  are.  31,  32. 

intangible  property  of,  subject  to  Stato  Taxation,  32. 

manner  of  assessing  railroad  property,  375. 


1130  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 
RAILROAD— Continued. 

property  alone  may  be  reassessed,  507. 

property  within  State  of  interstate  railroad  taxable  by  State,  228, 

239,  242,  244,  245,  256. 
right  of  way  through  Indian  Reservation  taxable,  28. 
stock  of,  not  "other  moneyed  capital,"  300. 
taxation  of.    See  Intebstate  Caerieks. 
taxation  of  lands  granted  by  U.  S.  to.    See  Laxds. 
to  be  regarded  as  unit  for  valuation,  259,  267. 
when   exemption   of  constituent   road   applies   after   consolidation, 

101. 

REASSESSMENT, 

cannot  be  made  directly  by  legislative  enactment,  363. 

may  include  interest  on  unpaid  old  assessment,  375. 

must  provide  for  notice  and  hearing.     Se©  Notice  and  Heabing. 

need  not  extend  to  personalty,  356. 

of  local  estate,  non-resident  executor  subjected  to,  356. 

of  personalty  valid,  356. 

of  railroads  alone  valid,  507. 

reassessment  as  dependent  on  local  law,  416. 

RECEIVER, 

of  Federal  court,  how  property  in  possession  of  is  subjected  to  lien 
of  State  tax,  633. 

of  Federal  court,  how  State  tax  on  property  in  possession  of  is  en- 
forced, 633. 

of  Federal  court,  how  subject  to  suit,  633. 

of  Federal  court,  injunction  issues  against  State  officer  seizing 
property  in  hands  of,  633. 

of  Federal  court,  property  in  possession  of,  not  subject  to  seizure 
for  State  tax,  633. 

property  in  State  in  possession  of,  subject  to  State  tax,  465. 

REFRIGERATOR  CARS, 

regulation  of,  by  Congress,  242. 
taxation  of.     See  IxxiaisTATE  Careiebs. 

REMEDY  FOR  INVALID  TAXATION, 

afforded  by  State  tribunals,  effects  on  power  of  Federal  court  to 

issue  injunction.     See  Ixjunctiox. 
afforded  by  State  tribunals  must  be  sought  before  seeking  Federal 

injunction,  when,  624. 
by  certiorari.     See  Ceetiorabi. 
by  habeas  corpus.     See  Habeas  Corpus. 


INDEX.  1131 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 
REMEDY  FOR  INVALID  TAXATION— Continued. 

by  payment  under  protest  and  suit  to  recover  Federal  taxes,  616, 

647. 
by  suit  against  State.    See  State. 
by  suit  to  recover  State  taxes  paid  under  protest  not  suit  against 

State,  631. 
considerations  of  public  policy  affecting  procedure  to  obtain,  600. 
in  Federal  courts.     See  Jurisdiction  of  U.  S.  District  Court  and 

Supreme  Court. 
of  receiver  of  Federal  court.    See  Receiver. 
one  having  voluntarily  paid  invalid  tax  has  no,  647. 
I)ayment  under  protest  and  right  to  recover  is  adequate,  at  law, 

649. 
personal  liability  of  tax  official  as.    See  Pb:rsonal  Liabiuty. 
power  reserved  by  the  legislature  to  repeal,  alter  or  amend,  92. 
practical  considerations  in  choosing  forum  for,  612. 
procedure  to  obtain,  varies  in  different  jurisdictions,  600. 
remedial  law  in  Federal  and  State  taxation,  648. 
repealable  contract  of  exemption  from  taxation,  83. 
requiring   deposit   of  accrued    taxes  before   testing   tax  sale   not 

valid,  364. 
statutes  of  limitation  affecting.     See  Limitation  Statute. 

RETALIATORY  LEGISLATION, 

conferring  reciprocity  power  on  President  of  U.  S.  as  to  imposition 

of  duties,  577. 
in  conditions  for  admission  of  foreign  corporations,  174. 
RETROSPECTIVE  LEGISLATION, 

applying  new  remedies  to  collection  of  overdue  taxes,  366. 
compulsory  process  to  examine  taxpayers  as  to  false  returns  during 

four  years,  356. 
legalizing  illegal  assessment,  363. 
limits  of  legislative  power  to  enact,  363. 
may  make  delinquent  taxes  bear  interest  from  date  of  delinquency, 

366. 
may  validate  proceedings  which  legislature  might  have  authorized, 

363,  366. 
must  not  be  ex  post  facto,  366. 

must  not  impair  obligation  of  contract,  366.    See  Contract. 
reassessing  property  under-assessed.     See  Reassessment. 
retroactive  features  of  Kentucky  Act  in  regard  to  listing  national 

bank  shares  for  taxation,  310. 
revival  of  exemptions  by  subsequent  statute,  101. 


1132  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 
RETROSPECTIVE  LEGISLATION— Continued. 

revocation  of  right  to  business  not  applicable  to  interstate  carrier, 

197. 
revocation  of  right  to  do  business  in  case  of  non-payment  of  fran- 
chise tax,  197. 

RHODE  ISLAND, 

State  tax  system  of,  Appendix,  p.  904. 

ROLLING  STOCK, 

taxation  of.    See  Interstate  Commerce. 

taxation  of  rolling  stock  absent  from  State,  239,  246. 

RULES   OF  DECISION, 

■when  decisions  of  State  courts  are,  in  Federal  courts,  260,  643,  644. 

RULES  OF  PROPERTY, 

of  several  States  followed  by  Federal  courts,  644. 

s 

SAVINGS  BANK, 

deposits  in,  not  "other  moneyed  capital,"  299,  302. 

SECURITIES, 

difficulty  of  reaching,  for  taxation,  318. 

foreign-held,  tax  on  void,  78. 

of  U.  S,  exempt  from  State  taxation,  10. 

of  U.  S.,  no  deduction  for  from  assessment  of  national  bank  shares, 

291. 
of  State  subject  to  inheritance  tax.    See  Inheritance  Tax. 
of  State  taxable  in  State  of  owner's  domicile,  485. 
of  U.  S.,  statutory  exemption  of  unnecessary,  13. 
of  U.  S.,  subject  to  inheritance  tax.    See  Inheritajxce  Tax. 
of  U.  S.,  tax  evasion  through  investment  in,  41. 
regarded    in    taxation    as    tangible   chattels    as   to   jurisdiction   of 

State,  447. 
taxation  by  State  or  municipality  of  its  own,  79. 

SEPARATION, 

of  sources  of  municipal  and  State  revenues,  503. 

SEWER, 

natural  benefited  district  subject  to  special  assessment  for,  402,  409., 
special  assessments  may  be  levied  annually  for  use  of,  409. 
special  assessments  may  be  levied  for  enlargement  of,  409. 


INDEX.  1133 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

SHAHES, 

distinguished  from  capital  stock,  103,  286. 
of  corporations  holding  U.  S.  securities  taxable,  19. 
of  domestic  corporation  taxable  when  property  of  corporation  not 
exempt.     See  Corporations  and  Exemptions. 
^  of  national  banks.    See  National,  Banks. 

SITUS   FOR   TAXATION, 

maxim  viobiUa  personam  sequntur  yields  to  actual,  443. 

national  bank  has  only  one,  287. 

of  debt  is  creditor's  domicile,  483,  485. 

of  deposits  in  litigation,  467. 

of  ferry,  214. 

of  grain  moving  in  interstate  commerce,  133. 

of  intangible  property,  274. 

on  intangible  property  of  interstate  carrier,  258. 

of  personalty  located  elsewhere  in  same  State  is  owner's  domicil, 
486. 

of  public  stock  is  domicile  of  owner,  457. 

of  rolling  stock,  239,  242.  261. 

of  stock  not  transferred  by  pledge,  466. 
of  stock  of  corporations,  302,  460,  484. 
of  vessels  at  home  port,  202,  203,  214. 
of  vessels,  mere  enrollment  insufBcient  to  constitute,  203. 
of  vessels,  not  affected  by  temporary  enrollment  as  coaster  else- 
where, 203. 
of  vessels  under  U.  S.  registry  laws,  203. 
of  vessels,  what  constitutes  home  port,  205. 
of  vessels,  when  home  port  is  not  conclusive  as  to,  206. 
John  D.  Rockefeller  not  domiciled  in  Ohio  for  taxation,  481. 
selection  of  situs  for  taxation  by  owner,  204. 
sheep  grazing  through  different  States  taxed  in  each  State,  131. 
SLEEPING  CARS, 

distinguished  from  vessels  as  to  situs  for  taxation,  241. 
sleeping  car  companies  taxed  by  State,  236. 
taxation  of.    See  iNTEajsTATK  Cabbiebs. 

SOUTH  CAROLINA. 

State  tax  system  of.  Appendix,  p.  906. 
SOUTH  DAKOTA, 

State  tax  system'  of,  Appendix,  p.  909. 
BPANTSH  GRANT. 

segregated  from  public  domain,  21n. 


1134  INDEX. 

(References  are  to  sections,  except  in  appendix  r«ferences  are  to  pajes) 

SPECIAL  ASSESSMENTS, 

application  of  equality  clause  in  State  constitution  to,  404. 

application  of  requirement  that  taxation  shall  be  ad  valorem  to,  404. 

application  of  uniformity  clause  in  State  constitution  to,  404. 
i    based  on  theory  of  special  benefit,  392,  398,  402,  426. 
\  basis  of  apportionment  for,  may  be  fixed  in  municipal  charter,  403. 

See  MtTNlCIPALITY. 

difficulties  peculiar  to,  393,  401. 

difficulty  of  determining  special  benefits  for.  See  Special  Bene- 
fits. 

decision  in  Norwood  v.  Baker  as  to  excess  of,  over  special  benefits. 
See  Special  Benefits. 

due  process  of  law  in,  does  not  require  judicial  proceeding,  417. 

due  process  of  law  in,  substance  not  form  considered,  423. 

enforcement  of,  424. 

for  drainage  valid,  398. 

for  irrigation  valid,  399. 

for  public  improvements  in  municipalities,  401. 

for  public  park  sustained,  374. 

for  sewers.    See  Seweks. 

for  street  improvements,  sustained,  410,  414. 

if  valid,  reassessment  may  be  made,  416,  426.     See  Reassessment. 

levied  by  area  and  frontage  rules.     See  Area  and  Frontage  Rules. 

levied  by  what  methods  of  apportionment,  403. 

notice  and  hearing  required  in.    See  Notice  and  Hearing. 

on  land  not  abutting  on  streets  paved  valid,  410. 

special  assessments  and  eminent  domain,  432. 

summary  of  decisions  of  Supreme  Court  as  to,  433,  434,  435. 

theory  of,  distinguished  from  theory  of  general  taxation,  392,  393, 
399. 

under  Fifth  and  Fourteenth  Amendments,  394. 

unlawful  where  property  incapable  of  benefits,  436. 

when  legislative  determination  is  conclusive  in.  See  Lixjislative 
Discretion. 

SPECIAL  BENEFITS, 

apportionment  by  legislature  excludes  consideration  of,  406,  414, 
418. 

apportionment  or  special  assessments  need  not  be  according  to,  405. 

difficulty  of  determining,  399,  402,  406. 

legislature,  in  fixing  basis  of  apportionment,  presumed  to  con- 
sider, 406,  407,  418. 

Norwood  V.  Baker  that  assessment  in  excess  of,  is  not  due  process 
of  law,  426,  427. 


INDEX.  1135 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

SPECIAL  BENEFITS— Continued. 

Norwood  V.  Baker  that,  to  invalidate  assessment,  excess  of,  must 

be  material,  426. 
Norwood  V.  Baker  that  taxpayer  must  be  allowed  to  show  excess 

of  assessment  over,  426. 
theory  of  legislative   conclusiveness  based   on   impracticability   of 

valuing  judicially,  406,  407. 

STAMP  ACT  OP  1878,  579. 

STATE, 

as  assignee  suing  other  State  on  its  bonds,  630. 

being  real  defendant,  though  not  party  to  record,  jurisdiction   of 

Federal  court  fails,  632. 
cannot  be  compelled  to  perform  contracts,  631. 
cannot  be  sued  without  its  consent,  630. 
control  of,  over  commerce.     See  Commerce. 
control  of,  over  proceeds  of  municipal  taxation,  85. 
decision  of  State  courts  in  re  impairment  of  contract,  when  not 

res  ad  judicata,  71. 
decisions    of   State   courts   upon    laws    of.      See    Constbuction    of 

State  Law. 
definition  of,  2. 

distinguished   from  State  government,  631. 
equality  in  right  and  power  of,  with  other  States,  2. 
has   no   taxing  jurisdiction   over  property   in   foreign   warehouses, 

445. 
immunity  of,  from  suit  does  not  extend  to  municipalities,  631.  See 

MUXICU'ALITY. 

immunity  of,  from  suit,  when  does  not  prevent  injunction  against 

illegal  tax,  632. 
immunity  of,   from  suit,   when  does  not  prevent  recovery  of  tax 

paid  under  protest,  631. 
in  regard  to  authority  to  tax  telegraph  companies  not  impaired  by 

Act  of  July  24,  1866,  34. 
inspection  laws  of.     See  Inspection  Laws. 
jurisdiction  over  land,  441. 

may  stipulate  medium  in  which  taxes  shall  be  paid,  42. 
may  tax  privilege  of  varying  or  towing  in  corporate  capacity,  209. 
opinion  of  State  courts,  66. 

power  of,  to  exempt  from  taxation.     See  Exemption. 
regulation  of  foreign  commerce,  111,  112. 
relation  to  Federal  government  assumed  by  new,  2. 
sovereign  power  of,  over  municipalities,  396. 
sovereignty  of,  how  affected  by  act  of  admission,  2,  212. 


1136  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

STATE — Continued. 

State  and  Federal  taxation  distinguished,  648. 

State  taxation  of  Federal  corporation  franchise,  18,  32. 

suable  only  In  court  indicated  by  its  consent,  630. 

suit  against,  and  against  State  official  distinguished,  631. 

taxation  by  State  of  U.  S.  treasury  checks,  13. 

what  constitutes  suit  against,  630. 

when  indispensable  party.  Federal  court  has  no  jurisdiction,  630, 

632. 
when  State  taxes  enforceable  by  U.  S.  courts,  370. 

STATE  TAXATION  SYSTEM'S  INTRODUCTION,  Appendix,  p.  769. 

STATUTE  OF  LIMITATION.    See  Limitation  Statute. 

STATUTES, 

exempting  corporations  from  taxation,  46. 

not  invalid  when  void  provision  separable,  197. 

relative  to  suits  and  procedure  against  collector  and  the  United 

States,  652,  654. 
reviving  exemptions.     See  Exemptions. 
when  requirements  mandatory  or  discretionary,  373. 

STREET  IMPROVEMENTS, 

special  assessments  for.     See  Special  Assessments. 

SURVEY, 

accepted  by  land  department,  25. 

not  approved  by  Commissioner  of  Land  Office,  21n. 

SUPREME  COURT, 

considers  special   assessments  only  in  relation  to  due  process  of 

law,  370. 
courts  jurisdiction   in  re   impairment   of  contract  not   dependent 

upon  form  of  legislation,  70. 
determines  what  constitutes  impairment  of  contract,  183. 
independent  judgment  of,  as  to  questions  of  general  law,  644. 
inheritance  taxation  and  equal  protectibn  of  the  laws,  517. 
jurisdiction  of,  broader  under  Fifth  than  Fourteenth  Amendment, 

394,  408. 
motions  in  dismissal  in,  634. 

on  classification  in  license  of  occupation  taxation,  530. 
on  duplication  of  inheritance  taxation,  494. 
when  bound  by  State  construction  of  State  law.    See  Construction 

OF  State  Law. 
will  not  designate  time  when  Federal  power  to  tax  ceases,  145. 


INDEX.  1137 

(Referinces  ar«  te  sections,  except  in  appendix  references  are  to  pages) 

SUPREME  COURT— Continued. 

Appellate  Jukisdiction  Over  State  Court, 

attaches  where  State  court's  decision  is  on  legal  effect  of  evi- 
dence relating  to  Federal  question,  609. 

does    not    extend    to    review    of    decision    sustaining    Federal 
claim,   612. 

limited  to  review  of  decision  on  Federal  claim,  613. 

requires   that   Federal   claim   shall   have   been   set  up    in   ad- 
versary proceedings,   615. 

what  is  final  judgment  of  State  court  as  to,  610. 

writ  of  error  issued  under,  is  to  highest  State  court  having 
jurisdiction,  610. 

amount  in  controversy,  immaterial  as  to,  602. 

attaches    notwithstanding    erroneous    decision    of    State   court 
that  the  question  is  not  Federal,  607. 

attaches  where  Federal  question  is  decided  on  ambiguous  plead- 
ings, 606. 

attaches  where  Federal  question  is  decided  on  motion  for  re- 
hearing, 606. 

depends  on  existence  of  Federal  question  in  case,  621,  425.    See 
Federal  Question. 

does  not  extend  to  general  principles  of  constitutional  law  in 
case,  378,  380. 

does  not  extend  to  review  of  decisions  of  fact  in  State  Court, 
609. 

essential   to,   that  specific   claim  of  Federal   right  appear  on 
record,  606. 

how  limited  by  Judiciary  Act  of  1789,  336. 

only  essential  to,  is  denial  by  State  of  Federal  right,  602,  605. 

pleading  Federal  question  in  condemnattpn  proceedings  to  sus- 
tain, 606. 

requires  that  adverse  decision  of  State  court  shall  have  been 
decisive  of  case,  606,  609. 

requires  that  averment  of  Federal  claim  shall  have  been  dis- 
tinct and  positive,  606. 

requires  that  claims  of  Federal  right  have  been  distinctly  made 
in  record,  601,   606. 

requires  that  procedure  adopted  to  resist  tax  must  have  been 
appropriate  under  State  law,  601. 

when  rcfu-sal  of  State  to  pass  upon  Federal  claim  does  not  sus- 
tain, 606. 


1138  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

SUPREME  COURT— Continued. 

Appellate  Jtjrisdictio??  Over  U.  S.  Courts, 

amount  in  controversy  immaterial  as  to,  602. 

essential  to,  that  decision  below  on  Federal  claim  shall  have 
been  controlling,  601. 

extends  to  all  questions  involved  in  case,  613. 

extends  to  review  of  construction  by  Circuit  Court  of  State 
law,  612. 

jurisdiction,  of  U.  S.  Court  over  case  essential  to.     See  Jxjris- 
DiCTioN  OF  U.  S.  District  Court. 

permits  review  of  decisions  as  to  general   principles  of  con- 
stitutional law,  378,  379,  380. 

where  legal  and  equitable  claims  were  blended,  618. 

TAX, 

distinguished  from  license,  469,  472. 

imposed  on  cigarette  selling  by  Iowa  code,  138,  127. 

is  not  debt,  452,  507,  592. 

nature  of,  to  be  determined  by  actual  operation,  565.  See  In- 
heritance Tax,  License  Tax  and  Taxation. 

on  carrying  local  passengers  of  sleeping  car  companies,  236. 

on  gross  earnings  invalid  in- Texas  and  Oklahoma,  but  sustained 
in  Minnesota,  254. 

on  occupation  of  importer  a  tax  on  importation,  112. 

upon  bank  deposits  held  not  discriminatory,  307. 

varieties  of  Federal  taxes,  defined  and  distinguished,  559,  560. 

what  constitutes  direct.     See  Direct  Tax. 

what  constitutes  excise.     See  Excise  Tax. 

TAXATION, 

and  regulation  may  be  authorized  by  same  law,  473. 

by  State  of  occupied  government  lands,  21n. 

by  State  of  receipt  for  government  taxation,  35. 

compared  with  regulation  under  police  power,  472. 

Congressional  power  of,  not  exhausted  when  once  exercised,  592. 

defined.  111. 

inequality  inevitable  in,  333. 

judiciary  reluctant  to  interfere  with  State  systems  of,  315,  364,  370. 

of  commission  merchant  and  broker  taking  sales  for  future  delivery 

not  interstate  commerce,  166. 
of  a  consolidated  railroad  company  as  a  domestic  corporation,  199. 
of  franchise  conferred  by  Act  of  1866  illegal,  34. 


INDEX.  1139 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

TAXATION— Continued. 

power  of  Confederation,  1. 

power  of  Congress.    See  Coxgbess,  Taxing  Poweb  of, 
power  of,  defined,  1,  377. 
power  of,  liability  to  abuse,  341. 

power  of,  most  pervading  of  governmental  powers,  341. 
power  of,  must  be  exercised  by  legislature,  431. 
power  in  internal  taxation,  basis  of,  2. 
power  of  State.     See  States*  Taxing  Power  of. 
theory  of,  general  and  special,  392. 

widows  and  orphans,  trustees  and  guardians,  carrying  burden  of 
tax  on  personal  property,  318. 

TAX  CERTIFICATE, 

holder  of  tax,  required  to  notify  landowner  of  application  for  deed, 

86. 
when  issuance  of  tax,  without  notice  to  taxpayer,  is  valid,  368. 

TAX  DEEDS, 

as  effecting  interests  of  United  States,  25. 

conclusive  presumption  arising  from,  not  alone  denial  of  due  pro- 
cess, 367. 

defects  covered  by  conclusive  presumption  must  amount  to  denial 
of  due  process,  367. 

may  not  be  made  conclusive  as  to  holder's  title  to  land,  367. 

may  be  made  conclusive  as  to  prior  procedure  in  collateral  pro- 
ceedings, 367. 

may  be  made  prima  facie  evidence  of  valid  precedent  procedure, 
367. 

not  made  conclusive  by  limitation  statute  where  tax  levy  waa 
void,  364. 

requiring  deposit  of  accrued  taxes  before  contesting,  void,  364. 

tax  titles  as  related  to  assessment,  358. 

TAXING  POWER, 

corporations  holding  U.  S.  securities,  how  taxable,  16,  17,  18,  19. 
difficulty  of  distinguishing  from  Federal  control  over   commerce, 

224. 
distinguished  from  construction  of  State  statute,  356. 
evasion  of,  through  investment  in  U.  S.  securities,  41. 
exemption  of  Federal  agencies,  6,  7,  8,  28,  31. 
exemption  of  securities.     See  Secukities. 
express  limitations  upon,  2,  3. 

Indian  Reservations  exempt.     See  Indian  Reservations. 
inheritances  subject  to.    Sec  iMiiauTANcE  Tax. 


1140  INDEX. 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

TAXING  POWER — Continued. 

Interstate  passengers  exempt,   20. 

interstate  railroads,  how  taxable.    See  Railroads. 

involves  exercise  of  legislative  power,  496. 

letters  patent  and  copyrights  exempt.  See  Copyrights  and  Pat- 
ents. 

limitation  upon,  growing  out  of  Federal  supremacy,  2,  5,  6,  7,  8,  9. 

mail  carriages  exempt,  15. 

over  commerce.     See  Commerce. 

over  corporations.     See  Corporation. 

over  imports  and  exports.    See  Imports  and  Exports. 

over  interstate  carriers.    See  Interstate  Carriers. 

over  its  own  obligations,  79. 

over  national  banks.     See  National  Banks. 

over  vessels.    See  Vessels. 

passengers  in  mail  carriages  exempt,  15. 

power  to  compel  levying  of  tax  by  township,  396. 

property  of  U.  S.  exempt.     See  Lands. 

restrained  by  constitution  of  State.     See  Constitution  of  State. 

restrained  by  Fourteenth  Amendment.  See  Fourteenth  Amend- 
ment. 

restricted  by  U.  S.  Constitution,  2,  107. 

salaries  of  U.  S.  officials  exempt,  14. 

scope  of,  137. 

supreme  over  completely  internal  commerce  of  State,  111. 

taxing  statutes  not  invalid  when  void  provision  separable,  197. 

treaty-making  power  in  relation  to,  40. 

when  concurrent  with  that  of  Congress,  2,  3,  6,  111,  213,  222,  553. 

TAX  PROCEDURE, 

requirements  of  due  process  of  law  in.  See  Due  Process  of  Law. 
See  Procedure. 

as  related  to  equal  protection  of  the  lays,  618. 
TELEGRAPH  COMPANIES, 

government  agency  under  Act  of  Congress,  216,  249. 

rental  charged  for  u:;e  of  streets  by  poles  of,  must  be  reasonable, 
237. 

taxation  of.     See  Interstate  C^vrriers. 

valuation  of,  by  unit  rule.     See  Unit  Rule. 

when  companies  accept  Act  becomes  instrument  of  foreign  and  in- 
terstate commerce,  under  Act  of  July  24,  1866,  34. 


INDEX.  1141 

(References  are  to  sections,  except  in  appendix  references  are  to  pages) 

TENDER, 

of  tax  receivable  coupons  equivalent  to  payment,  58,  59. 

of  taxes  due,  622. 

of  valid  part  of  excessive  tax.     See  Injunction. 

TENNESSEE, 

State  tax  system  of,  Appendix,  p.  912. 

TERRITORIES, 

acquired  by  conquest  neither  foreign  nor  domestic  for  taxing  pur- 
poses, 576. 
acquired  by  conquest  not  foreign  for  taxing  purposes,  572,  573,  576. 
"appurtenant"  distinguished   from   "incorporated"  territory,  573. 
conquered  by  United  States,  when  liable  to  imposition  of  duty.    See 

DUTT. 

direct  tax  need  not  extend  to,  568. 

has  same  taxing  power  as  State  over  national  banks,  290. 

Justice  Gray  on  "transition  period"  in  incorporation  of  acquired, 

573. 
levy  of  duties  on  captured,  under  war  power,  571. 
obligations  and  bonds  exempt,  10,  13. 
organic  Act  of  territories  supersedes  Indian  Treaty,  596. 
power  of  unincorporated  territories,  597. 

taxing  power  of  Congress  over  persons  and  property  in,  576,  595. 
traveling  salesmen,  188. 

TEXAS, 

State  tax  system  of,  Appendix,  p.  916. 

TONNAGE  TAX, 

jurisdiction  of  United  States  Court  over  suits  arising  under  Act 

imposing,  602. 
property  tax  proportioned  to  tonnage  distinguished  from,  218. 
State,  invalid,  201. 

tax  computed  on  registered  tonnage  of  vessels,  217. 
taxed  as  violation  of  Constitution,  217. 
wharfage  charges  distinguished  from,  218,  219. 
wharfage  charges  graduated  by  tonnage  not,  220. 
what  constitutes,  212,  217,  218,  219. 

TOWING  BUSINESS, 
taxed  by  State,  209. 

TUCKER  ACT, 

actions  under  Tucker  Act  ex  contractu,  650,  653,  654,  655. 

TUGBOATS, 

State  license  on,  when  invalid,  208. 


1142  INDEX. 

(References  are  to  sections,  exv«pt  in  appendix  references  are  to  pages) 

TREATY, 

does  not  control  State  inheritance  taxation,  40. 

does  not  control  State  power  to  exclude  foreign  corporations,  172. 

may  be  revoked  by  subsequent  statute,  578. 

TRUST  COMPANY,  TRUSTEES, 

assessment  of  trustees,  372. 

is  not  bank,  301. 

stock  in  is  "other  moneyed  capital,"  301,  303. 

u 

UNIFORMITY  IN  FEDERAL  TAXATION, 

distinguished  from  uniformity  under  State  constitution,  569. 

inheritance  tax  consistent  with  requirement  of,  569. 

is  geographical,  not  intrinsic,  569. 

levy  of  custom  duties  consistent  with  requirement  of,  570. 

required  in  all  indirect  taxes,  569. 

requirement  of,  applied  to  territory  acquired  by  conquest,  572,  573. 

tax  on  alien  passengers  consistent  with  requirement  of,  569. 

tax  on  sales  made  on  commercial  exchanges  consistent  with  re- 
quirements of,  569. 

what  constitutes,  569. 
UNIFORMITY  IN  STATE  TAXATION.     See  Constitution,  State. 

UNIT  RULE, 

applied  to  express  companies.  271,  272,  273,  274,  276,  277,  278. 

board  presumed  to  have  allowed  for  disproportionate  value  of  ex- 
tra-state property,  265,  267,  280. 

consistent  with  equal  protection  of  laws,  508. 

does  not  allow  taxation  of  extra-state  property,  264,  267,  270. 

entire  property  in  use  considered  in  valuing  part  within  State, 
267,  268,  270. 

exceptional  circumstances  requiring  deduction  must  be  shown,  273, 
275,  462. 

in  taxation  of  telegraph  companies,  269. 

in  valuation  of  interstate  properties  sustained,  263,  264,  267. 

in  valuation  of  intrastate  properties,  259,  260,  262. 

involves  mileage  apportionment.     See  Mileage  Apportionment. 

summary  of  decisions  of  Supreme  Court  as  to,  277,  278,  279,  280. 

UNITED  STATES.     See  Federal  Taxing  Povper." 
not  an  eleemosynary  corporation,  38. 

privileges  and  immunities  of  citizens  of.  See  Foubteenth  Amend- 
ment AND  Congress. 


INDEX.  1143 

(References  ^re  to  sections,  except  in  appendix  references  are  to  pases) 

UNITED  STATES— Continued, 
what  are  debts  of,  557,  558. 
what  constitutes  general  welfare  of,  555. 

UTAH, 

State  tax  system  of,  Appendix,  p.  919. 


VALUATION  FOR  ASSESSMENT, 

by  capitalization  of  net  earnings,  257,  547. 
.  conflict    between    statutory    requirement    of,    at    cash    value    and 

equality  essential  In,  540,  542,  544. 
dilemma  of  courts  in  remedying  discrimination  in,  540,  542,  543, 

544,  545. 
discrimination  in,  by  relative  undervaluation  remedied  by  courts, 

542,  543,  544,  546. 
discrimination  in,  must  be  distinctly  alleged  and  proved,  541. 
discrimination  in,  must  be  intentional  and  habitual,  312,  314,  315, 

316,  541. 
discrimination  in,  though  plaintiff's  property  is  valued  below  true 

value,  539. 
discrimination  in,  through  fraud  of  assessors,  how  remedied,  538, 

539,  546. 
discrimination  in,  through  relative  undervaluation  of  other  prop- 
erty, 539. 
distinction  between  sporadic  and  habitual  discrimination  in,  545. 
equality  in,  essential  to  equality  in  taxation,  312,  535,  542. 
equality  in,  prevented  by  error  of  assessor's  judgment,  536. 
equality  in,  renders  basis  of  assessment  immaterial,  535. 
equality  in,  secured  by  separating  sources  of  State  and  municipal 

revenue,  537. 
expressed  intention  of  assessors  to  discriminate   in,  unnecessary, 

545. 
for  public  improvements.    See  Special  Assessments. 
full  valuation  enforced  by  creditors,  552. 
inequality  in,  for  State  tax  due  to  unequal  assessments  for  local 

taxes,  537. 
Judge  Taft  on  dilemma  of  courts,  544. 
Justice  Field   on  discrimination   in,  543. 
of  corporation.    See  Coki-okatiox. 

of  national  bank  shares,  discrimination  in.     See  niscruMiNATTov. 
of  right  invslved  as  affecting  jurisdiction  of  Federal  courts.  603. 
presumption  that  assessor  does  ofRclal  duty,  540,  541,  547. 


1144  INDEX. 

(References  are  to  sections,  except  in  appenu'ix  references  are  to  pages) 

VALUATION  FOR  ASSESSMENT— Continued. 

summary  of  requirements  of  Fourteenth  Amendment  as  to,  548. 
what  evidence  of  assessor's  intention  is  sufficient,  545,  546,  551. 

VERMONT, 

State  tax  system  of,  Appendix,  p.  923. 

VESSELS, 

employed  in  interstate  commerce  taxable  only  at  situs,  201,  202. 

engaged  in  interstate  commerce,  205. 

in  harbor  or  transit.  State  police  power  over,  210. 

not  subject  to  State  tax  for  privilege  of  navigating  public  waters, 

207,  208,  214. 
State  power  to  license,  for  oyster  dredging,  211.     See  Ferries. 
State  taxing  power  over,  how  limited,  201. 
tolls  levied  upon,  for  navigating  improved  rivers,  208,  212,  220. 

VESTED  RIGHTS, 

in  fruits  of  false  returns,  taxpayer  has  no,  356. 
not  impaired  by  inheritance  tax  law,  83. 
relation  of  retroactive  statute  to,  86. 
vested  rights  in  exemptions,  33. 

VIRGINIA, 

State  tax  system,  Appendix,  p.  926. 

w 

WAR  REVENUE  ACT  OF  JUNE  13,  1898,  566. 

WAR  REVENUE  ACT  OF  OCTOBER,  1917,  Appendix,  p.  1007. 

WAREHOUSES, 

bonded,  jurisdiction  of  State  to  tax  property  in,  444. 
foreign,  no  jurisdiction  of  State  to  tax  property  in,  445. 

WASHINGTON, 

State  tax  system  of.  Appendix,  p.  933 

WEST  VIRGINIA, 

State  tax  system  of.  Appendix,  p.  935. 

WORKMEN'S    COMPENSATION   LAW   AND    TAXING   PROVISIONS 
SUSTAINED,  473. 

WISCONSIN, 

State  tax  system,  Appendix,  p.  939. 

WYOMING, 

State  tax  system  of.  Appendix,  p.  943. 


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